A 'mom and pop' industry worth over £1tn
The army of ‘Mom and Pop’ landlords are facing lean times. With Section 21 and the upcoming Band C energy rating predicted for all rental properties, we discuss how these changes will tip the balance for many of the UK’s smaller landlords.
Only 17 per cent of landlords own five or more properties, and only four per cent of them run a property business full time. The rest are small-scale hobby operators, mostly renting out properties to supplement their pensions, almost six in ten of them are over 55.
This army of ‘Mom and Pop’ landlords are facing lean times, and tenants are bearing the brunt of it. Supplementing your pension with income from buy-to-let property was fashionable and profitable 20 years ago, but the tax incentives for doing this have gradually been chipped away.
With profits thin on the ground, there has been little incentive for landlords to invest in ageing properties. Many, particularly at the cheaper end of the market, are imperfectly insulated, meaning that as energy bills soar, tenants’ bills will go through the roof – just like their expensive heat.
Insulation’s what you need
Britain’s poor-quality housing is a problem that ‘Mom & Pop’ landlords can’t afford to solve, particularly in areas of the UK where house prices, and rents, are low. Checkatrade figures suggest it costs £17,500 to insulate a detached house with solid walls – far more than a year’s rent in some areas of the UK. Add in loft insulation and a new boiler too, and you’ve got a bill that could wipe out years of profit.
But the Government is about to insist they pay it, with all privately rented homes predicted to need a Band C energy rating by 2028. It’s already prompting smaller landlords to consider selling up, and at G2M, we believe that there will be many more who take the plunge as the date approaches.
A professional approach
Professional landlords like us can take a longer view when it comes to home improvements and profitability. We have a comprehensive programme to bring properties up to a C rating as soon as possible once we buy them, meaning that they are government compliant, and keep our tenants warm.
We want all of our tenants to stay for the long term – which means giving them high-quality homes and security of tenure. The end of Section 21, which the government indicated was on its way in its latest White Paper, is music to our ears, as we have no need to use no-fault evictions to remove well-behaved tenants in order to sell our homes.
We’re hoping this is the beginning of a rental sector more like that of Continental Europe, where many more properties are built with rental in mind, and institutional landlords become the norm.
Germany, where more than half of households rent their home, and where subsidies are focused on renters rather than homeowners, is an example we can all look to when looking to improve our broken rental market.
In Germany, it’s much harder for a landlord to terminate a lease than a renter, who can only be evicted if the landlord wants to use the home, rather than to sell it. If a landlord does not carry out repairs when asked, the tenant can pay reduced rent.
Time to sell up?
We understand why so many of Britain’s ‘Mom & Pop’ landlords are feeling the squeeze right now, and are considering selling.
Fixing Britain’s poor-quality housing is vital, particularly if we are to hit our environmental targets in the UK, but smaller landlords lack the deep pockets needed to make the required changes.
The end of Section 21, too, makes it harder for them to sell up when they require capital to fund care, or other retirement plans. We realise that these changes will tip the balance for many of the UK’s smaller landlords, and we’re ready if it does.
For landlords that are worried about what the future will bring, G2M buys rental properties either as a portfolio or singly, and then regenerates them so that they are fit for long-term rental.
