In last week’s article we explored why political parties of all persuasions are pro-tenant. With the Coronavirus Outbreak having caused considerable loss of life, it’s had a damaging effect on all other aspects of society and the Private Rented Sector is no exception. The Housing Minister, Robert Jenrick, announced in mid-June that there will be a further 2-month extension on the current eviction ban. This renders Landlords unable to evict tenants until August 23rd, at the earliest. In this weeks article I share with you my thoughts on the knock-on effect this will have for Investors and why its bad for the future of Buy-To-Let.
What this means for Investors
In last week’s article we explored why political parties of all persuasions are pro-tenant. The Coronavirus Outbreak has caused considerable loss of life and a damaging effect on all other aspects of society, the Private Rented Sector is no exception.
The Housing Minister, Robert Jenrick, recently announces that there will be a further 2-month extension on the current eviction ban. This renders Landlords unable to evict tenants until August 23rd at the earliest. This announcement was made without any notable degree of consultation and caught the trade bodies on the hop.
What this means for Landlords
The announcement was made with no consultation and has caught the Industry trade bodies on the hop. Looking at the current situation, it’s potentially very damaging for the 2.6 million Investors up and down the Country. The Housing Minister announced that this would give “security” and “certainty” for renters who have been affected by Covid-19. The good news is that the rental sector is now gathering momentum in some parts of the Country and is arguably keeping the housing market afloat.
My concern is this extended eviction ban will choke off any recovery the rental market is making. Landlords with issues in their tenancies should have the power to evict quickly and be rid of defaulting tenants. A lot more homes could have been made available to rent, to good quality, reliable tenants, thus aiding market recovery. Now that the brakes have been applied, this has forced Landlords to continue housing defaulting tenants.
To give some respite, defaulting tenants should have been ordered to vacate the properties, for Landlords to cut their losses. This will give non-paying tenants an opportunity to find cheaper housing rather than occupying a household they cannot afford to keep.
Whilst we have seen a gradual increase in demand, affordability is paramount. Tenants who have been furloughed by their employers or those who’ve taken a pay cut , have to come to the realisation of living within their means.
It’s unacceptable that Landlords could be facing a year-long eviction battle with no income. In many cases, Landlords have a mortgage and other costs to pay. This ill-thought out scheme will surely lead some down the road of Bankruptcy.
The extended ban on evictions is making a bad situation worse. Parts of the market in all regions of the country are suspended ,denying Investors the chance for price realignment. This has created a distorted view of the rentals market where prices are skewed. Given that the Government’s pro -tenant stance, if it really wants to help renters it should issue them with low cost loans to clear up the arrears. The repayments can be attached to their earnings ( like Student Loans) and paid back over a fixed period. With interest rates at their lowest of all-time, surely that makes practical and economic sense?
Landlords cannot operate in a realistic and sustainable market with defaulting tenants occupying properties. Whilst I mentioned this will drive some Investors out of business and undoubtedly cause financial distress to those who choose to ride the storm. This is a blatant destruction of the Private Rented Sector before our very own eyes. Government needs to get its act together and recognise that Landlords have invested their hard earned for passive income and a secure financial future,not to be forced into providing free accommodation for defaulting tenants.