Welcome to our Summer Newsletter 2023
Landlord Broadband welcomes you to the latest edition of our quarterly newsletter. We hope that you enjoy it. If the latest industry news, customer market updates, and new content interests you, then read on. Want more? You can check out our previous newsletter here.
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For landlords, the Renters Reform Bill is one of the most significant aspects of the legal sector. It is an important initiative of the UK government that looks to overhaul the existing rental market by introducing comprehensive reforms. It aims to create a fairer, more transparent, and balanced environment for both tenants and landlords, addressing long-standing issues and improving the overall renting experience. It’s worth knowing about and keeping an update on as it may affect you and your position as a landlord!
Key Highlights of the Renters Reform Bill
Abolishing “no-fault” evictions: Perhaps the most significant change proposed by the bill is the abolition of Section 21 notices, commonly referred to as “no-fault” evictions. This reform aims to provide tenants with greater security, ensuring they cannot be evicted without a legitimate reason. This aims to create a fairer and more balanced private renting sector.
Lengthening notice periods: The bill also suggests extending notice periods for both tenants and landlords. This will mean both tenants and landlords have more time to find alternate accommodations and plan for any necessary changes that may need to happen.
Improved access to rental deposits: Recognising the financial burden faced by many tenants, the bill aims to introduce an improved deposit system. This change in approach would enable tenants to transfer their rental deposits seamlessly between tenancies. This means that upfront costs will be reduced therefore improving the overall efficiency of the process.
Stricter regulations on property standards: The Renters Reform Bill places emphasis on rental properties meeting certain standards of safety. This means things will be put in place to stop unsafe and substandard living conditions. In essence, tenants will have better protection against rogue landlords.
Are there any further changes in the private rental sector that you should be aware of?
Proposed reforms in the private rental sector bring significant changes for tenants and landlords alike. Tenants will gain the right to keep pets in their rented properties, although landlords can still refuse these requests with valid reasons and the option to require pet insurance. What’s more, is that the government also plans to tackle delays and enhance accountability by reforming the court system and holding local authorities and councils more responsible for housing standards. As part of the government’s levelling-up strategy, a ‘Decent Homes’ specification will be established, ensuring a minimum standard for private rental properties, and setting higher benchmarks.
Investors in buy-to-let (BTL) properties and landlords are finding it increasingly challenging as the finance sector changes dramatically.
Regarding BTL investors, in April compared to March, BTL mortgage searches were down 23%, while investor deposits have increased as high-interest rates hit. The increase in interest rates impacted landlords’ ability to properly finance. If rental income stays constant, rising interest rates will drive the landlord to take out fewer loans, meaning fewer mortgages can be approved at the funding level that landlords desire. Overall, this lowers the loan value if property values stay flat. Research has supported this as the average loan-to-value (LTV) has dropped 5% from 66% to 61% from April 2022 to April 2023 (Twenty7tec). Does this explain why searches for BTL mortgages have decreased? Although it’s difficult to say for sure, uncertainty about interest rates must be one of the factors influencing this (LandlordZone).
Addressing landlords, it’s revealed that they’re selling their properties and contributing the proceeds to their pensions. In this quarter landlords are re-evaluating where they’re putting their money. BTL has been a dependable source of income for more than 20 years, but profits have fallen because of the removal of tax relief benefits over the last five years. Landlords will now have to invest thousands of pounds in improvements to meet the 2028 deadline for strict energy efficiency regulations. Many landlords are contemplating selling up, especially those who don’t own huge portfolios. Perhaps those who have inherited or saved for years to invest in one property in the hope that helping them to retire are now getting advice to exit as their investments are now not financially viable anymore (iNews).
According to Ofcom’s Connected Nations: Spring 2023 report, Gigabit Broadband covers 73% of the UK, which is a 3% increase since their last report. In addition to this, “full fibre” (FTTP) now reaches 48% of the UK, which is an increase of 6% from September 2022 to January 2023. (Ofcom Spring 2023).
14.2 million homes can now access FTTP, which is up from 12.5 million in December 2022. Gigabit-cable network coverage is higher than FTTP as it has improved by 3% which equates to 21.9 million premises. This is mostly due to Virgin Media being in the process of upgrading to its existing Hybrid Fibre Coax (HFC) network.
To try to close the gap the Government has launched a £5bn Project Gigabit programme to improve speed connectivity by using state aid. By targeting the final 20% of hardest-to-reach premises in the UK they can target connectivity improvements in these areas. This could improve coverage to at least 85% of UK premises by the end of 2025. (ISPreview).
Recently, Sirius Property Finance conducted research into the number of homes in multiple occupations (HMOs) in the past year and found that there has been a 2.4% decrease. The regional analysis reveals even more significant declines. The East Midlands has experienced a 26.1% annual decline in HMO stock, while the Northeast has seen a 15.8% drop, and the Southeast has witnessed a decrease of 6.7%. However, not all regions have experienced declines. The West Midlands and Yorkshire & Humber have recorded impressive annual stock growth of 16.9% and 11.2% respectively.
In April 2023, the Department for Levelling Up, Housing and Communities (DLUHC) put forth a proposed temporary regulation concerning Houses in Multiple Occupation (HMOs). This regulation specifically focuses on accommodation required for asylum seekers arriving in the United Kingdom.
Recent regulations have redefined the concept of Houses in Multiple Occupations (HMOs) in relation to Part 2 of the Housing Act. Notably, these regulations state that housing provided to asylum-seekers on behalf of the Home Office will be exempt from the requirement of obtaining an HMO license from local authorities for a period of two years (with amendments set to be repealed on 1 July 2026). Once these regulations are fully implemented, section 254 will witness the introduction of two new subsections, namely 5A and 5B. This marks a significant development in the housing landscape, ensuring better living conditions for asylum-seekers while streamlining the licensing process for relevant authorities.
So why the sudden changes?
Well, as highlighted in the Explanatory Memorandum of The Houses in Multiple Occupation (Asylum-Seeker Accommodation) (England) Regulations 2023, there are currently around 6,000 HMO properties housing approximately 28,000 asylum seekers. Recognising the challenges posed by these regulations, it became imperative to make amendments to Part 2 of the Housing Act. The aim was to temporarily remove the barriers that impede the timely and cost-effective acquisition of sustainable contingency accommodation for asylum seekers. By addressing these obstacles, the Home Office seeks to facilitate smoother processes and ensure the provision of suitable housing for those in need.
Build to Rent
Exciting news for Leeds within the build-to-rent (BTR) sector! 488 BTR homes are planned for a waterside site in Leeds, and a £108 million forward finance agreement has been reached for the project. The managing director at HUB, Damien Sharkey, expressed his excitement stating, “We are thrilled to have secured forward funding for our second developing in Leeds… Work has already started on site, and we look forward to delivering a scheme that will continue the transformation of this exciting area of Leeds.” Sharkey is feeling optimistic about the future of the BTR sector and hints towards further deals coming in the near future. Simon Ringer, partner and head of property funds at Bridges Fund Management, shares the enthusiasm saying this scheme along with their other existing schemes in Leeds will help “addressing the clear local demand for quality lower-cost housing and creating an attractive public realm that will benefit the whole community” (Insider Media).
There are improvements that could be made in the BTR sector and could be inspired by the hospitality industry. In the hospitality industry, how a customer is treated is just as crucial as the service they are receiving something the BTR operators need to take note of. What can BTR specifically learn about providing exceptional service? Firstly, putting in place a long-term strategy and goals which are thoroughly researched and communicated clearly to all involved and how they are expected to fulfil them. Second, identifying areas that require improvement by listening to residents and gathering and assessing customer feedback. Thirdly, continuing to put the needs of the consumer first and making sure they are being listened to. A quick, efficient approach for resolving possible issues must be established if the business is to increase the quality of its services (BTR News).
Data shows that purpose-built student accommodation (PBSA) sector stock is being stretched, as the sector struggles to keep up with rising student numbers in the UK (Savills). Markets such as Bristol, Durham, and Manchester have had to house students in other nearby cities or have offered money to students to defer entry or live at home. These measures all negatively impact the student experience and highlight the pressing need to increase the provision of PBSA. Richard Valentine-Selsey, Director, Head of European Living Research, Residential Research says, “To alleviate this pressure, more PBSA stock must be delivered, especially given that the wider rental market has seen such a dramatic fall in supply as well as a surge in demand, with rents increasing steeply as a result.”
A recent survey found that around two-thirds of investors are looking to deploy more capital into PBSA over the next three years. Of these, close to a fifth expect to deploy more than €500 million over this period (Savills – European Living Investor Survey). Current challenges for PBSA include the price of land and increased construction costs. Renewed investment activity will be supported by rising rents, which offset the operational cost increases, alongside the underlying student growth. The long-term demand however demonstrates the attractiveness of the sector. (Savills).
In England, the Department for Levelling Up, Housing and Communities has published a consultation that proposes the implementation of planning permission for existing properties to be turned into short-term lets. The intention is to help keep housing affordable in areas with high levels of tourism. There may still be some leeway for those wanting to temporarily rent their properties, as it is likely there will be a period of time allotted where planning permission would not be considered necessary. (Gov.UK).
Scotland has proposed enabling local authorities to double council tax for second homes. This would be enacted in April of 2024, increasing council tax to the same rate as empty homes. With 42,865 ‘long-term empty homes’ as of January 2023, it is likely that Scotland’s willingness to increase council tax on top of the suggested double will become a reality. (Gov.Scot).
More drastically, in Wales, second homes and long-term empty properties have been subject to a premium tax of up to 100% of the standard council tax rate since 2017. However, at the discretion of each local authority, this has now been increased to 300%. Such a significant increase is intended to combat the housing crisis that has been exacerbated by second-home ownership. A number of councils have already chosen to increase the premium, with more set to follow next year. (Gov.Wales).
Since April 2023, the UK government has had an additional £842 million available to vulnerable people across England. The purpose is to aid with food and energy costs and the spending of these funds is at the discretion of local councils. This has been implemented alongside £200 in energy bill support for those that use alternative fuels. (Gov.UK). In terms of affordable housing, an estimate by the National Housing Federation and Crisis from Heriot-Watt University states that England needs to provide 145,000 affordable homes per year. The inability to reach this target has been attributed to various different factors, including the planning system being “slow, costly, and complex”. (House of Commons).
Across Wales, during 2021/2022, over 2,600 affordable homes were built, 80% of which were provided by Registered Social Landlords. Furthermore, it is claimed that 68% of these units are due to capital grant funding. Though the number of new affordable homes has decreased from the previous year. This year, an additional 3,306 units are planned. (Gov.Wales).
In Scotland, £105 million has been allocated to increasing the number of affordable homes. This is in addition to £25 million to the existing £80 million that was previously committed. All of this will hopefully culminate in the achievement of Scotland’s goal to deliver 110,000 affordable homes by 2032. (Gov.Scot).
Top Tips for Landlords to Enhance the Marketability of Student Lets
Our latest piece of video content explores 5 essential tips from students themselves in order for your properties to be more appealing to you target audience and explain how our expertise can help you achieve it.
5 essential tips to make your properties more appealing to your target audience and how Landlord Broadband can help.
This property consists of 9 supported living flats for 10 tenants and additional staff users. Watch this video for information about our bespoke Wi-Fi installations.
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