13th August 2020

Advice for landlords during the current rent crisis


This blog will focus on the impact of the coronavirus crisis on UK landlords, after a record fall in rent paid was announced in June 2020.

Around 20% of households in England rent from private sector landlords. Back in March, as it became clear that the coronavirus crisis put renters at risk who had lost income and would be unable to pay their rent, the government moved to protect renters. A three-month ban on new evictions was put into place, as well as a 90-day suspension for any proceedings already going through the courts.

The eviction ban was set to end for England and Wales on 25 June 2020 but has since been extended two more months to 23 August 2020 (20 September 2020 for commercial properties). A YouGov poll undertaken in March found that one in five private tenants (roughly 1.7 million people) said they expected to lose their job due to the coronavirus crisis within three months. Two million renters said if they were to lose their job, they would not be able to pay their rent. So, what next for landlords who may soon be owed in excess of five-months’ rent? In June, it was reported that 60% of landlords were not receiving full rentals for their properties. There are a number of ways landlords can address falls in rental income while still supporting their renters and safeguarding the future.

Work with tenants on creating a flexible payment plan

Housing secretary Robert Jenrick has been clear that no one is to be evicted from their home this summer due to the coronavirus crisis. The main worry now for both tenants and landlords is the repayment of rent arrears accrued over the past few months. For tenants who have lost their income and/or jobs during the crisis, this is particularly worrying. Landlords are being encouraged to speak directly with tenants in these instances and arrange a manageable repayment plan of rent owed. It is expected that landlords exhaust all possible options before considering eviction of tenants once the ban is lifted in the autumn.

Temporarily drop, defer or suspend the rent

London has already seen rental prices drop by a record 15% in places due to a lack of demand, as people stay away from the capital during the pandemic. Across the UK, average rents also fell by 0.7% in June, although some areas such as the north west have experienced an increase.

As we move to new ways of working, with people potentially working from home more, rental demand across the UK is likely to be changeable for a while to come. If your tenants are struggling with their rent, it’s worth weighing up the cost of finding new tenants versus losing a proportion rental income for a few months. For example, if it costs a landlord £600 in admin fees to find and sign up new tenants for a property, they might be just as well to drop rental prices by £100 for six months for the current tenants. This gives the tenants a chance to pay off any rent owed and (ideally) stay on top of their bills. Bearing in mind that rental market demand is unstable in some areas, this may be the most sensible option for the short term future.

Move from short- to long-term lets

To reduce potential losses, rent properties as a long-term let rather than a short-term let. Although the long-term market is likely to be less lucrative, it will provide security. With tourism and business travel severely curbed for the foreseeable future, the short-term lets market is not what it was this time last year. The health concerns of coronavirus combined with short rental periods – i.e. high turnover of people – mean it’s no surprise there has been a global shift, from Madrid to Dublin, towards longer term lets over the past few months.

Take advantage of temporary tax cuts to build your portfolio

The government has made cuts on the amount of stamp duty payable on property purchases until 31 March 2021. These cuts apply to buy-to-let properties in England and Northern Ireland. Property investors who purchase through a limited company are exempt on paying stamp duty on homes valued up to £500,000, but must still pay the buy-to-let 3% tax surcharge on purchases.

This means a buy-to-let property at £400,000 will pay 3% tax of £12,000, as opposed to £22,000 before the tax cut was announced. A saving of £10,000 is a huge incentive for those considering making an investment.

Forecasting for the future

The rental property market boomed in 2019. Sadly, that bubble has burst this year. Yet forecasts for the long-term health of the housing market are positive and rental demand is surging in many parts of the country. If landlords can weather this temporary dip, or take advantage of current tax cuts, the future still looks bright.