Covid, rent arrears and binning Section 21 – a lethal cocktail for the PRS

The State Opening of Parliament took place today [11 May] and as expected, the Government has reconfirmed ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Covid, rent arrears and binning Section 21 – a lethal cocktail for the PRS | LandlordZONE.

Covid, rent arrears and binning Section 21 – a lethal cocktail for the PRS

The State Opening of Parliament took place today [11 May] and as expected, the Government has reconfirmed its commitment to reform in the private rental sector.

Although not mentioned specifically, Her Majesty the Queen promised to ‘enhance the rights of those who rent’. This undoubtedly means that the Renters’ Reform Bill, which will scrap the use of Section 21 evictions, will happen soon.

Even though this is inevitable and has been for some time, the scale at which the pandemic has accelerated rent arrears is really quite frightening and I am deeply concerned what this will do to the rental market if it goes ahead too early and without greater thought and detail into strengthening the Section 8 process.

We’re now more than a year on from the start of the pandemic and the strain on the private rented sector is starting to show. In a recent poll carried out by , nearly a third of letting agents (32 per cent) said that more than 50 per cent of their portfolio of tenants have fallen into rent arrears:

  • 21 per cent said between 30 and 50 per cent are affected
  • 19 per cent of agents said it is 15-30 per cent of their portfolio
  • 28 per cent have between 0-15 per cent of tenants affected by rent arrears.

Obviously, the pandemic and the current eviction ban is playing a huge part in these rising rent arrears, but it does not bode well for when things start to go back to normal, only for tenants to be faced with the end of furlough and landlords to be hampered by the removal of Section 21.

The vast majority of landlords and letting agents are working hard to keep the lines of communication with their tenants open and be accommodating wherever they can.

In some instances, mediation has helped to successfully reach a way forward, whether that involves the tenant looking for another property, being offered a rent reduction or implementing a repayment agreement. 

In my view, there needs to be a significant amount of time, post-pandemic, for the market to readjust. 

Back to normal

Landlords and tenants need time to get back to normal and see if they want to remain in their current tenancy contracts, courts need time to clear the backlog of repossession cases, which are currently stacked up, and significant consideration and alterations must be put into making Section 8 fit for purpose. 

Reporting on the extent to which tenants are in arrears, 21 per cent of letting agents reported to CMP that arrears have reached six months or more. A further 18 per cent reported tenants being between three and six months in arrears.

If this is a taste of what landlords can expect, then it is inevitable that more landlords will start to leave the market, particularly at a time when prices in the sales market are at record highs.

Many landlords will be looking at this right now and considering their options. We even know of landlords selling their properties with tenants in situ just because they want out.

Devastating

I know there are many tenants who have been badly affected by the pandemic, unable to work or had their wages/hours cut and for these people building rent arrears has been unavoidable, which is devastating for all involved. 

Unfortunately, there are also a lot of tenants who have played the system to their advantage and avoided paying rent simply because they know there is nothing their landlord can do about it.  No landlord wants to make someone homeless, but more has to be done to check the tenants’ viability to pay rent.

Without , landlords will be much more exposed to these kinds of serial rogue tenants who know how to use the system’s loopholes to remain in properties for free.  This will also have a dramatic knock-on effect to referencing, making it even more difficult for honest hard-working tenants to find properties.

Affordability problems

Affordable rental properties are difficult to come by and many agents are already inundated with enquiries every time a new property comes available. All that is going to happen, is the majority of tenants won’t even get a look in, as landlords and agents will be forced to cherry-pick only those in the very strongest and proven financial position.

In Bristol, for example, 30 percent of households are privately rented, and rents have gone up 52 per cent since 2011, but wages have only risen 24 per cent. This is only going to get worse if the pool of rented properties is reduced because landlords do not feel supported in the sector.

Tenant charities are calling for the Renters’ Reform Bill to be brought forward but I would urge government to consider such a move very carefully whilst there is so much uncertainty following the pandemic.

As I have said before, when it comes to tenants and landlords, one does not work without the other, so we need a PRS which is fair for all.  

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Covid, rent arrears and binning Section 21 – a lethal cocktail for the PRS | LandlordZONE.

Source : Landlord Zone More   

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Queen’s Speech: Government to launch radical White Paper on PRS reform

The government has promised to introduce its Renters Reform Bill in the autumn which will include details ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Queen’s Speech: Government to launch radical White Paper on PRS reform | LandlordZONE.

Queen’s Speech: Government to launch radical White Paper on PRS reform

The government has promised to introduce its in the autumn which will include details on abolishing Section 21 ‘no fault’ evictions.

Eighteen months after she first announced the Bill, the Queen’s Speech included its intention to enhance renters’ rights in a White Paper outlining plans to improve security for tenants in the private rented sector, as well as strengthening repossession grounds for landlords when they have valid cause.

It will include proposals for a new ‘lifetime’ tenancy deposit model and bring forward reforms to drive improvements in standards, including by ensuring all tenants have a right to redress. It also promises to explore the merits of a landlord register.

In its background briefing, the government says it will consider a set of measures to hold bad landlords to account for delivering safe and decent housing to tenants without penalising good landlords.

The legislation will also explore improvements and possible efficiencies to the possession process in the courts, to make it quicker and easier for landlords and tenants to use.

Paul Shamplina of , says: “It was expected that the Queen would make reference to the Renters Reform Bill; I’ve been predicting for a while that Section 21 will be abolished in the next 12-18 months, but there has to be reforms of the Section 8 Grounds and major investment made in the Court System coupled to bailiff reforms, especially in the wake of Covid and the lengthy evictions ban”.

Ground rents

The Queen’s Speech also included a promise to end the practice of ground rents for new leasehold properties, a new building safety regulator and to modernise the planning system so that more homes can be built.

Many leaseholders face high charges increased by freeholders over the years, making selling a leasehold property with cladding conditions attached extremely difficult.

The government also plans to spread opportunity across the UK and deliver a national recovery from the pandemic.

said: “To achieve this, my government will level up opportunities across all parts of the United Kingdom, supporting jobs, businesses and economic growth and addressing the impact of the pandemic on public services.”

Reaction

furlough

Ben Beadle, Chief Executive of the National Residential Landlords Association said: “We welcome the Government’s commitment to publish a White Paper on reforms to the rental sector and consult widely before introducing a Bill.

“What is proposed amounts to some of the biggest changes in the private rented sector for over 30 years. We urge the Government and all others in the sector to use the time they now have to ensure that the reforms are fair and workable for both tenants and landlords.

“This must include comprehensive grounds upon which landlords can legitimately repossess properties, the development of a new tenant-landlord conciliation service to help sustain tenancies wherever possible and court reform to ensure possession cases are dealt with much quicker than the year or more currently being taken.

“Lifetime deposits for tenants provide an opportunity to reduce the upfront cost of renting, but they need to work for all concerned.

“We welcome also the Government’s ambitions to drive out bad landlords from the sector without penalising those who do the right thing. We want to root out all those who bring the sector into disrepute.”

Timothy Douglas, Policy and Campaigns Manager, Propertymark says: “The announcement in today’s Queen’s Speech that the UK Government will publish a Renters Reform White Paper in the Autumn demonstrates that Ministers are prepared to engage with the industry to understand the impact any substantial legislative changes will have on those involved in the private rented sector.

“With the focus of the new package on lifetime deposits, landlord redress and greater enforcement, the UK Government must look at ensuring that a system that would allow deposits to be passported can only take place if there is a bridging loan, with the UK Government as the guarantor, in order to ensure the remaining part of the deposit is covered should the tenant default.

“Additionally, the UK Government must prevent ‘double jeopardy’ and only extend redress membership to properties that are fully managed.

“Propertymark will be engaging with MHCLG and MPs to ensure they fully understand the consequences of any changes. We will also be scrutinising the White Paper and proposed legislation, to ensure the best possible outcome for our members.”

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Queen’s Speech: Government to launch radical White Paper on PRS reform | LandlordZONE.

Source : Landlord Zone More   

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