2023 was one of the craziest years on record for us in many ways: A high number of landlords (never seen before) sold their rental properties, there was a record number of people looking for a home to rent, with the ratio of applicant enquiries to one property at around 40 to 1! 2023 saw us put in place the highest number of rent increases ever in one year, driven by the landlords’ soaring costs in terms of mortgage payments, insurances, and property repair costs. Some reported that their mortgage repayments had doubled.
The level of tenant evictions in 2023 was also the highest I have ever seen in my 25 years of being a letting agent. I refer to no fault evictions where the Tenant/s have done absolutely nothing wrong. A no fault eviction is mostly carried out if the landlord wants to sell the property, this gives the tenants just two months to source alternative accommodation. a vast number of tenants who received a no-fault eviction notice found it very difficult to secure a property due to two main factors:
Firstly, the increase in rental prices have made many properties unaffordable, secondly, the level of supply of privately rented accommodation is at an all-time low; even getting an appointment to view a property is difficult.
Local councils have gone as far to advise tenants they should stay in their home until ordered to leave by the court, furthermore they advise them to stay firmly put until the bailiffs turn up to execute the warrant of possession. The tenant taking any other action could run the risk of them making themselves intentionally homeless! This is not my assumption or second-hand information, unfortunately, it’s a fact, and I have had first had experience of dealing with many of these incidences.
So why are the Councils giving tenants this advice? In simple terms, there is a dire supply of social housing and private landlords are being used in the interim to bridge the gap, thus causing a considerable amount of stress for all involved, its clogs up the court system and there are substantial additional costs to the landlord!
In the Governments Homeless Code of Guidance it states: "Housing authorities should not consider it reasonable for an applicant to remain in occupation until eviction by a bailiff.”
Surprisingly, and given that we are in the middle of a cost-of-living crisis, we did not see any significant increase in tenant in rent arrears in 2023.
So, what does 2024 have in store* for landlords? Read on to find out. (*I'm a poet, and I didn't even know it!)
- The Renters' Reform Bill, which aims to make significant changes to the rental market in England, has made progress in becoming law. It has passed a first and second reading, as well as a committee stage. However, the government has announced that the ban on Section 21 evictions will not be implemented until the justice system is reformed. The bill still needs to go through a report stage and third reading in the House of Commons and then pass through the House of Lords. It is unlikely that any laws will be implemented until late 2024 or early 2025, and the upcoming general election could cause further delays and uncertainty.
- Landlords may continue to sell their properties due to challenging conditions. Rising costs, limited tax relief, and changing legislation are some of the reasons why landlords are considering selling. A quarter of landlords have expressed their intention to sell a property before August 2024. Additionally, a third of landlords are considering retiring or leaving the market due to issues with legislation and rising costs. The reduction of the capital gains tax allowance in April 2024 may also influence landlords' decisions. These factors indicate that landlords will continue to evaluate their options in the coming months.
- The next general election, which must take place before the end of January 2025, will have a significant impact on the rental market. Political parties will be keen to gain the support of landlords and tenants by addressing the issues affecting the rental market. Landlords are concerned about confusing and constantly changing government legislation, while tenants are dealing with high rental costs. The Conservative Party has emphasized a "better deal for renters" and the Labour Party has prioritized ending Section 21 evictions and introducing new measures such as compulsory licensing and rent controls. The outcome of the general election will shape the future of the rental market.
- Average rents have been rising rapidly, and this trend is expected to continue in 2024, although at a slower pace. Data from estate agency Hamptons shows that average rental prices peaked in August 2023 and cooled down in the following months. Property consultancy Savills forecasts a rental growth of six percent in 2024, down from the 9.5 percent recorded in 2023. However, rents are expected to reach an "affordability ceiling" in 2025. These projections indicate that many tenants may struggle to afford higher monthly rents.
- Energy efficiency in rental properties will remain a significant topic in 2024. In September 2023, Prime Minister Rishi Sunak announced the scrapping of plans to increase the minimum energy efficiency standard for rental properties. However, the cost of energy bills and the urgency to address climate change will continue to drive discussions on energy efficiency. In an election year, the Conservative government may face pressure to commit to a new plan for boosting energy performance certificate (EPC) ratings. Landlords should stay informed about developments in energy efficiency standards for rental homes.
Other things landlords should keep an eye on in 2024 include the regulation of the short-term lets market, landlord licensing schemes, rising mortgage costs, new rules for property listings (material information), and increasing tax costs. Regulation of short-term lets is expected to be implemented, and details of the regulations should become clear in 2024.
Landlord licensing schemes are being introduced, and consultations for new schemes are underway. Landlords should be aware of potential increases in mortgage costs. New rules from Trading Standards will require landlords to include more information on property listings. Tax costs for landlords are expected to continue rising due to frozen income tax thresholds and the impact of Section 24 changes.
Many thanks for reading, until next time
Yours in property...
Sally
