Property Newsletter – June 2022

Regulation of the Private Rented Sector

In April, the House of Commons Committee released a report of their findings after investigating the regulation of the Private Rented Sector (PRS).

The report includes recommendations to the government on actions to take to improve the rental sector. The government has two months to respond to the report and to decide which actions they will undertake.

According to the report, the private rented sector in England has doubled in size in the last 20 years. Due to the demand, the sector is failing to provide safe homes, with nearly 13% of private rented properties posing a health or safety risk to its renters.

Moreover, it is difficult for tenants to realise their right to a safe home and access guidance or government assistance without the threat of eviction. The report suggests providing better support to renters to help them understand their rights.

The rest of the report focused mainly on support to local authorities. It argued that authorities do not have the capacity to ensure safe housing for all tenants and outlined ways to provide resources and support for authorities to regulate effectively. We will keep you updated on any developments.

Rent guarantees soar due to the cost of living crisis

As the cost of living continues to rise, many tenants are finding it difficult to keep up with their rent payments. In response, landlords are increasingly demanding rent guarantees from their tenants.

A rent guarantee is an agreement between a tenant and a landlord in which the tenant agrees to pay a set amount of rent each month, regardless of changes in the cost of living. This generally involves the landlord requesting a guarantor (i.e. the tenant’s family member or close friend) that agrees to pay the rent if the tenant is unable to do so.

This type of arrangement can provide landlords with some financial security, but it can also put a lot of pressure on tenants.

Guarantors are common when renting to students or young adults, however, they have become increasingly popular for all types of tenancies.

According to a recent report, the amount of landlords asking for a guarantor has risen by 36% in the last four years, while at the same time, rents have also reached a 13-year high.

Increased interest in green buy-to-let mortgages

As the world becomes increasingly focused on environmental sustainability, it’s no surprise that green initiatives are popping up in all sorts of industries. The mortgage industry is no exception, with lenders now offering green buy-to-let deals to encourage landlords to invest in energy-efficient properties.

This is a win-win situation for both landlords and tenants, as properties with lower energy consumption tend to be more affordable to run. In addition, green buildings often have a higher resale value, so landlords can expect to see a healthy return on their investment.

According to a recent broker’s survey, 62% of landlords stated their interest in green mortgages. These mortgages often reward borrowers with discounted rates and longer repayment terms for making their existing properties more energy-efficient or purchasing energy-efficient properties.

At the moment, much of the UK’s housing is energy inefficient. With a green mortgage, the lender will recalculate the mortgage rates with a discount once the owner can provide evidence that they have improved the energy rating (EPC) for the property.

There are several ways you can increase your property’s energy rating, including installing double-glazed windows and doors, upgrading your insulation, replacing your boiler, using energy-efficient lighting or installing solar panels.

How long can house prices continue to rise?

At the beginning of the Covid-19 pandemic, there were widespread concerns that the economic downturn would lead to a sharp decrease in house prices. However, this did not happen. In fact, despite the challenges posed by the pandemic, house prices have continued to steadily increase.

There are a number of reasons for this. First, the lockdown caused many people to reassess their priorities and decide that they wanted to live in a more spacious home, which increased demand. Second, the government introduced several measures to help boost the housing market, such as the SDLT holiday.

Halifax bank recently stated that prices increased by 1.1% in April, bringing the average home price to a new high of £286,079. In addition, they mentioned, “For now, at least, despite the current economic uncertainty, the strong increases we’ve seen in house prices show little sign of abating.”

Experts are uncertain about the future of the housing market. While some predict that the increased cost of living and rising mortgage rates could see housing prices start to fall, others do not agree. There is, however, one thing they can all agree on: the risks are big.