What Alternatives are Buy-To-Let Landlords Looking For?

Nearly one in five landlords say they plan to reduce their buy-to-let portfolio as a result of the proposed rental reforms announced last month in the government’s Fairer Private Rented Sector white paper.

That’s the finding of a new survey by Total Landlord Insurance, which looked at landlord sentiment towards plans unveiled to overhaul the UK’s private rented sector.

Published in June, proposals in the long-awaited white paper include abolishing Section 21 ‘no-fault’ evictions, meaning landlords would instead have to rely on Section 8 evictions and have a valid reason for terminating a tenancy.

There are also plans to introduce a simpler tenancy structure and double the notice period required for rent increases, as well as outlawing bans on tenants with children and pets, and those on benefits.

The Decent Homes Standard is also set to be applied to the private rented sector for the first time, with landlords needing to ensure their properties meet set criteria to provide a ‘decent’ home.

Other reforms set out in the white paper include a new housing ombudsman, and the roll out of a property portal to help landlords understand their obligations.

So far, the proposals have received a mixed response from investors and property industry experts.

While many welcome changes to improve fairness and standards for tenants, there are concerns that the proposals place the balance of power too far in the tenant’s favour.

Almost a month on from the publication being released and we are now starting to get more reaction to the white paper.

Total Landlord Insurance recently published the results of its survey of over 1,000 landlords, finding that many oppose three of the most major reforms proposed by the government.

60% of those surveyed said they do not support the abolition of Section 21, while 58% were against outlawing blanket bans on tenants receiving benefits or those with children.

In addition, 57% of respondents opposed the right for tenants to live with a pet unless there is reasonable reason for refusal.

Despite this, some of the plans were welcomed by landlords. 

Almost two thirds said they are in favour of giving tenants more power to cease arbitrary rent review clauses such as unjustified rent rises. Meanwhile, 58% support plans to double notice periods in cases of justifiable rent increases.

Somewhat surprisingly, almost 90% of landlords were in favour of a new ombudsman to settle disputes between landlords and tenants.

But some landlords said they plan to reduce their investment portfolios as a result of the proposals.

17% of landlords surveyed said they are set to reduce their buy-to-let portfolio if the plans become law under the Renters’ Reform Bill.

Eddie Hooker, CEO of Hamilton Fraser Group which operates Total Landlord Insurance, said:

“We’ve waited with baited breath for three years to hear the detail of the government’s proposed  rental market reforms and while it’s fair to say that their latest plans are rather tenant focussed, any attempts to improve the sector are extremely welcome and should improve standards for all stakeholders regardless of what side of the tenancy agreement they stand on.

“Despite this, our latest gauge on landlord sentiment shows that the vast majority are in favour of greater tenant protection and a fairer, more level playing field across the rental sector. 

“This has always been the case and while there are bad apples in every batch, the view that all landlords are money hungry tyrants who forsake tenant welfare to increase their rental yield simply isn’t the case.

“However, while they are happy to see tenant welfare increase, they are also understandably protective of their investment portfolio and don’t want to be powerless when it comes to removing rogue tenants, or preventing potential damages to their properties.”

What impact will the rental reforms have?

Ultimately, it remains to be seen how these reforms will affect the property market and the number of buy-to-let investors, but there is little doubt that many landlords are facing tough times ahead.

The proposed changes come on top of rising interest rates, which are driving up mortgage costs for investors on variable rate mortgages.

This, combined with other factors, will surely add pressure for many buy-to-let investors to consider selling up. Few would be surprised to see more landlords quitting the market if these reforms are made law.

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Important note: The advice provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.