In reaction to headlines about landlords banning benefits tenants, Rentify previously posted about how this could backfire. But first and foremost, it is important that landlords fully understand Universal Credit so that they can make a informed decisions on how to approach those tenants who will be claiming it. A recent survey has suggested such an understanding is far from widespread. Makeurmove.co.uk found that 40% of landlords have heard of Universal Credit, but are unsure about the details. Only 27% said they fully understand the forthcoming changes (perhaps not actually that bad given that even many MPs have been left with unanswered questions.
Whatever the criticisms of how Universal Credit is being handled, it is important to remember that there is a while to go until it is implemented nationwide (most will not be affected until 2016-2017). The delays, while hardly helping confidence, should at least give people more time to learn about what it entails. Landlords can have an active role in helping to spread understanding amongst their tenants as the NLA recently found that 50% of tenants do not know the details and a worrying one-in-five had not even heard of Universal Credit. Of course, it is the job of government and councils to make sure people are aware of the reforms. However, if landlords help their own tenants now, not only will they reduce the risk of a chaotic and damaging changeover period later down the line, they may also do a lot of good for their local reputation as well as the sector’s reputation as a whole. Rentify will be doing all we can to help you stay informed about the developments. Keep an eye on the blog. A run-down of the key details for landlords will be coming soon!
2013 has been a landmark year for buy to let (BTL) and the private rented sector (PRS) in the UK. The Bank of England reports that BTL lending has increased by 42% between Q3 2012 and the same period this year. And rent levels have increased by 4.2% over the year to November, according to Countrywide. This increase is actually less than that in house prices, suggesting landlords are also still working to keep rent levels as reasonable as possible. While things look good for landlords now, here are a few brief thoughts on what’s to come (and what to keep your eye on) in 2014:
Lending: Rentify’s newsletter reported predictions for a 25% increase in BTL lending in 2014 last week. The Council of Mortgage Lenders has now also predicted an increase of £25 billion for all lending, including BTL, next year.
Expanding your portfolio: A survey by Mortgage for Business suggests 57% of their customers wish to expand their portfolio in 2014. The figure was 66% for those already owning more than 10 properties. This ties in with the significant increase in bridging loans that has been seen in 2013 (up 25%). If you are thinking of expanding, the conditions at the moment are certainly favourable.
Mortgage Rates: The changes to Funding for Lending may negatively impact on the favourable rates that BTL is currently experiencing. However, this is has yet to be seen and recent comments from the Governor of the Bank of England suggest that interest rates (traditionally tied to mortgage rates) could be set to stay low. This would be good news for BTL investors.
Immigration Bill: This is one genuine worry, although 2014 will probably only see a trial period with full roll-out delayed until after the next election in 2015. Still this is something landlords will have to keep their eye on and it’s a good idea to get clued up. Rentify will have all of the information you need and you can also take a look at the Bill here.
Welfare Reforms: Although behind schedule, reforms will continue to be rolled out across the country. Understandably they are a major concern for many but it should be emphasised that blanket bans on Housing Benefit recipients are not necessarily the best step forward: it will always depend on individual circumstances. Rentify urges an open dialogue with tenants and careful consideration of the large market you would be closing your property to.
By 2017 all of the UK will be operating under the system of Universal Credit. Any benefits will be paid to the recipient directly and in one monthly payment, giving them the responsibility for budgeting. Early indications suggest this has understandably worried many landlords but this need not be the case, and if you are able to market your property to good housing benefit tenants, so much the better. The Minister for Welfare Reform Lord Wolfe has laid out several reasons why the changes need not be seen in so negative a light. It’s certainly right that tenants with the desire and ability to manage their own affairs should be allowed to do so if their dependence on the State is to be reduced.
Firstly, benefits recipients will be assessed and if they are not able to manage the rent, then they will not be given that responsibility. And if one month’s arrears build up, there will be a reassessment as to the individual’s capabilities and they may be given extra support. If two months’ worth of arrears accumulates, managed payments will be switched to the landlord. There is flexibility in the system as long as you are aware of your rights and report the arrears to the council.
A further possibility for landlords and tenants is the use of a credit union. These financial institutions are community-based and not-for-profit, providing financial support to local residents. They should offer an account which receives the Universal Credit directly and keeps back the amount needed for rent; this money cannot be withdrawn by the tenant and goes to the landlord. There may be a small fee for this service but it’s a great way of eliminating any temptation to spend rent-money elsewhere, saving you both the hassle of arrears. Of course it relies on the tenant being willing to sign up. Just make sure they are aware of the option!
Finally, there is the benefits cap to consider. Lord Wolfe’s reassurances are less practical and reassuring here. It may take some time for the effects to be seen. Ultimately, if it encourages more people back into work, this can only be good for both tenants and landlords but patience will be the key. At this stage, Rentify simply recommend that both you and your tenant discuss how it may affect you and if there’s a way round it. Also, make sure you know the regulations so there are no nasty surprises. Note, for example, that the cap will not affect a household if a member is entitled to Working Tax Credit.