The private rental sector has doubled since 2002, now accounting for 19% of households – potentially giving way for Landlords to become political targets, perhaps most recently by the Labour Party’s plans to remove the responsibility of paying council tax from renters. Instead, Labour plans to implement a new progressive property tax, payable by owners, to ‘discourage making homes a financial asset’ in the hope that values will reduce, making property purchase more affordable.
Meanwhile, the current Government’s Selective Licensing Review recommends creating a National Register of Landlords, as it steps up plans to increase licensing in response to local authority concerns about anti-social behaviour, poor property conditions and higher crime levels in areas of high concentrations of private rented accommodation.
44 UK local authorities are now operating areas of selective licensing, inspecting properties and enforcing compliance, ensuring that landlords or their managing agents hold a valid licence for rentals. Unfortunately, irresponsible landlords and agents, who don’t maintain properties to a good standard and mishandle tenants’ deposits and payments, or fail to control tenants’ behaviour, are giving the sector a bad name. Allowingloud, disturbing parties, ignoring drug abuse and aggressiveness can break down community wellbeing, and eventually require police intervention. Consequently, there is little public sympathy when landlords are penalised, though the majority are not to blame.
The Government is gradually scrapping tax relief on mortgage interest, replacing it from 2020 onwards with a flat 20% tax break for all landlords. This follows a 3% stamp duty surcharge on buy to let properties and second homes, introduced in 2016, and a reduction on the tax relief claimed on ‘wear and tear’ from 10% of the rent to 10% of the replacement cost for furniture and appliances.
These changes and a surge in demand for staycations are encouraging investors to switch to holiday lets. (although existing properties purchased on buy to let loans would not be eligible)However, there is a growing interest amongst lenders in developing the sector, with prime properties in the right locations. In order to be eligible for holiday let, they must be available for 210 days a year and let for at least half that, commanding average peak season rents in excess of £1000 a week. Long lets of more than 31 days are not permissible (except to family and friends).
Holiday lets currently allow landlords to deduct all mortgage interest from pre-tax profits whilst paying business rates instead of council tax, and they can also claim wear and tear as a deductible expense, making the idea a lot more appealing than maintaining their current situation
Investors must ensure that any property complies with safety regulations and is well maintained; to attract repeat business, and recommendations, some landlords provide welcome packs, including samples of local produce, or a bottle of wine, as well as a guide to places of local interest and bars/restaurants. With customer care a priority, holiday lets can be a lucrative alternative to buy to let, or an addition to an existing property portfolio.