How agents can adapt to new lettings trends during the cost of living crisis
New lettings trends are emerging as the cost of living crisis grows. Landlord Action's Paul Shamplina and Goodlord's Oli Sherlock share some advice on how to adapt.
The cost of living crisis is throwing up new trends in the lettings industry. Paul Shamplina, Founder of Landlord Action, and Goodlord's Director of Insurance, Oli Sherlock, recently joined a Goodlord webinar to share their insights, advice, and predictions on what agents can expect - and how they can help support their customers throughout.
Get ready for more Section 21s
Paul predicts that the abolition of Section 21 coupled with the rising cost of living will push some landlords to leave the sector - in part, due to a lack of understanding around the new processes and grounds that will replace no-fault evictions.
"When you talk about Section 8 to agents and landlords, they get really intimidated by it because it's a hearing and they don't know what to do," says Paul.
"I think it could be a perfect storm brewing. You will see landlords that are whacking in those Section 21s, want to get vacant possession, want to do the property up, want to put the rents up and then try to find another tenant. That's definitely going to happen."
You should ensure that you keep up to date on the latest as more details are announced, so you can share the full information with your landlords to help them when making a decision on the future of their property investment.
Choose the right tenant, rather than simply the highest rents
It's important to choose the right tenant for a property, sometimes over and above what the applicant can pay on rent - and this is only becoming more important as landlords look for some certainty while things are uncertain. "It's about longevity, having that tenant as long as possible," says Paul.
You should also make sure you're not overpromising on the rental amount for a property. "The biggest bug bear that a landlord has about a letting agent is when a letting agent turns around and says 'I could get you X amount', and it's not achievable because they just want to pick up the instruction," he says.
"It's about being realistic. I'd rather charge a tenant 25 quid or 50 quid less a week and make sure that I pick that tenant rather than that tenant picks me."
Expect pressure to build on already vulnerable renters
Another reason to focus on the tenant rather than the rental amount is to ensure low-income renters can still find a home to rent, says Paul.
"[Tenant] demand is so strong," he says. "If you have a professional couple go for a property, you've got a cap on universal credit or your LHA, and you can get another £200 or £300 a month from a private couple. And then there's the worry about whether you are going to get the direct payment from universal credit."
"I think that there's going to be a real knock-on effect, and you will see an even worse temporary housing and social housing crisis. That's going to continue to grow because the PRS is acting as a sticking plaster."
Make guarantors a normal part of the referencing process
Paul shares that asking for a guarantor is becoming more routine. You should ensure that you know how to contact each guarantor too, in the case of any issues.
"Having regular comms with a third party on a tenancy makes sense," says Paul. "More landlords and more corporate landlords have now implemented processes where they have guarantors as part of the mechanism when renting out properties - as well as obviously more people taking rent guarantee insurance."
Combine strong referencing with rent protection to help support landlords in the long term
Oli suggests that agents should focus more on the affordability ratio in referencing, rather than only seeing the end recommendation of "pass" or "approved" - and understand holistically what it means for landlords in the face of new challenges, such as the rising cost of living.
"I think being extremely explicit with landlords that, ultimately, the tenant has passed referencing. [You can say] here's their earnings, but also here's where their liabilities are going to sit in the property."
That's where rent protection can once again come into its own. "Referencing means that you can be certain - at this moment in time - that the tenant has the means to live in that property consistently and pay their rent," says Oli. "However, having that extra layer of protection with rent protection, I think, is important."
Target big portfolio landlords looking for property management services
There are opportunities for agents among these trends. Paul is part of a membership organisation, where you need to hold a minimum of 100 properties. All of its 35 members are currently scaling up and adding to their portfolio, he says.
"One landlord came up to me, he's got 30-odd properties. He's been a landlord for 25 years. He goes, 'I don't want to sell yet, but what I am going to do is switch to full management with an agent'."
Agents should be looking for these new opportunities while stock is low to ensure they're still earning enough to support their business. Pitching to bigger landlords to convert them to full management is just one solution. However, agents need to ensure they're delivering on what they promise.
"Finding the right agent for a landlord is a big move," says Paul. "It's a big decision and there's a lot of landlords out there, big landlords, that have a lack of confidence in agents as well - so agents need to really come to the fore."
Want the latest lettings new delivered straight to your inbox every week? Sign up to our mailing list and stay up to date.