Sean Hooker, Head of the Property Redress Scheme, outlines 12 things that landlords and letting agents need to consider, to help them through 2023.
Parliament has resumed but there's still no sign of the second reading of the Renters (Reform) Bill. Spiralling rents, ever rising costs, tax burdens coming home to roost, and the spectre of forthcoming regulations are showing up clearly in the sentiments of all sides of this delicately balanced market - as demonstrated in Goodlord's State of Lettings Industry Report.
What's the industry sentiment as we head into the second half of 2023?
The confidence in the sector is not great and this is despite the market showing no signs of slowing down. Much of the negativity stems from the uncertainty created by the unstable economic and political environment.
However, it is also clear the structural weaknesses of having relied on the private rented sector consisting of small property investors, whether accidental or entrepreneurial, is coming home to roost.
The policy makers have woken up only to realise things may have gone too far to undo. So, what should letting agents and landlords be planning for as we head to the autumn equinox and the final quarter of the year?
1. Make sure you know your responsibilities - and your tenants' rights
We know that regardless of whether the machinations of parliament or the political fortunes of the politicians wax or wane, there is a consensus that new legislation will be passed in the next couple of years and this will be focused on tenant’s rights.
What exactly this will look like is still to be revealed however the clues are there. There have been indications that housing quality will be key and the Ministry of Justice launched a rental property repair checker, which tenants can use to find out where to find help if a landlord refuses to do essential work.
2. Read up on managing damp and mould in your properties
We have also seen the publication of guidance for all the rental sector on damp and mould, which now clearly lays the onus on landlords and agents to identify and deal with problems, whether they believe it is the tenants’ fault or not.
The private rental market is set to come under particular scrutiny, especially in the light of the data released at the same time as the guide, collated from reports of damp and mould reported to local authorities.
I predicted - again in a Goodlord blog - this would be a major concern for the sector, following the tragic death of baby Awaab and whist it has taken the government the best part of ten months to get their act together, the guidance, whilst controversial, lays down the ground rules and firmly puts the responsibility for dealing with issues on the landlord.
3. Don't rely on section 21 - instead, help your tenants
Tenants will need to be given support and advice to help reduce condensation, but ultimately the landlord will need to deal with the consequences.
I have heard landlords say in response to this that they will just serve a section 21 if a tenant does not change their lifestyle and not hang their laundry around the house. However, that will not wash (excuse the pun).
Getting hard-pressed housing officers to come and inspect the property has proven difficult in the past. Many local authorities have been hauled up for poor housing, so I predict that, once mould is involved, these notices will be handed out like confetti!
4. Keep track of how new health and safety standards develop
The government has also finally published the summary report on the outcomes and next steps for the review of the Housing Health and Safety Rating System (HHSRS).
Now given the review process started way back in 2018 and massive consultation with stakeholders conducted, leading to a proposed action to proceed with a modernisation and simplification of the regulations, which could be more easily followed and enforced.
This plan was four years ago and we are now only seeing the results. Even now, however, secondary legislation will be needed to bring the revisions to the HHSRS into force.
There are already plans to introduce the Decent Homes Standard to private rented property. Following the major consultation on this last year - which the government is still analysing and a second review of this is planned - the onus to ensure a property is fit for human habitation will fall squarely on the landlord.
This will mean more will look to a property manager to provide the expert help and advice.
5. Regularly inspect properties and encourage action now
My advice to all agents is to ensure regular inspections of a property are undertaken, if possible, use an independent inventory clerk to do these or use one of the apps available which you can rely on as a record. Make sure both landlord and tenant get the reports.
Ensure you provide clear instructions to residents on how to help prevent issues and report back to your client with any structural problems.
If they refuse to deal with them, tell them you will do the work and charge them or you will not continue to manage for them. These records will be essential to show you have acted proactively to deal with things.
6. Prepare for delays in rental reform, as the next election nears
Much of the proposed legislation in the Renters (Reform) Bill, if the government is to be believed, has the overall support of all sections of parliament. As I have pointed out previously, this was why the white paper and extensive consultations were undertaken.
The reality is that, due to the delays and political climate, the consensus is breaking down. We're now faced with an Armageddon situation.
If the bill does not get parliamentary time soon, the government will be forced, by the convention of the King's Speech, to reintroduce the bill again. That means it would join the legislative queue for the next parliamentary session.
In the meantime, the campaigners and opposition are lining up their ducks. The Lib Dems have a major housing policy motion on their conference agenda.
Labour have just appointed big hitter Angela Rayner on the housing case, with the weight behind her of being Shadow Deputy Prime Minister, so expect no punches to be pulled over the next few months.
7. Understand the rights - and support available - for older and vulnerable tenants
Shelter have raised the issue of older renters living in fear of eviction and whilst their stats may not stack up, their media minutes are steadily rising.
The latest contribution to the debate comes from Disability Rights UK who have called for greater protections for disabled tenants, including hoarding and mental health issues leading to anti-social behaviour.
They suggest that landlord’s ability to evict such people should be curtailed and fears discrimination and lack of accessibility if the powers to evict based on anti-social behaviour are increased as part of the measures in the Renters (Reform) Bill for when section 21 is abolished.
They also express concerns that local authorities do not have the capacity to enforce the proposed measures such as signing up to the property portal (register) and to a new ombudsman.
They also fear that some disabled people may struggle to access redress and get the right outcomes.
8. Keep an eye on how section 8 and redress could change under the Renters (Reform) Bill
I have long argued that a strong ground should be in place under section 8 for when a property is unsuitable or does not meet the needs of a tenant and for the current ground 9 to be beefed up to put pressure on local authorities to make provision to provide suitable alternative accommodation for when people get old, get, ill or cannot cope in a rental property.
Yes, access to help for properties to be adapted should be increased - but the private sector cannot be expected to take the strain for the lack of social housing. The "stay put" approach is no good for anyone.
I agree a different approach to providing access to redress will need to be considered when a wider ombudsman system comes into place.
However, I do not support a heavy-handed approach with complicated rules and procedures and a culture of name and shame. There is huge scope for mediation, conciliation, help and support as the first intervention with more draconian measures to follow for the serious offenders.
Agents can anticipate the future environment by integrating alternative dispute resolutions into their procedures and ensure they have robust evidence they have considered the needs of the tenants when things change.
9. Stay positive with your landlords on investment in the private rental sector
We have seen over the last couple of years lots of difference views on what is the best way for property investment to work. This has seen the market shift almost seismically at times. However, this has not worked out for many investors and has distorted the market.
For example, a sizable number of landlords have shifted into the short-term let model and the yields from this were reportedly bigger than in the traditional market.
However, with rent inflation soaring, many are trying to return, especially as looming regulation and tax implications have started to be promised for the holiday and serviced apartment sector.
10. Look out for a rise in landlords as limited companies
Tax changes have encouraged many landlords to look at incorporation as way of getting their fiscal bills down.
However, for many adding "Limited" to their name is causing as many challenges as remaining an individual.
Corporation tax rises are on the horizon and many mortgage lenders and insurers are treating the risks of company landlords more cautiously.
11. Get ready for the energy efficiency drive
The green spotlight is also a concern in the sector as the drive towards Net Zero, becomes ever more front of stage. Politicians of all shades are not now shy to point the finger at the private landlord as not doing their bit and the push me pull me on policy is not helping.
Whether or not the move to Minimum Energy Efficiency Standards of an EPC C comes in for 2028 is not the point. The market is moving towards demanding more sustainable rental properties and again mortgage companies and insurers are starting to take things seriously.
The landlord who plans in advance, will therefore likely be ahead of the game.
12. Prepare for change but don't panic
The journey for many of you over the coming period, will be different and for some more difficult than for others. Trying to find the right way may prove tricky as the future may not be clear.
You will need the right people and expertise, and the right tools to spot the opportunities. This is why ensuring you prepare now and adapt and change your plans as required is essential.
