Landlords! What are you like? You entered the decade as entrepreneurs, but leave it more like rogues! It’s time that we regained our reputation and take pride in being a landlord once again!
Up until the middle of the decade, as an industry, we were weathering the post Credit Crunch economy better than most. Then it started – the onslaught of increased legislation! There have been more Acts of Parliament introduced or amended since 2014 than in the previous 20 years, leaving us worse off on so many levels … and that’s not even counting the Section 24 tax changes from HMRC!
So, who’d be a landlord on the eve of 2020? Well, we would … and we are landlords, as well as letting agents. The only thing we know for sure about the new 20s, is that change will happen. Whatever comes our way, we’re staying positive. We intend to remain ethical and profitable, and we will continue to help our clients be the same and take pride in being a landlord.
What’s happened to landlords?
In the 15 years leading up to 2009 The Private Rented Sector experienced sustained growth. Every time you revalued your property, it was worth more. Equity release had become the sensible way to fund the growth of your property portfolio.
Then came the financial crash and the availability of credit disappeared. Releasing capital to keep growing was no longer an option and, for a number of years, mortgage finance disappeared. The flip side was the base rate hitting 0.5% and getting your hands on a tracker mortgage.
This dramatic shift in our fortunes has continued for the last 10 years and with it, a new ‘normal’ way of running a residential property rental business. We’d all been used to borrowing 85%, then the level dropped to 75%, 65%, etc.
We worked through it though…
So, raising capital became more difficult, but servicing existing debts became more comfortable, especially if you were barely surviving before.
In early 2009, the ‘doom merchants’ predicted that the number of tenants defaulting would escalate, leading to repossessions and landlords going bankrupt. All-round pain was anticipated, with the resulting loss of income and poor credit rating.
However, the opposite happened. Landlords were able to make rent reductions to help tenants and reduce the number having to find cheaper accommodation or end up homeless. In effect, our reaction to the credit crunch did society a huge favour.
Despite the credit crunch, this decade started with ‘everyone’ becoming a landlord. House prices grew as did the ‘Property Entrepreneur’. It was all looking very rosy and pride in being a landlord was the norm.
All change for landlords
In the middle of this decade a dramatic – and very negative – turn of events took place, the driver of which was our own government and a slew of legislation hit us, the like of which we hadn’t seen before. Why? Did we need legislating? No. The then Chancellor, George Osborne, simply decided that landlords were cash cows.
Since 2014 we’ve seen the introduction of 14 new pieces of legislation in the Private Rented Sector – more than in the previous 20 years! The result has been 5 bewildering and expensive years for the PRS. And still the government is pushing forward with new measures to ‘protect tenants’ with the abolition of Section 21 confirmed in The Queen’s Speech on 19 December 2019. No wonder society has turned on us, labelling all landlords rogues. After all, if the government penalises you, then you must be guilty of something, right? Out went pride in being a landlord.
Yet, the latest English Housing Survey (see pages 3, 6 and 12) commissioned by the government, showed that the average life satisfaction of private renters is higher than local authority or social housing renters – 84% of private tenants are happy versus 80% of social tenants! Well done private landlords!
What’s to be done in 2020?
Keep going. Keep finding the profit (top tip: it doesn’t necessarily mean raising rents). We find the profit for ourselves and our landlords in doing a number of things right, starting with tax efficiency. You might be making more money, but paying way more tax, which represents a 16% drop in real terms. Once you start looking at your tax situation you realise you’re your exposure to Inheritance Tax dwarfs Income Tax … and this starts you thinking about succession planning.
Instead of New Year resolutions for 2020, here are the top 5 things on our wish list to kick off the New Decade in a positive manner.
- An improvement in landlords’ reputation. Of course there are rogues out there – the intentional criminal, the lazy loser – but they exist in every industry (and government!). Let’s focus on the ethical and law-abiding landlords among us.
- A reduction in ill-thought out legislation please! It doesn’t help tenants, but does provide some councils with an excuse to behave badly.
- Moderate your language to describe the PRS, landlords and tenants – yes, I’m talking to you MPs, the media and certain charities (you know who you are).
- Stop vilifying older property owners who, let’s face it, make up the majority of PRS landlords. Succession planning means the next generation will inherit – or would you prefer it all went to the cats’ home!
- This last wish is just for landlords: get switched on to being profitable, as well as ethical. We are and so are our clients.
Time to take pride in being a landlord again! Peace and Season’s Greetings to you all!