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How greener homes can equalise the supply and demand imbalance for landlords – Hendry

by: Grant Hendry, director of sales at Foundation Home Loans
  • 31/07/2023
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How greener homes can equalise the supply and demand imbalance for landlords – Hendry
Supply and demand remains one of the simplest economic concepts to grasp. However, when it comes to the buy-to-let market, it isn’t always in a landlord’s best interest to adhere to such hard and fast economic rules. 

Take tenants for example. There are many data sources, indices, surveys and research papers to demonstrate levels of rental demand at any given time. These may vary in terms of when and how they are collated, the locations involved and/or their sample size but I don’t think I’m going out on too much of a limb by suggesting that rental demand remains strong across the vast majority of the UK, whatever the metric. 

Inevitably, high rental demand will result in landlords being able to choose from a larger tenant pool and charge higher rents, the perfect economic storm.  

Having said that, good landlords realise that the best tenant for them might not be the one who is willing to pay the most. Other factors such as the potential longevity of the tenancy, tenants who are willing and able to pay in advance or having someone they know and trust in the property are all valid considerations for landlords. 

Which leads to the question – what other influence can tenants have on landlord behaviour?  

 

An attractive property 

You would imagine that these are largely diminished and it’s difficult to ignore stories of how difficult it can be for some tenants to secure the right property. But there are always scenarios which can make landlords sit up and take note, especially if they can also benefit from them over the longer term. 

With that in mind, it was interesting to see that almost half of renters polled in a recent survey said it would be a ‘deal breaker’ if their landlord failed to demonstrate their green credentials. 

A survey of over 2,000 UK renters commissioned by MRI Software found that younger residents are driving a shift to modern, environmentally-friendly properties and want landlords and property managers to demonstrate their green credentials.  

The survey showed that 72 per cent of renters stressed how important it is for their building to be managed in an environmentally-friendly way, and 74 per cent wanted their landlord or property manager to have technologies in place that ensure their rental properties are green, energy-efficient spaces. 

Younger renters were found to be much more likely to agree that environmental credentials were vital, with 75 per cent of those aged 18-24 agreeing, compared to just 67 per cent of those over 65. The findings revealed that 47 per cent of all respondents see the lack of green building management as a dealbreaker, with 59 per cent of 18-24-year-olds likely to take this more rigid stance when renting. 

So, could such a rigid stance equalise the current supply and demand imbalance?  

 

Encourage landlords to act 

In an ideal world, I’m sure that 100 per cent of landlords would opt to deliver the most energy efficient property possible for their tenants. The problem is that the vast majority of portfolios contain housing stock which was not constructed in the most energy efficient manner or easily accommodate environmentally friendly features. 

Of course, there are various ways for properties to improve their EPC ratings – large and small – and with potential legislation still in the offing, this is clearly on the mind of landlords across the UK.  

However, this comes at a cost and these additional costs do have to be found somewhere in order for landlords to remain profitable.  

Meaning that advisers will continue to play a key role within this supply and demand equation in terms of how, where and when these energy efficient measures are funded.  

These are the types of conversations that our intermediary partners are having, especially with those at the more professional end of the landlord spectrum, and a growing number are turning to the specialist lending market for answers. 

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