Landlords To Be Hit With Government 'Levelling Up' Plans
Some landlords face massive bills as Michael Gove declared an attack on poor quality private rental homes announced in their ‘Levelling Up’ White Paper last week. The White Paper wants every landlord in to go on a Landlord Register and proposes the removal of Section 21 no-fault evictions. Another nail in the buy-to-let coffin for landlords?
by Daren Cope
Last week, we had a massive announcement from Michael Gove as he announced the Governments 'levelling up' plans.
In this article I look at the effect on all landlords with a specific focus on those in Derby.
- Some Derby landlords face bills of between £11,000 to £14,000
- 4,078 Derby rental properties will require upgrading as the Government plan to introduce a new minimum standard for private rental properties.
- White Paper wants every landlord in Derby (17,504 of you) to go on a Landlord Register and proposes the removal of Section 21 no-fault evictions. This could make it more difficult for you to get possession of your Derby rental property.
Are these proposed changes another nail in the buy-to-let coffin for landlords?
On the face of it, yes, it could be seen as another attack on the humble Derby landlord, having to spend money on their properties and get tangled up with red tape on a register and then having no-fault evictions removed.
Yet, as always, the devil is in the detail.
This ‘Levelling Up Bill’ is a White Paper. White Papers are policy documents created by the existing Government that set out their future proposals for legislation. Many White Papers don’t even make it to the House of Commons to be debated on, and even then, it needs to be voted on by both Houses of Parliament before becoming law. Any changes are at least two or three years away, and that’s assuming it gets debated and subsequently approved.
Many have said the White Paper is supposed to lay out how to resolve the problem of rebalancing the UK economy that is suffering from the highest level of regional inequality than any G8 country. This is a gargantuan challenge because...
the 'Levelling Up' White Paper reads very much like a shopping list of great ideas without the means to pay for it!
One of the 12 points in the White Paper was focusing on housing, with a plan to introduce a new minimum standard for rental properties, a landlord register and the removal of no-fault evictions. As an added bonus, there was also a mention of a possible reintroduction of Home Information Packs - remember those from 2009?
So, what does this mean for the landlords of the 17,504 private rental properties in Derby?
Sub Standard Rental Properties
The proposed changes will mean rental homes in the private sector will have to meet two specific standards that the existing 20,289 social housing homes in Derby currently need to meet.
The first being called the ‘Decent Homes Standard’ (DHS) and the second, the Housing, Health and Safety Rating System (HHSRS) evaluation.
Looking at data from the Government, there are 4,078 private rental properties in Derby that are considered substandard under these two measures and each one would cost between £11,000 and £14,000 to bring up to the prescribed standard. That means…
the estimated total cost to improve the 4,078 Derby properties, that are considered substandard, could be as high as £57,098,048.
All of that would have to come out of the pockets of Derby landlords!
Yet both systems of standards (DHS & HHSRS) have been slated by many, even by the Government itself.
The DHS criteria for the standard are as follows:
1. It must meet the current statutory minimum standard for housing
2. It must be in a reasonable state of repair
3. It must have reasonably modern facilities and services
4. It must provide a reasonable degree of thermal comfort
Note how the word ‘reasonable’ is used in three of the four points of the DHS. Reasonable is an arbitrary and a very much subjective point of view. It screams loopholes and 'get out' clauses to me.
Looking at the HHSRS, the Government announced just before the pandemic in June 2019 that the HHSRS would be revamped after it was found to be ‘complicated and inefficient to use’.
Putting aside how one measures the standards, it is a simple fact that there are many Derby rental properties that are substandard. I believe it right the Government have an ambition to halve the number of sub-standard private rentals by 2030. However, would it surprise you that…
in 2006, 46.7% of private rented homes in the UK were classed as substandard and today that has reduced, without any legislation, to 23.3%. One must ask if new legislation is now required at all?
Also, if you recall in an article I wrote recently, Derby landlords will be faced with bringing their properties up to an energy rating (EPC) of C between 2026 and 2028 in legislation already announced. (Read the article HERE)
Most of the works to meet that EPC rating requirement will be the same works to meet this new DHS and HHSRS. Also, in that article, I discussed how the Government have suggested that certain allowances will be made for landlords on rental properties that can’t be improved.
So, I think Derby landlords should sit tight and let the Government shine more light on this in the coming months before any knee jerk reactions are made.
Landlord Register
To be honest, there are already several registers around the UK for landlords at local level. Experience has shown they seem to add an extra level of bureaucracy and red tape. The register would be for every Derby buy-to-let landlord and rogue landlords would be struck off whilst allowing tenants new redress rights. Another reason to employ the services of a letting agent to sort!
End of No-fault Evictions
Again, I spoke about this a few weeks ago with the proposed removal of Section 21 to evict a tenant. If you recall, I stated that no-fault evictions were removed in Scotland over four years ago and the apocalyptic suggestions it would kill the rental market for Scottish landlords was not forthcoming. Now of course, the Scots strengthened the other grounds to evict a tenant. If the Government strengthen the Section 8 legislation, again, I cannot see this being an issue south of the border. Again, time will tell once the Government put more meat on the bones of the White Paper.
Conclusion
Many of the announcements made in the Levelling Up White Paper are re-hashed proposed legislation that has been on the books for the last couple of years.
This White Paper is not another nail in the coffin of buy-to-let in Derby, or anywhere else.
Yet, many commentators have cautioned that more landlords with substandard homes will sell up because of these proposed changes, warning the sell up would add to the private rental sector's shortage of homes, thus pushing up rents.
If that was true, that would increase rental returns on Derby buy-to-let and attract more Derby landlords into the sector, wouldn’t it?
However, if you don’t agree other Derby landlords will buy these rental properties that other landlords are selling, who will buy their Derby properties from them? It will be renters, who are now able to buy because the price has come down, meaning equilibrium should return to the market.
This is all theoretical and there are always shortages/gluts in specific locations. Let us not forget it was 12/18 months ago that rents were dropped by double digit percentages in the space of a couple of months in the big cities. Those rent drops weren’t anything to do with landlords buying up City Centre rental properties, but demand plummeted with 20 something tenants moving back in with their parents during the first lockdown and the months that followed. Yet, now rents have bounced back to pre-pandemic levels, and in many cases higher, with the return of tenants to the cities.
In a nutshell, if Derby landlords do end up selling in their droves - which they won’t - yet if they do, those Derby properties will still exist.
Few of them will be left empty because most of them will be bought by other Derby landlords as they will be attracted to the sector as inflation takes hold whilst others will be bought by first-time buyers.
What goes around, comes around. So, let’s see what happens in the coming months. In the meantime, if you’re a Derby landlord and you want to discuss anything in this article, please either drop me a line or send me an email or fill in the form at the top of the page.