The Residential Expert - July 2022

The Residential Expert - July 2022

What a turbulent summer it has been. Boris is going, petrol is going up, the war in Ukraine is still going on, and the property sector is going crazy over the Renters Reform Bill. So who better to put things in perspective - at least when it comes to property - than our very own Residential Expert, Mark Hayward?

JMI: So the Renters Reform Bill is actually happening. Are you surprised the white paper has finally arrived?

Mark: Last time we spoke, I was slightly worried it might get kicked into the long grass. But within days it finally arrived. The government had obviously been listening to us! However, we need to bear in mind that it’s just a white paper at this point. So it’s subject to change.

We’re going to see a period of intense lobbying from both tenant and landlord groups before we see the final result. Shelter has been very vocal in support but there are concerns from letting agents and others. Let’s see what plays out. 

JMI: Michael Gove called the proposed reforms a “generational shift that will redress the balance between landlords and tenants”. Is this fair or overegging it? 

Mark: Well, I think it reinforces the government’s intentions, which do go further than many expected. What it does for landlord sentiment, and property owners’ desire to be a landlord, is another thing.

My fear is that the proposed changes will make landlords subject to more scrutiny and regulation. Therefore, from the landlord’s perspective, this might indeed become a game-changer. 

JMI: The abolition of section 21 will obviously get most of the headlines. Will it give tenants the courage to challenge landlords more?

Mark: It depends how well-informed they are. Are they up to date with the changes? If they are then it will definitely give tenants more protection so they’re not evicted at short notice simply because the landlord wants more rent etc.

The flipside is that it will make landlords more careful about who they take on as tenants. Landlords will be pleased about the strengthening of section 8 though. It will give them some comfort and confidence.

Overall, I’m worried that the word ‘landlord’ has now assumed negative connotations. And this is a problem. It’s unfair, too, because landlords are fulfilling an important need. The government isn’t providing enough new housing so homes have to come from somewhere. 

JMI: The introduction of a Decent Homes Standard will be welcomed by many. Do you think it is overdue?

Mark: We’ve had one in social housing for a while but not in the private rented sector so I can see where you’re coming from. Interestingly, it takes builders longer, and costs them more, to build social housing partly because of the standards involved and the regulations they need to follow.

I’m sure many will feel reassured by the introduction of a Decent Homes Standard in the PRS. We certainly don’t want private tenants living in subpar homes or homes that are dangerous. 

JMI: Another big change proposed in the white paper is notice periods being doubled to two months. Is this a good thing?

Mark: Well, it’s certainly positive for tenants. It might not be for landlords. But it’s definitely reasonable, in this day and age, to have lengthened notice periods because it gives tenants longer to find somewhere new at a time when there’s little vacant accommodation on the market.

It’s interesting that landlords will have to give a reason for ending a tenancy but tenants won’t. This does seem a little unfair but it could all be sorted during the lobbying phase. Otherwise you could, in theory, have tenants flipping from property to property. We could also end up in a situation where landlords need to be registered but tenants don’t. So nobody can tell if an applicant is a serial bad tenant. 

JMI: The government also wants to make all tenancies periodic tenancies. Will this, as they claim, make everything simpler?

Mark: Yes, I think it will. And that’s a good thing because there’s a lot of complicated landlord and tenant laws out there. So anything that’s simpler and gives people more time should be supported. 

JMI: Talking of complications, do you think the new proposed property ombudsman will be effective?

Mark: Again, yes. The existing property ombudsman is effective - although it acts for consumers not for agents. Crucially, the new proposals will make it easier to seek redress. Tenants will have their voice heard, whilst landlords will, too. The prospect of a truly independent ombudsman is therefore a good one.

I definitely think this one will happen; whether its part of the Renters Reform Bill or not, it will happen. And it will certainly be better than what we’ve currently got. It should give landlords and tenants real comfort. 

JMI: How do you feel about the government prohibiting blanket bans on children, those on benefits, and pets? Surely a landlord has a right to decide who lives in their property? 

Mark: I tend to agree. Landlords don’t want children because of the increased wear and tear on their property. And it is their property. So they should be allowed to impose reasonable restrictions on who lives there. These changes could, therefore, dissuade some people from becoming landlords.

Why are the government proposing this then? It’s political. The policy obviously sounds progressive and it will go down well with the majority of voters. 

JMI: Is there a real fear that all these changes might shrink the number of landlords then?

Mark: Well, there was probably was a bit of weeping and wailing when the white paper came out. But now people have had a few weeks to digest the proposed reforms, I think most people have come to terms with it and they’re not feeling so negative after all.

I think landlords, and everyone else, just has to think practically and work their way through this. And, of course, these changes aren’t set in stone yet. Lobbying may well soften some of the more controversial proposals.

JMI: The white paper also mentioned the government’s intention to raise minimum energy efficiency standards to EPC band C by 2025. What are you thoughts on this?

Mark: This was going to happen even without the Renters Reform Bill. And agents in areas where the housing stock is particularly old are worried. Rather than spending the money to upgrade their property (which could costs thousands) landlords may just sell up.  

Having said that, we currently have a cost of living crisis so anything that keeps bills lower and helps the environment is good. But it’s just so expensive to improve EPCs. It can be tens of thousands of pounds. And landlords don’t have long to do this. 2025 isn’t far away. 

JMI: Moving away from the Renters Reform Bill now, the government apparently wants to encourage 50-year mortgages. Would these work in practice? 

Mark: The average age of a first time buyer is now 34. So the average person wouldn’t pay back their 50-year mortgage until their mid-80s. When you consider that life expectancy is 81, most people will die before they pay what they owe. And this will leave their children with a lump of debt rather than a lump of cash. 

Consequently, while I understand that the government is trying to encourage home ownership, this policy is a strange one. Has it been thought through? And what will lenders make of it all? It’s hard to know what an applicant’s circumstances will be like in 50 years.

Although they do offer long mortgages with a fixed rate in other countries, I’m not sure if it would work here. 

JMI: Well, that just about it for today’s discussion. Thanks for your time, Mark. Same time next month? 

Mark: Definitely. See you then. 

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