“More housing stock in the private rented sector would give tenants more choice and ease the burden on rents. It’s a critical situation and although we primarily represent our landlord clients, it’s also important that our tenants, and thousands like them, have a voice as well. We hope the Government will listen to the views of the industry, as well as our recommendations, and take steps to ease the problem.”
The letter to Gove follows a consultation with HOP’s landlord clients, tenants and other industry professionals working in the private rental sector. As well as addressing the current challenges, the letter offers recommendations about how the government could slow the exodus of landlords who are selling investment properties and exiting the market.
HOP manages one of West Yorkshire’s largest rentals portfolios, worth more than £245m, and expects rents to increase by another seven per cent in 2023, which follows a 10 per cent rise in 2022.
The company’s recommendations include removing the three per cent additional homes stamp duty and instead charge landlords selling additional homes the three per cent stamp duty levy, to incentivise landlords to purchase new buy to let properties.
Gidney also advocates incentivising the transfer of BTL property into limited company ownership by removing the stamp duty levy for a 12-month period. This would enable landlords to pay tax on profit rather than revenue and would help to professionalise the industry further.
On top of that he wants more certainty over upcoming rental reforms and streamlining and simplifying the Section 8 eviction process. This would enable landlords to evict bad tenants and ease their concerns about the removal of Section 21.
Dear Michael Gove,
I am writing to you as the managing director of one of Leeds’ largest letting agents, which manages a large property portfolio in the area.
Although we manage these properties on behalf of our landlord clients, I’m actually writing on behalf of our tenants, and millions of people like them in the UK, who live in the private rented sector.
In recent years the raft of legislation, red tape and tax changes designed to make buy to let (BTL) properties less appealing to landlords, combined with upcoming rental reforms, Section 24 tax, changes to capital gains tax thresholds and EPC legislation, have had a profound impact on the rentals market, with huge numbers of landlords selling their investment properties.
Although this was the aim of these changes, and some former tenants have had the chance to get on the housing ladder as a result, the shortage of available homes in the private rented sector has now reached a critical point.
Research from estate agency data specialist, TwentyEA, shows that during 2022, supply volumes reduced by 8% year-on-year and 25% since 2019. Analysis of HMRC data by chartered accountant, UHY Hacker Young also found that the UK lost 116,000 BTL properties in the last year alone, and as landlords face being squeezed by rising mortgage costs, we can already see that this exodus will continue in 2023.
Eroding landlords’ margins has had the desired effect and made BTL a far less appealing asset class, but tenants are suffering as a result. This includes the many people who live in private rented property, either because they specifically want a short-term home, or enjoy the freedom it offers, or they don’t have a deposit to get on the property ladder.
Tenant demand for rental property is up by 10 to 12% nationally according to Rightmove, and this has pushed rents up by 10% annually in recent years and we’re forecasting that they’ll increase by a further 7% in 2023 in West Yorkshire alone.
Potential tenants now regularly have to bid against each other to secure rental properties, which is driving rents up further, and it’s a similar story across the UK.
Plus, when all this is combined with soaring energy bills and the cost of living crisis, it’s likely that more tenants could slip into arrears and find themselves in financial hardship.
The problem is predominantly due to a chronic undersupply of private rental stock due to landlords leaving the industry. Void periods between tenants are now just five days on average in West Yorkshire and tenants are generally staying longer in properties and moving less, for fear of being unable to find a replacement property. Approximately half of tenants now report being worried about the difficulty of finding a home to rent.
This huge imbalance in supply and demand is also allowing unscrupulous landlords to get away with letting out poor quality homes and generally leading to a decline in the quality of rented housing, as landlords don’t need to upgrade properties in order to secure suitable tenants for their properties.
If there was more housing stock available in the private rented sector it would give tenants more choice and ease the burden on rents.
A petition is now calling on the government to reverse the Section 24 tax changes for BTL landlords, which prevent them claiming mortgage interest against their tax liability. However, after consulting with our team and landlord clients, we have an alternative and potentially more workable recommendation.
One immediate way to stem the tide would be to remove the 3% additional homes stamp duty and instead charge landlords selling additional homes the 3% stamp duty levy. This would incentivise landlords to purchase new BTL properties.
I would also recommend incentivising the transfer of BTL property into limited company ownership by removing the 3% stamp duty levy for a 12-month period. This would enable landlords to pay tax on profit rather than revenue and would help to professionalise the industry further.
As well as this, landlords would benefit from more certainty over upcoming rental reforms. Streamlining and simplifying the Section 8 eviction process so that landlords can evict bad tenants would help to remove the concerns landlords have about the removal of Section 21s.
Finally, simplifying the planning process so that small builders and developers can build more homes would also benefit and support tenants and buyers, alongside whole swathes of the wider economy.
I hope you find this letter constructive and look forward to hearing of any progress made and of course, if you, or any of your colleagues, would like to discuss further, please feel free to contact me.
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Happy to share this letter that I recently sent to my MP. I have redacted as appropriate, but other agents / Landlords/ Tenants may wish to use some of these points and lobby their MP's too. Copy and paste if you want to!
Dear Rt Hon
Thank you once again for taking the time to read my communication.
You may recall I wrote to you back in 2021 expressing my concerns about excessive anti-landlord interference in the private rental sector.
I thought it prudent to update you on the current state of supply, as we reach a critical stage of the Renters Reform Bill.
The concerns and outcomes I expressed back in 2021 are certainly coming home to roost, with a supply crisis worsening by the month and leading to exponential rent increases. Only last week I received 12 separate tenant offers on a 2 bedroom property within 24 hours of marketing. A difficult job advising 11 potential suitors they had been passed over! Such situations are becoming the norm.
As previously advised, I am all for the positive reform and tenant security of tenure, with tougher penalties for landlords who ignore compliance and their repairing obligations. Fortunately, such landlords are few and far between, and appear greater in the social housing sector than in the private sector. Suffice it to say, the media sentiment of greedy uncaring private sector landlords is grossly exaggerated.
With the current landlord sector exodus worsening, steps need to be taken reverse this trend as a matter of urgency. The majority of the Renters Reform Bill has overwhelming acceptance in our industry, but there are arrears that are too heavily weighed against landlords.
1. Periodic tenancies from the outset are simply unworkable. Given the costs to landlords for compliance, inventories, referencing etc, there must be some commitment beyond 2 months from a tenant from the start of a tenancy. Moreover, most tenants prefer the security of fixed term tenancies. It is probably different in the social housing sector I appreciate, and certainly a reason to consider reforming these sectors independently of each other.
2. The addition of section 8 grounds to incorporate an accelerated possession procedure for rent arrears, or anti-social behaviour, would stop new legislation becoming ‘a gift’ for bad tenants. Section 21 has previously been used for bad tenants in the main and created a buffer for potential court system overload. My view is that removing this buffer, and not including an accelerated possession procedure in a reformed section 8, will collapse the court system completely. This will create anarchy in the sector and drive much of it underground.
3. Deposit reform is unnecessary. The current system provides more than adequate tenant protection and works perfectly well. Any changes that will compromise appropriate tenant responsibility for leaving a property as they found it should be dismissed completely, otherwise it will only serve to drive more landlords away.
I do sense a greater political understanding and a more considered approach is now being adopted. It is important that politicians stand firm and do not bow down to outside pressures and tenant support groups. I am not naïve enough not to acknowledge the importance of young voters, but allowing this to dominate reform will make a housing shortage a supply tsunami that will take decades to repair.
Having been in the industry since 1984, I would hope my knowledge and experience can be passed on and used to support a fairer and positive sector for both tenants and landlords alike.
Yours sincerely
I have to comment on this. I keep seeing these kinds of articles where it is stated that what would be best for tenants is an increase in rental stock. This is false.
I also keep seeing tenants spoken about as if LL's know whats best for them. This is completely false. All tenants want is their own home, not more PRS stock. Why do these articles keep speaking for them as if they know what tenants want, without actually asking them?
Just be straight and say it's what you want, for your business and profit. But stop claiming you know what tenants want for your own benefit!
A great letter from a fab agent who knows his stuff. We have to keep ringing the same bell over and over again in any way we can in the hope the message will trickle through. Ben at NRLA has been exemplary in this approach and, as an industry, we need to keep going. Bravo Luke!!
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