Philip Hammond recently delivered his first Autumn Statement as Chancellor, and while much of the announcement left commentators underwhelmed, there were a number of points that could have a significant impact on landlords in the East of England and across the UK.
Unfortunately, there was no good news for buy-to-let investors, but that’s something they’ll have gotten used to over the last couple of years. There was certainly no repeal of the legislation that will remove mortgage interest as a legitimate business expense, nor was there any backtracking on the stamp duty surcharge.
Instead, there was the following:
- A ban to be imposed on upfront fees charged by letting agents in England “as soon as possible”
- £2.3bn housing infrastructure fund to help provide 100,000 new homes in high-demand areas
- £1.4bn to deliver 40,000 extra affordable homes
So how will these changes affect the UK’s landlords?
A ban on letting agent fees
The plans announced in last week’s autumn statement will make it illegal for letting agents to charge for the essential administrative tasks that must be carried out before a tenancy can begin. There are concerns that if the administration costs come back to the landlord, then given the mortgage interest tax relief cuts and stamp duty rises of prior statements, these are costs landlords will be unable to absorb. As a result, rents will inevitably increase.
It is also thought more landlords will step away from agents and carry out the necessary checks themselves without incurring any fees. To keep costs down, they may choose to cut corners by recycling existing tenancy agreements and not obtaining the tenant references they need. The result could be a reduction in the level of protection they receive.
Finally, banning letting fees could reduce financial liability on behalf of the tenant. Without admin and check-in fees, tenants could potentially turn around on the day before they’re due to move in and pull out of the agreement without incurring a financial loss. This will certainly not be the case for the landlord, who would be left out of pocket and facing a void period on the property.
The housing infrastructure fund
With a rapidly growing and ageing population, new homes are desperately needed in the East of England, and it is hoped this is one area that will benefit from the £2.3bn housing infrastructure fund. Only around half the homes needed to meet demand in the region are currently being built, with an estimated 62,950 shortfall in new homes being built over the last four years.
The result is that an annual household income of more than £100,000 is needed to buy a property in some areas of the East, while renting privately costs an average of £690 per month and accounts for 30 percent of average incomes. Given the increasing demand, it is likely rents will not fall in the area, but the additional housing stock could create new opportunities for buy-to-let investors.
40,000 more affordable homes
Mr Hammond also announced that the government is investing £1.4bn in an effort to deliver 40,000 new affordable homes. This, along with the extension of the Right to Buy programme, will have the likely effect of reducing rental stock. These measures could cause further upward pressure on rents, particularly in high demand areas like London and the East of England.