Short-term let changes are on the horizon, while the rent control experiment in Scotland may not have had the intended result. Here's what you need to know in May 2023.
The big topic of the month - and the coming year - is the Renters (Reform) Bill. It's now been introduced to parliament, and that means a journey through the Houses of Commons and Lords, before it receives Royal Assent.
This monthly update is therefore Renters (Reform) Bill special, outlining some of the debates that have emerged around the topic.
1. Student lets in the bill and how this could disrupt seasonality
Most student lets take place during January to March ahead of the next academic year. However, with private student lets currently expected to transition to the single system of periodic tenancies under the bill, this seasonality could be disrupted.
Two-month notice periods for tenants may mean no guarantee of properties for those looking earlier. It could also mean longer void periods for landlords if their tenants choose to move out before the summer months - meaning that properties could be lost from the student let market as landlords look to house professionals instead.
However, the Telegraph has reported that Michael Gove is considering amending the bill to take these concerns into consideration. You can read more about this in our blog.
2. Eviction powers to increase
One letting agency has said that the risks posed by abolishing section 21 may be lower than originally feared by landlords. Beverley Kennard, Head of Lettings Operations at Knight Frank, explains that, although that trigger for eviction has changed, the grounds for eviction under section 8 have increased.
“The [grounds] now include rent arrears and anti-social behaviour, which should give landlords even more comfort” Kennard says. You can read more about changes to section 8 in our guide.
3. The property portal could be important for tax
HMRC may be able to use the new property portal to advise its investigations into taxes unpaid by landlords. Advisory firm BDO has said that the bill doesn't state this explicitly but that it will have access to the same public data as tenants.
BDO shares that HMRC will be able to combine data from the new database with the information it can access through the Land Registry for analysis.
Dawn Register, Head of Tax Dispute Resolution at BDO, says: “HMRC already holds significant information on taxpayers’ financial affairs. The introduction of a new private rented sector database will leave few places to hide for landlords who don’t comply."
4. Preparation can now begin for the bill
The bill may yet face some amendments, but there's plenty that agents and landlords can do to start to prepare. Our blog highlights five of the things that you can do to start getting reform ready.
Goodlord has plenty of extra materials and resources that outline all of the changes to come under the Renters (Reform) Bill, from the abolition of section 21 and Assured Shorthold Tenancies, to the introduction of a property portal and landlord ombudsman.
You can download our e-book, watch our webinar, read our guide, or even listen to our podcast on it. Head to our resource hub to find everything in one space.
A recap of the past three months
- What you needed to know in May 2023
- What you needed to know in April 2023
- What you needed to know in March 2023
Things to know from May 2023
Short-term let planning permission rule proposals announced for England
The government has launched a consultation into new planning permission rules for converting short-term lets in England.
This aims to "help local areas have greater ability to control any future increase in the number of short term lets".
The plans aim for a flexible approach, giving local authorities the power to restrict permissions for converting long-term rental properties or homes into short-term lets where those short-term lets are restricting supply. You can read more about these proposals in our guide.
A new consultation about the short-term let register released
The government is seeking views on the creation of a short-term let register in England. The proposals aim to "ensure England continues to provide safe and high-quality guest accommodation".
The new consultation is analysing whether the framework should be mandatory across the country, or whether it should be opt-in for regions in tourist hotspots, where housing supply is affected.
The consultation will also look into what exactly will be registered (property owners or their properties?), as well as enforcement. Read more about these proposals in our blog.
A 10-point action plan for government published
Since the launch of its open letter in November 2022, Goodlord has conducted research across landlords, agents, and tenants to understand more about why landlords are leaving the sector, and what the government could be doing to stem this flow. The results of this research were published in its "Renting Done Right" manifesto.
This report outlines a 10-point action plan with proposals for the government to consider - and it's not all about financial backing. More support, more consistency, and more incentives are the three headline requirements.
The results are in for rent controls
Data from Citylets has shown that average rents increased by 12.4% in the past year in Scotland, despite the rent freeze introduced by the Scottish government in September 2022. The rent freeze has now been upgraded to a rent cap of up to 3% in most instances, or 6% for certain permitted costs.
The agency highlights that there's a disparity between increases for existing tenancies - which remain low - while those searching for new properties experience a jump in prices and face issues with availability.
Things to know from April 2023
Changes to eviction notice periods for anti-social tenants
The government has announced that it will give landlords more power in the face of anti-social tenants - including reducing the notice for eviction of an anti-social tenant to just two weeks.
The proposals are detailed in its Anti-Social Behaviour Action Plan, and are expected to be included in the Renters' Reform Bill, when it's introduced to parliament.
The bill will abolish section 21 and strengthen grounds for eviction under section 8.
You can read more about the new plans for dealing with anti-social tenants in our blog.
New Scottish rent cap rules since 1 April
The rent freeze rules in Scotland have now changed. Landlords are allowed to increase rents by up to 3%, or up to 6% for certain prescribed costs.
The government previously came to an agreement with the Scottish social housing sector to ensure that social housing rents don't increase faster than inflation.
The moratorium on evictions remains in place for both social and private housing, with some exemptions.
EPC updates delay?
The Telegraph has reported that plans to increase minimum energy efficiency standards in private rented homes to an EPC band C on new tenancies by 2025 and for all tenancies by 2028 may be delayed.
The expected new deadline is simply 2028 for all tenancies - yet this has yet to be confirmed.
This delay - and a final confirmation on the official date - would help landlords plan the relevant upgrades required and spread the cost of those upgrades over the course of the next five years.
The original consultation on these changes outlined that a £10,000 cap limit on spending to reach the relevant standards will likely come into play.
Changes to capital gains tax from 6 April
Landlords selling their properties need to pay capital gains tax, which is calculated based on the difference between the amount the property cost originally and its value when sold.
Some of this profit - Annual Exemption Allowance (AEA) - can be tax-free. However, the tax-free limit is going to decrease from £12,300 to £6,000 in the 2023-2024 tax year, from 6 April 2023. This means landlords will be paying tax on more of their profit.
This amount will decrease again for the following tax year, dropping to £3,000. You can find out more on the government's site.
New edition of the How to rent guide now live
At the end of March 2023, the government published an updated version of the How to rent guide for tenants.
This edition includes details about the new carbon monoxide and smoke alarm requirements and recent digital improvements to right to rent checks.
It's essential for any new tenants to receive the latest edition of the guide before the start of their tenancy, and for any renewing tenants too. Section 21 notices may be invalid if the guide wasn't shared with tenants at the right time.
You can read more about the importance of this guide to your agency's compliance in our guide.
Things to know from March 2023
Chancellor's Spring Budget 2023 to be presented in mid-March
On 15 March, the Chancellor of the Exchequer, Jeremy Hunt, will share his economic plans for the coming months. Letting agents and their landlords will need to keep an eye on what's announced to understand how any changes may affect the lettings landscape.
Hunt has already stated that “the best tax cut right now is a cut in inflation” - suggesting that tax cuts for the near future may be off the cards.
You can read our blog for an analysis of whether tax relief reform for landlords may be a possibility in the long term.
Results of a right to rent evaluation show opportunities for letting agents
The government released the results of an evaluation of the right to rent process. Initially this was to detect if the scheme encouraged discrimination in the tenants that were chosen.
Yet there are other insights that letting agents can take from the report, to understand how their landlords view the checks, and how letting agents can help support. You can read more about what the research found in our blog.
A short-term let licensing consultation in Wales will close on 17 March
A consultation from the Welsh government on a visitor accommodation licensing scheme addresses the concerns around "inconsistent compliance" with the current legal requirements, and the impact of these short-term lets on housing supply and local communities.
You can respond to the consultation on the Welsh government's site, and learn more about the other changes on the horizon for the short-let sector in our blog.
Scottish rent freeze rules to change from 1 April 2023
From 1 April 2023, the rules in Scotland will change to increase the rent increase limit to 3% in most instances, with certain exceptions to cover mortgage increase, insurance premium increases, and other costs. In these instances, landlords will be able to increase rents by up to 6% - but will need to follow a set process to do so.
You can read an overview of what's in place now and what will change at the end of the month in our guide.
Cities across England call for rent controls
The mayors of Manchester, Liverpool, and London have shared an open letter to the levelling up secretary, Michael Gove, asking him to introduce a rent freeze and ban evictions. The letter was also signed by members of the Green party, trade union leaders, and more.
These calls come after Scotland froze rents in September 2022 - yet Timothy Douglas, Head of Policy and Campaigns at Propertymark, says: "The crux of the housing problem is that demand is far outstripping supply, yet this legislation is having the opposite effect of pushing landlords out of the sector."
Labour leader, Keir Starmer, has also shared plans to devolve power to councils if Labour came to power, which may place the power to introduce a rent freeze into the hands of those currently calling for one to be introduced. The industry waits to see if the current government will follow Scotland's lead.
New recommendations shared with government around renters' reform
A report written by the cross-party Levelling Up, Housing and Communities (LUHC) Committee, Reforming the Private Rented Sector, lists recommendations to the government for amending the existing Renters' Reform Bill white paper proposals.
The report takes into consideration the call for evidence submissions from industry stakeholders - including Goodlord's.
From abandoning plans to legislate around tenants having pets in rental properties to highlighting how court processes could be sped up, you can read our guide to what may be taken into account when the bill is introduced.
Payslip fraud is on the rise
From a sample of over 300,000 tenancy applications in 2022, just 1 in 1,000 were proved to be fraudulent - yet 54% of those proved to be false involved payslip fraud, according to Goodlord data.
“As the technology fraudsters use gets smarter, agents should ensure they’re deploying the best-in-class tech tools to combat it," says Blake Richmond, Managing Director of Referencing at Goodlord.
While fraudsters are getting smarter, the number of tenants asked to provide a guarantor is on the rise, showing that agents and landlords are looking for new ways to add an extra layer of security to their referencing activities, as the fraudulent activity grows throughout the cost of living crisis.
For some insights into how to better protect your agency against fraudulent activity in the tenancy process, read four of our top tips.
New trends in buy-to-let investment
Despite challenges in the lettings industry, research has highlighted positives in the buy-to-let investment landscape - as long as those investors are willing to see it as a long-term project.
"[A property investment] is one which will see many economic cycles and changes of Government, but despite interest rates rising and falling and regulations coming and going, a BTL investment will invariably deliver a good financial return," says Allison Thompson, Managing Director of lettings at Leaders Romans Group (LRG).
The group's data shows that 71% of its landlords plan to keep their portfolio size the same while 10% plan to grow it - a positive for agents and landlords to take into March 2023.
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