Labour made their debut as the majority party once again in over fourteen years of failed elections. The party for the people, they herald themselves as but for landlords, the threat of red tape, rent caps, tenant eviction bans, selective licensing and even more obstacles to be thrown at us, we find ourselves asking at what point is it going to stop being profitable to be a landlord in the UK? Will we all sell our property investments where supply massively outstrips demand so that tenants can suddenly come up with the vast amounts of money they do not have to purchase their first home? Absolutely not.
Property has been a stellar investment throughout the history of time, it is the one thing that has retained value over all others; whilst the value of the pound has fallen, property prices have continued to increase. Even with the drop-offs in the market where property prices have slumped, they have never slumped so far as being cheaper than any point ten years previous, in average terms. Whilst market conditions will vary across the country, generally speaking homes are more expensive today than they were ten years ago and this is true regardless of what period of time you’re comparing. In 2010, property prices were more expensive than in 2000 and this is halfway through a major recession where the Daily Mail and other newspapers were touting that properties were cheaper than they’d ever been.
Tile Ventures specialises in innovative property solutions for landlords and homeowners and we are open to addressing any concerns you might have about the new Labour government but as comfort, rest assured we’re not concerned so neither should you. We will briefly address the three main topics of the Labour government’s approach to renting in this article.
Government Private Rented Sector Policy 2024: The Renters’ Reform Bill
The Renters’ Reform Bill has been in the pipeline since 2018 or even before. It aims to bring about even more rights for tenants at the additional expense to landlords who, inevitably, will increase rents to make the service a financially worthwhile provision. The biggest fear of the bill is that it brings about the end of Section 21 evictions, incorrectly terms “no-fault” evictions because nobody is evicted for no reason and the genuine “no-fault” evictions that take place, because the landlord needs to sell or re-occupy the property, are a negligible minority. The Renters’ Reform bill is designed to protect landlords so that they can sell or re-occupy the property, or at least that’s what the outgoing Conservative party suggested; this could change under Labour.
What is largely neglected in the media, however, is that it isn’t a simple abolishment of Section 21 of the Housing Act 1988, instead, legislators are proposing amendments to the Act so that the valid reasons in which Section 21 has been used previously, to save costs and time, might be protected.
However, there is something that has been ignored by landlord and tenant groups like Shelter and Acorn alike and that is the unintended consequence of abolishing Section 21 and forcing landlords to rely on Section 8 grounds. It is no secret that rising rents can trigger a tenant to ask for a Section 21 so they can approach the council for social housing on the grounds of them being at risk of homelessness due to being evicted through no fault of their own. Abolishing Section 21 means tenants won’t have this luxury anymore, which may trap them in the property they can’t afford and if they find themselves enjoying a takeaway and high-end mobile phone contract rather than pay the rent that is above their means anyway, councils will decide that this person could’ve sacrificed every luxury they had to pay the rising cost and because they didn’t, they are “voluntarily homeless” and therefore, the council has no legal obligation to them to assist them whilst they’re homeless.
In other words, abolishing Section 21 will leave tenants who benefit from the legislation in limbo where they are unable to be evicted at their request. It is expected that Section 21 will be replaced with something similar but I wouldn’t count on it under the Labour government.
Government Housing Policy 2024: Rent Controls
Labour has suggested multiple times that rent controls are on the cards, or at least greater powers for local authorities to govern rents. However, the suggestion alone doesn’t make it fact. It is extremely unlikely, in my opinion, that Labour will introduce rent controls for the simple reason that the majority of Labour MPs who have a strong political influence are all multiple-property portfolio landlords and even the likes of Polly Neate, CEO of Shelter, is a landlord with her investment portfolio in her husband’s name.
There is nothing on the government website that confirms they are considering enforcing rent controls and, whilst Sadiq Khan has campaigned diligently for rent controls in London so that TFL can skim off even more money from their residents, he has so far failed repeatedly and even his own party doesn’t entertain the idea except for a small cell of Labour MPs who are wet behind the ears, who don’t have real-life experience or have experience of being a landlord, who feel that landlords should be charities and operate at a loss to suit their tenants.
It’s a good vote winner, the idea of rent controls, because most of the population in the UK rent, especially the younger generations that political parties really want to capture as loyal voters. That’s why rent controls will always be suggested, as they have been since at least 2015 (it’s always a big thing around local and general elections) but they’ll never be implemented. Don’t forget, we already have a suitable system with the Rent Tribunals; the tribunal can be asked to set the rent fairly if a tenant disagrees with the amount of rent they’re paying or the amount that their rent is to be increased by.
Government Housing Policy 2024: House Building
The government announced plans to build 1.5 million new homes in the next five years. These are a mixture of affordable homes (available on the Help to Buy schemes and part-ownership schemes) and traditional new-build properties.
Concerns are raised about the influx of supply of homes, which we know is going to drive prices down but we’ve already established that property values never fall below the previous decade’s value.
I think a lot of us can agree that rents have gotten out of control, it’s necessary to cover our rocketing costs of being a landlord, though, isn’t it? But the problem is, as property becomes more affordable, more landlords will enter the market and they’ll want to compete on price. A newly built home will have much lower maintenance costs (generally speaking) than an older property and therefore, rents are likely to be influenced accordingly.
This is the most appropriate way to “control” rents. Rent controls and capped rents don’t work because they distort the market, Scotland tried and failed to do this many times over and it simply doesn’t work. What does work is allowing the free hand of the market to control the price of rent governed by supply and demand.
This new housing policy is incredible news for property investors and landlords like us because it means greater opportunities to secure deals and developers are going to be needed to build this 1.5 million new homes.
If you’re worried about the state of the market and you’re on the edge of giving up, get in touch with us today to see how we can solve your problems, uplift your profit margins and take the stress out of being a landlord. Simply call or message us on WhatsApp on 07845 555 766.
