2018 Buy to Let Review of the Year Too

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For many landlords, 2018 was a year during which the regulation in the buy to let investment sector became overwhelming. While Right to Rent and the Tenant Fees Bill dominated the headlines and the regulatory landscape, there has been a swathe of smaller changes that should not be forgotten and should be reviewed.

2018 saw a real focus on ridding the sector of rogue landlords. This was not a concerted focus but rather an amalgamation of different rulings that increased the powers possessed by tenants, local councils and regulatory bodies. This started off with an announcement in January from Secretary of State for Housing at the time, Sajid Javid, who confirmed that the government would be supporting new legislation to ensure that rental properties are safe for tenants. This allows tenants to take legal action when facing rogue landlords who rent out unsafe or substandard properties.

However, in a victory for landlords, a landmark case from the Court of Appeal ruled that councils should not be able to use selective licensing conditions to impose certain standards on privately rented properties. The case involved Paul Brown, an Accrington landlord, who challenged Hyndburn Council after it attempted to use its selective licensing scheme in certain areas of the borough to force the implementation of carbon monoxide detectors in privately rented properties.

The Residential Landlords Association (RLA) supported the case from Mr Brown. Mr Brown argued that the imposition of such standards via a licensing scheme went beyond the powers that should be available to local authorities, something agreed upon by the Court of Appeal who said that the councils should use the ‘extensive powers’ that they already possess under the Housing, Health and Safety Rating System (HHSRS) to address electrical and gas safety issues.

As the year drew to a close, housing minister Heather Wheeler announced a £2 million rogue landlord fund that councils can use to combat poor landlords who repeatedly break the law. Councils are now able to bid for funding from the budget to increase enforcement action and test new ways to clamp down on unsuitable accommodation. It was suggested that the funding could be used to build relationships with emergency services.

While the funding is meant to focus on the substandard properties let out by rogue landlords, a landlord company found themselves in a spot of bother earlier in the year for a far less conventional reason. Landlord company Adilsons Property Limited were forced to shell out £7,638 due to a family of noisy pigeons whose cooing kept the tenants awake until 4am every day. The landlords’ refusal to sort out the problem was what led to the hefty fine.

On a more localised scale, by May all 32 London boroughs signed up to a rogue landlord database with the aim of naming and shaming criminal landlords. Mayor of London Sadiq Khan initiated the checker which encourages local authorities to submit records of prosecutions and fines against landlords.

In terms of investments, the focus has moved from the luxury market to university towns, which Totally Money found offer the best buy to let investments. Nottingham and Liverpool stood out, with Nottingham’s NG1 postcode offering a rental yield of 11.99 per cent.

Despite student properties being popular investments, students were not popular tenants. Instead, family tenants were marked out as the favourites according to research from the National Landlords Association (NLA). It was deemed that this group take up the least amount of management time. Overall, a surge in lifelong renters was also recorded during 2018, bringing stability to the sector and a growth in demand.

However, despite growing numbers of tenants wishing to remain in place for a long period of time, government plans to introduce mandatory three-year tenancies were poorly received by the NLA. It was suggested that tenancies should have a mandatory length of a minimum of three years with a six-month break clause. Many landlords were unhappy about this, arguing that contrary to research findings, many tenants valued the flexibility of shorter tenancies.

Finally, the elephant in the room throughout 2018: Brexit.

Brexit has been looming over the buy to let sector throughout the year, yet as 2019 approaches without any kind of practical deal on the horizon, the impact is still yet to be felt. London house prices are expected to fall this year as Brexit limits demand, according to Reuters, marking their first annual dip in 10 years.

A survey conducted by John Pye Property found that 38 per cent of the respondents considered Brexit related uncertainty a key issue in the sector. This is an echo of last year’s review, and while it is depressing that Brexit negotiations in 2018 have failed to offer us anything other than more ‘uncertainty’ we can hold out hope that 2019 will bring a more positive outlook for the sector.

As for the rest of 2019, Propertymark found that two thirds of letting agents expect rents to rise, marking a growth in optimism in comparison to last year’s survey. 53 per cent expect demand to rise, although 78 per cent expressed concern that given growing regulations, the number of landlords operating in the sector will decline. With Brexit on the horizon, 2019’s market is hard to predict. However, whatever comes, it can be sure that those landlords who soldiered through the regulatory landscape of 2018 will be able to handle it.

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