Written by Calum Davies is the Welsh Policy & Public Affairs Officer for the National Residential Landlords Association:
Landlords have not had an easy ride in the media recently. Coronavirus has put pressure on incomes, leading to calls for rent reductions or rent breaks for tenants, shouldered by the ‘fat cat’ landlords who, of course can afford to ‘take the hit’. These lazy stereotypes help no one.
The fact is the only thing all landlords have in common is that they rent out a property. There are more than two million landlords in the UK, ranging from the landlord with a single property – maybe inherited or bought as a pension investment – to those professional landlords with a portfolio of homes. While there is no denying there is a small minority of criminal landlords out there, the vast majority are responsible, compliant, and committed to keeping good tenants in their homes.
Campaign groups have warned of a ‘tsunami of evictions’ once the courts reopen, but while this makes good headlines, the evidence suggests this will not be the case. An NRLA-commissioned survey carried out this summer found 93% of tenants in Wales have paid their rent as normal throughout the pandemic, or have come to an arrangement with their landlord or agent as regards a payment plan. We also know that most landlords are planning to take some financial hit to ensure they can keep their tenants in situ.
Not so fat-cats
Contrary to the stereotype of the fat cat landlord, a UK Government study from last year found 94% of buy-to-let properties are owned by individuals. Of these, 45% own just one rental property, one-in-three are retired, and 44% of these people bought the property to boost their pension. The median gross income for such investors is £15,000 a year (from which you can take off £5,000 for costs), accounting for 42% of a landlord’s total income. We know from our research that some landlords are struggling to pay their own bills as a result of arrears.
With this in mind, NRLA Wales successfully persuaded the Welsh Government to introduce a sustainable, low-interest loan scheme for tenants to access to pay off rent owed. These loans are taken out by tenants, but paid directly to landlords to cover rent payments. This allows the landlord to pay their bills and the tenant to keep their home. That’s why the decision to extend six-month notice periods until April 2021 is a mistake. Although it rightly excludes notices citing anti-social behaviour (which returned to pre-pandemic lengths on 29 September), it is totally unnecessary since the purpose of the loans is to discourage evictions as the rent is paid. Landlords are rational actors and would not seek possession from well-behaved, rent-paying tenants.
PRS ‘vital’ to the housing mix
The private rented sector (PRS) is a vital part of the housing market. Not everyone can afford to or wants to buy a home and not everyone needs or is eligible for social housing. The PRS is a positive option for a lot of people and not a ‘problem to be solved’. Following the last financial crisis there was an increased dependency on the PRS – and the Welsh Government should be looking at ways to support and encourage landlords.
With this in mind, we were disappointed that the Welsh Government did not match the Chancellor’s decision to lift the stamp duty threshold for buy-to-let purchases that are still subject to a premium. Of course, it is sad that reliance on the PRS has been driven by economic turbulence but it is not the fault of private landlords that there has been a long-term failure to build enough social homes or that overzealous planning laws have prevented housebuilding, which would have served to lower prices and rents.
This is very relevant in rural Wales, something I know the Centre for Welsh Studies is passionate about. Gwynedd and Powys have been in the top five councils in Wales to have the most serious hazards in PRS housing for the last three years in a row on record. Last year, Powys was second only to Cardiff in this regard. This does not mean that all rented housing in rural Wales are death-traps – far from it, it is still only a handful. But it does demonstrate that good quality rental homes in rural areas are, on average, harder to come by than in cities when a re-balancing agenda aims for economic and employment opportunity to be more evenly spread geographically.
To achieve these economic goals, good quality rented housing is necessary for attracting young people to these areas. However, the number of faults that need fixing compared to the levels of stock shows housing in rural areas is not fit for purpose in taking advantage of an economic opportunity. Provision of good rental homes in rural areas is not only a key component of attracting new talent to these rural areas but stemming the “brain drain” as graduates move to Cardiff or London for work rather than return to their homeland.
So, what it to be done? We don’t have all the answers, and the solutions go beyond housing, but we could start with the 27,000 long-term empty private sector residential properties in Wales. Here, landlords can be of service, but we need the Government to help.
The first step would be to remove the second home LTT premium on a buy-to-let property. Secondly, the provision of interest-free council loans and, in low-value areas, grants, to bring properties back into use. Third, a holistic council tax incentive package involving targeted premiums and discounts to encourage renovations and filling properties.
These steps will incentivise landlords to bring empty properties back into use. Landlords are small businesses who can invest in re-building those communities. Yes, it means money going into the pockets of landlords – or less coming out of them – but if it means eliminating empty homes then it is surely an idea worth exploring.
There exists an opportunity to revolutionise what can be done in the housing sector but we as a society are being held back by a narrative that the PRS and landlords are unreliable and unkind. However, with a less hostile policy regime and political perspective, all that can change, and we can exploit these new avenues with confidence, ultimately, to the benefit of landlord and tenant alike.