Landlords continue to be the popular target of all parties
The 2017 general election is trundling towards us like a juggernaut running on jet fuel. It’s now less than three weeks to polling day, and Britain’s parties have now all published their manifestos. They make interesting (and, in some cases, alarming) reading for buy-to-let investors and landlords.
All the parties promise to build more homes, and the Conservative, Labour and Liberal parties all plan to follow through on the proposed ban on letting agent fees. There are pledges for rent caps, rental increase caps, longer tenancies, and new standards for homes in the private rented sector.
In this article, I outline the key policies which could affect you as a landlord. Let’s begin with the Conservative party:
Conservative manifesto housing pledges
The Conservative manifesto is light on detail. However, it does promise to “improve protections for those who rent, including by looking at how we increase security for good tenants and encouraging landlords to offer longer tenancies as standard.”
They have already set aside £1.4 billion infrastructure spending, and this will be used to provide for a new generation of social housing in England. Plans include fixed-term council housing to be sold off after 15 years, with all proceeds reinvested in social housing.
Labour manifesto housing pledges
Labour’s manifesto is a little more detailed when it comes to housing. It will create a ‘Department of Housing’. It will be tasked with achieving Labour pledges to build one million new homes over five years. Half of these will be council and housing association properties. Labour says these would be for rent and ‘totally affordable’.
Labour promises a set of new standards for homes in the private rented sector and fines of up to £100,000 for landlords who rent out properties considered unfit for human habitation.
Like the Conservatives, Labour believes that tenants should be protected with longer tenancy agreements. It has put a figure on this: three years.
Labour also believes that rent rises should be capped in line with inflation.
Liberal manifesto housing pledges
The Liberals want three-year tenancies as standard, too, as well as automatic inflation-linked rental increases. They also want a cap on the size of deposit required by landlords.
Green manifesto housing pledges
The Greens fall in line with Labour and Liberal policies, promising rent controls, 500,000 socially-rented and affordable homes, and a new licensing scheme for landlords.
What you can learn from the parties’ manifestos:
On the face of these policies, landlords are going to feel the pinch whichever party gains power in June. That’s probably not a surprise. Political parties buy votes by promising voters what they want. There are more tenants in the UK than there are landlords, and so housing policy will be biased towards tenants. It only stands to reason.
I think we can safely say that letting agent fees will be banned. Deposit limits have been put on the agenda by the Liberals. We may see those introduced in the future. However, whoever gets in, rent controls are on the cards. Should you be nervous about profitability in a rent-controlled environment?
Rent controls – don’t get your knickers in a twist
Perhaps the harshest of the policy promises is rent controls. It doesn’t allow any scope for rent rises to marry up with actual landlord costs. For example, what if landlords are expected to register each property and become accredited for each property they own, because of new regulations? The costs of this would have to be absorbed by the landlord, without the ability to pass on to the tenant.
Where private sector rents have been controlled in other countries, the controls have not worked as assumed. For example, in Berlin, where rent controls prohibit landlords from charging more than 10% above an area’s average rent, eight out of ten online housing listings were advertised above legal limits. Rents in the city have increased by nearly 10% in two years.
Rent control tends to either be circumnavigated or lead to fewer new homes being built. There is widespread evidence in European cities where rent controls exist that tenants pay part of their rent in cash, thus paying the ‘real’ rent to the landlord. If buy-to-let investors cannot make money from renting, they will stop buying. Rent controls were introduced in Toronto in the 1960s, and new home building virtually ground to a halt.
My advice is, don’t get your knickers in a twist over rent controls. The devil will be in the detail, and I’d bet a pound to a penny that there will be a lot of giving to landlords. You cannot have a system where costs are uncontrolled, and income is limited. There will be ways to navigate rent controls to maintain profits, and savvy investors will find them.
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