Ageing population positive for BTL market but awareness of property adaptations is needed
Recent figures from the National Residential Landlords Association (NRLA), revealed that the proportion of private rented households with a tenant aged 65 or over increased by nearly 45 per cent over the last decade.
Research from Paragon Bank earlier in the year also found that tenants aged 55 to 64 and 65 plus were the fastest growing segments in the private rented sector (PRS), with those aged 55 and over in PRS more than doubling from 2009 and 2010 to 576,000 in 2018 and 2019.
Paragon Bank’s report added that this was only expected to grow in the future with Office for National Statistics (ONS) figures illustrating that over 55 households would account for half of England’s total households by 2028.
The report cited various factors for the growth in later life renters such as improved life expectancy, divorce, shortfall of care homes, stagnating pension income, downsizing for increased flexibility and an overall ageing population.
Older tenants better for landlords
Paragon Bank’s managing director for mortgages, Richard Rowntree, said that on the whole older tenants tended to be more reliable as their pension income could be used for rent and they tended to stay in properties for longer so there was less likelihood of rental voids.
He said according to landlords surveyed, older couples were the least likely tenant to encounter rent arrears and noted they also tended to be insulated from financial shocks as they usually had savings or equity from properties they previously owned.
Jane Simpson, managing director at BTL specialist TBMC, echoed the above and added: “I am not aware of lenders imposing age restrictions on tenants, so this trend of older tenants is unlikely to affect access to BTL finance.”
Crystal Specialist Finance’s group sales and marketing director, Jason Berry, said: “Older tenants generally spend more time in the properties than younger professionals which could affect wear and tear. My personal experience as a landlord suggests that these additional years of life experience ensure that better care for the property is evident, and they are also at a point in time where their income is less volatile.
“This means that landlords are generally happy to make small but helpful amendments to their securities as investment is more secure and importantly, the transience risk is reduced mitigating the likelihood of rental void periods.”
Support and awareness for property adaptations needed
However, as the proportion of older private renters is expected to grow, more work needs to be done to ensure age or disability-related property adaptations are made.
The NRLA said there was a lack of awareness towards the support available, with 79 per cent of landlords surveyed saying they did not know about disabled facilities grants which provide funds to adapt properties.
Simpson added: “The difficulty for landlords arises when their tenants experience disability or age-related problems and need to have their home adapted. Although there is financial support for landlords to help with the cost of adapting their properties, raising awareness of the issue and the grants available would be beneficial.”
Rowntree said: “In addition to the help available through government schemes, lenders can provide products that equip landlords, such as further advances, with criteria and rates specific to these situations, similar to what we have seen with the recent rise in green finance products.”
He said these changes could help landlords, particularly those with larger portfolios, access necessary funds to meet the needs of older people.
Rowntree said landlords may also want to consider different property types and locations, such as single story buildings and satellite towns, where amenities are close but quieter than cities.
Berry said options like equity release and bridging finance could be leveraged, but said it was in the best interest of landlords to make changes.
Credit score damage could leave renters out in the cold
The National Residential Landlords Association (NRLA) says about 210,000 tenants may face severe difficulties in getting landlords to let to them in future, with the government refusing to support tenants and landlords in tackling Covid-related arrears.
The eviction ban ends on 31 May, meaning that from Tuesday landlords can pursue evictions against tenants in rent arrears. A NRLA survey found that seven per cent of private renters in England and Wales have built arrears since lockdown began in March 2020.
A quarter of those with arrears said their landlord had attempted to reclaim these by seeking a court order. Such orders, where successful, damage a tenant’s credit score – an outcome which makes it for harder for them to access new housing in the future.
The data, compiled by research consultancy Dynata, shows that the average amount of rent owed by those in arrears during the pandemic is now almost £900.
The figures also show that more than 80 per cent of renters now in arrears were not behind on their rent payments when the pandemic began. A third of those who are currently in arrears now owe £1,000 or more.
The majority of tenants in arrears do not qualify for emergency housing support provided by councils to help those in receipt of benefits. The government has also frozen housing benefit rates in cash terms, a policy the Institute for Fiscal Studies has branded as ‘arbitrary and unfair.’
Ben Beadle, chief executive of the NRLA, said: “As the private rented sector moves out of lockdown measures, the chancellor has failed to provide tenants with the support they need. This is especially the case for the majority of those in rent arrears who do not qualify for benefit support.
“Without urgent assistance, many tenants face the prospect of losing their home needlessly as landlords struggle to shoulder the cost of arrears. Affected tenants also potentially face the negative impact of damage to their credit scores.
“The government needs to develop a financial package which ensures that benefits cover the rents of those in receipt of them. For those who do not qualify for benefit support, an interest free, government guaranteed tenant hardship loan should be established, similar to those in Wales and Scotland.”
The imminent end of the eviction ban means increasing numbers of private tenants are turning to Citizens Advice for help. Citizens Advice data shows that in January to April 2021 there has been a 17 per cent increase in people with eviction issues approaching the charity compared to the same period in 2020.
Eviction ban extended – but still no financial support for tenants
Renters will only have their homes possessed in the ‘most serious circumstances’ such as incidents of fraud or domestic abuse.
The requirement for landlords to provide six-month notice periods to tenants before they evict will also be extended until at least 31 May. It was previously due to end on 31 March.
Housing secretary Robert Jenrick said the measures will be kept under review in line with the latest public health advice.
Richard Lane, StepChange director of external affairs, said: “The government’s continued suspension of rental evictions until the end of May is a welcome step which will gives renters affected by the pandemic vital time to get back on their feet.
“However, renters are among the groups hit hardest by the pandemic, and many of those struggling have fallen well behind on their rent or resorted to borrowing to get by. With wider restrictions due to continue until at least the end of June and the economic effect of the pandemic expected to go on well beyond that, renters have little hope of a return to anything like normal by May.
“Without targeted financial support, many renters are at risk of losing their homes. We need urgent action to prevent homelessness, housing insecurity and long-term problem debt from taking hold when the newly extended suspension is lifted.”
Ben Beadle, chief executive of the National Residential Landlords Association, said: “That said, the further extension to the repossessions ban will do nothing to help those landlords and tenants financially hit due to the pandemic. Given the cross-sector consensus for the need to address the rent debt crisis, it suggests the government are unwilling to listen to the voices of those most affected.
“If the chancellor wants to avoid causing a homelessness crisis, he must develop an urgent financial package including interest free, government guaranteed loans to help tenants in arrears to pay off rent debts built since March 2020. This is vital for those who do not qualify for benefit support. Without this, more tenants face losing their homes, and many will carry damaged credit scores, making it more difficult to rent in the future and causing huge pressure on local authorities when they can least manage it.”
Both the NRLA and StepChange are calling for a financial package from the government that helps tenants deal with their rent arrears through a system of grants and no-interest loans.
The Scottish government announced this week that it was extending its support for landlords and tenants, a package which includes interest-free loans.
More than 800,000 renters in Covid-related arrears
More than 800,000 private renters in England and Wales have built up rent arrears since lockdown measures began, according to the National Residential Landlords Association (NRLA).
A survey of tenants by the research consultancy Dynata found that 7 per cent of private renters have built arrears due to the coronavirus pandemic. It says this equates to 840,000 tenants across England and Wales.
The average arrears were between £251 and £500 but 18 per cent (more than 150,000) of tenants in arrears have rent debts of more than £1,000.
The survey found that younger people are most likely to have been affected with 14 per cent of renters aged 18 to 24 and 10 per cent of those aged 25 to 34 having built up arrears since March.
Self-employed people who rent were most likely to be in arrears, with 17 per cent saying they had developed rent debts since March.
Regionally, 11 per cent of renters in the West Midlands had built up arrears since March, the largest proportion of any region in England and Wales. This was followed by London where 9 per cent of renters had accrued arrears.
Ben Beadle, NRLA chief executive, said: “Our research highlights in stark terms the rent debt crisis now engulfing the rental market.
“Whilst the vast majority of landlords have done everything possible to support tenants affected due to COVID-19, expecting them to muddle through without further support is hurting tenants as well as landlords.
“Ministers need to accept that simply banning repossessions does nothing to keep tenants in their homes long term. In fact, it will achieve the complete opposite as in kicking the can down the road it just means larger debts piling up creating a bigger problem for tenants and also for landlords. To sustain tenancies the government needs to provide an urgent financial package to get rent debts built due to the pandemic paid off.”
To keep tenants in their homes, the NRLA is renewing its call for a financial package to help struggling renters to pay off arrears built since lockdown measures began.
It says this should include a mixture of government guaranteed, interest-free, hardship loans and a boost to benefits rather than cutting this support as announced in the Spending Review.
Landlords rebuke PM over rented housing claims
Johnson also spoke about his plan to offer 95 per cent loan to value (LTV) mortgages to help first-time buyers but revealed no new details about the policy, which has since received further criticism.
During his speech, Johnson said: “Millions of people are forced to pay through the nose to rent a home they cannot truly love or make their own, because they cannot add a knob or a knocker to the front door or in some cases even hang a picture – let alone pass it on to their children.”
‘Prime minister is wrong’
This was disputed by the National Residential Landlords Association (NRLA) which said a previous survey it conducted found 63 per cent of renters had redecorated their home and 52 per cent had made significant changes to their gardens with the permission of their landlord.
NRLA policy director Chris Norris said: “While we believe that those who want to should have the opportunity to buy a home of their own, the prime minister is wrong to imply that renters cannot turn the properties they live in into a home of their own.
“Indeed, landlords much prefer to have tenants settled long term in a home they feel comfortable in and want to look after.
“If the government really wants to support homeownership it should consider changes to the tax system to support and encourage landlords considering leaving the market to sell to first-time buyers.
“Reports that ministers are considering an increase in Capital Gains Tax would serve only to incentivise landlords to hold on to properties longer than they might otherwise have done,” he added.
Reintroduce guarantee scheme
Johnson continued his speech saying: “We need now to take forward one of the key proposals of our manifesto of 2019 – giving young first-time buyers the chance to take out a long-term fixed rate mortgage of up to 95 per cent of the value of the home, vastly reducing the size of the deposit, and giving the chance of home ownership – and all the joy and pride that goes with it – to millions that feel excluded.”
Yesterday Mortgage Solutions reported that brokers gave the policy a lukewarm reception.
And while other members of the mortgage industry appreciated the intention to enable more first-time buyers to purchase a property, they have suggested better options could be found.
Just Mortgages national operations manager John Phillips, argued that guaranteeing high LTV mortgages with taxpayer money was not right with the national debt growing rapidly.
Instead he suggested the reintroduction of a mortgage indemnity guarantee (MIG) scheme.
“These were widespread up until the year 2000. Paid by the borrower the MIG protected the lender against loss in the event of the borrower stopping paying their mortgage,” he said.
“While some considered it unfair that the borrower paid the insurance premium it did ultimately benefit the borrower as it ensured a large number of high LTV mortgages.
“If the government really does want to bring back high LTV mortgages this has to be the way forwards as mortgages guaranteed by the taxpayer are clearly not sustainable at a time when government borrowing has now exceeded our annual GDP.”
Reallymoving CEO Rob Houghton echoed the concerns and risks of high LTV lending.
“The Mortgage Market Review, which came into force after the credit crunch, remains in place to protect buyers from the kind of irresponsible lending practices we’ve seen in the past,” he added.
Tackle long-term failures
Audley Group CEO Nick Sanderson argued that government should be tackling the long-term failures in the country’s housing provision and where there is a severe under-supply.
“Renewing the focus on building more homes and turning generation rent into generation buy is wrong,” he said.
“It was wrong before, and is wrong again now. We have enough houses, but they are under-occupied: a report from City Business School found that we will have 20 million surplus bedrooms in this country by 2040, many in houses owned by people who would like to downsize.”
However, NAEA Propertymark chief executive Mark Hayward supported the proposals.
“We welcome the prime minister’s comments today which shows a positive change in tone by promoting a generation of renters to become a generation of buyers,” he said.
“We encourage lenders to come on board and support this initiative to enable first time buyers to enter the property market by future proofing the financial burden many face.”
Government extends eviction ban and notice period
Evictions have been on hold since March as part of measures to protect households from the coronavirus crisis, but courts had been set to resume cases from Monday.
Campaigners had called on the government to protect renters who have fallen into debt and arrears as a result of the pandemic.
And now the government has agreed to extend the ban to protect tenants from losing their home until September 20.
Tenants in England will also get at least six months’ notice of eviction in England, an increase from the previous notice period of three months.
After this period is up courts can hear a case.
Housing charity Shelter found that more than 230,000 private tenants have fallen into arrears since the start of the pandemic.
However, landlord and letting associations want the ban to end.
Timothy Douglas, policy and campaigns manger, ARLA Propertymark said: “The whole of the private rented sector has been impacted as a result of Covid-19 but we must recognise that the courts already faced a backlog of cases prior to the pandemic.
“It is important to take steps back towards normality so that both landlords and tenants have access to the justice system, while putting measures in place to offer further support to tenants who have built up Covid-related arrears through no fault of their own.”
Anti-social tenant cases will be prioritised by courts when they start hearing cases, according to housing secretary Robert Jenrick.
He said: “I know this year has been challenging and all of us are still living with the effects of Covid-19.
“That is why today I am announcing a further four week ban on evictions, meaning no renters will have been evicted for six months.
“I am also increasing protections for renters – six-month notice periods must be given to tenants, supporting renters over winter.
“However, it is right that the most egregious cases, for example those involving anti-social behaviour or domestic abuse perpetrators, begin to be heard in court again; and so when courts reopen, landlords will once again be able to progress these priority cases.”
Eviction surge not likely as less than five per cent of tenants in arrears – NRLA
In a survey of private tenants carried out by the National Residential Landlords Association (NRLA), 87 per cent of tenants said they had maintained their full rent payments throughout the pandemic. A further eight per cent said they had agreed with their landlord to pay lower rent, take a payment holiday or made other arrangements, while three per cent had built up arrears and were unable or unwilling to repay the debt.
A ban on evicting tenants was brought in at the start of the lockdown period to protect renters in financial difficulty. But from 24 August, the courts will begin to hear possession cases again.
Some two per cent of those surveyed said they had been served with an eviction notice.
NRLA also reported that in a separate survey, 55 per cent of landlords who have granted at least one tenant a deferred rent or rent free period plan to absorb the losses from their own savings.
These figures come ahead of new rules being introduced which will mean courts can adjourn possession cases where landlords have failed to adequately explain the impact that the pandemic might have had on their tenants before seeking possession.
The trade body has developed guidance along with with other groups to support landlords and tenants on reaching an agreement over how to deal with rent arrears to sustain tenancies wherever possible. NRLA is also calling for the government to introduce a tenant loan scheme to help pay off arrears built up due to the coronavirus.
Ben Beadle, chief executive of the NRLA, said: “The vast majority of landlords and tenants are working together to sustain tenancies, and critically the overwhelming majority of tenants are paying rent as normal. Eviction is not, and need not be, an inevitable outcome where tenants have struggled to pay their rent due to Covid-19. Those who argue otherwise are stoking needless anxiety for tenants.”