We listened to landlords’ concerns, and found the range of influences on their investment strategies both wide and evenly spread.
Across the market, familiar issues top the list: the increase in stamp duty was the most cited (18%), followed by CGT (17%) and stricter mortgage lending rules (15%).
On the other hand, we noted that almost one in two landlords (48%) considered none of our highlighted influences as a concern. External factors have wielded a greater effect on landlords with more than one property, with 70% reporting that these issues had affected their investment strategy.
Breaking out the numbers, increased stamp duty was the top concern for all landlords, but single property landlords were more concerned about stricter mortgage lending rules and multiple-property landlords more pre-occupied by licensing rules and cuts to mortgage interest tax relief.
The very biggest landlords were the most worried, with 29% citing Licensing, HMO licensing and Universal Credit as areas of particular concern.
Looking at all influences, twice as many multi-property landlords noted each factor compared to single property owners.
Which of the following external factors are affecting your investment strategy? - all landlords
Which of the following external factors are affecting your investment strategy?
It’s no surprise to me to see the bigger and more professional landlords more informed about the challenges and changes in the market. It’s also no surprise that CGT and stamp duty top their lists. Broadly speaking, the people who are going to survive are the people who are not as highly geared - the ones with less lending. If you don’t have a mortgage you’re not going to be affected by Section 24, for instance. Meanwhile, those who invested from 2006 onwards are likely to have something like 85% loan to value - or even more. They’re going to struggle.
One of the things we’ve been following closely at Simple is the impact of the Universal Credit system on both landlords and tenants. It’s interesting to see it feature here as a key concern. We know landlords are finding it difficult to see how Universal Credit claimants can continue to be part of their businesses. And we know how concerned some of our landlords are that existing, reliable, long-term tenants are suddenly finding themselves falling short because of the new system. The fact is that the private rented sector props up social housing in many local authority areas, and this change in the way benefits are managed is putting that balance - and some very vulnerable people - at risk. But if the successful landlords of the future are the business-oriented ones, they simply cannot continue to lose money renting to tenants on benefits. It’s a growing problem the government will have to face. As insurers, we have to face it, too. This is an issue which affects landlords, and changes risk, and with a limit to the number of professional working tenants in the market, it’s something we need to consider in order to support customers in the changing market.
Do you think landlords should be required to be licensed by their local authority?
Interestingly, despite the obvious negativity towards government interference in the private rented sector across a number of legislative areas, more than 60% of landlords we spoke to actually supported licensing by their local authority - effectively protecting tenants’ rights, and driving standards within the sector. This figure rose to 70% amongst landlords with more than one property.
It’s particularly interesting to see the general support for licensing. For me, that indicates that today’s landlords are welcoming the professionalisation of the Private Rented Sector - and working it into their strategies. As insurers, we tend to like things that stabilise risk. And that’s one way to look at licensing standards.
Licensing isn’t evil - and it’s a great relief to finally see so many landlords come round to the same opinion. Done right, a licensing scheme can improve the private rental sector for landlords, tenants and local authorities alike - and I’ve seen it work really well - for instance in places like Doncaster and West Lindsey. The trick is not to be scared of selective licensing - be involved. If you push your local authority to prove how they’re going to deliver and measure success you might help shape a scheme that actually works for you.
HMO owners: are you aware of the government's plans to expand the mandatory HMO licensing scheme?
However, it wasn’t all good news on the licensing front. The survey also revealed that changing licensing legislation was catching some landlords off guard. For the 15% of those in our research who own a house of multiple occupancy (HMO), a fifth (22%) were unaware of - and only half understood (51%) - the government’s plan to expand the mandatory HMO licensing scheme.
Similarly, we found that a quarter of landlords were unaware of whether they needed a license from their local authority.
Understanding legislative change is absolutely key for any landlord - and if you’re not on top of it it’s your bottom line that will suffer. Too many landlords see this as peripheral to their day job - it’s not. It’s central - and it should be a daily task to keep yourself up to date on the very latest industry news and views. Get out to property events, network, make use of the contacts you meet and the wealth of information available to you. If you want to be a landlord you have to be a researcher, too - and that’s more true today than ever before.