A Clearer View
Lisa Simon, Partner and Head of Residential Division, offers a practical view on residential letting issues currently in the news.
Delays to the Rental Reform White Paper
In the Queen’s Speech in May it was announced that the Government would publish a Rental Reform White Paper ahead of a future Renters’ Reform Bill.
The White Paper was due to cover possession reform (including the abolition of Section 21 and reform of Section 8), mandatory redress for landlords, the merits of a landlord register, lifetime deposits and improved enforcement procedures.
However, the White Paper has now been delayed pending the findings of a review of existing regulation being carried out by the National Audit Office. It will also take into account responses of organisations, such as the NRLA. The NRLA, representing residential landlords, is calling for a balanced approach to the needs of landlords and tenants, including reforms to the courts; the introduction of a new conciliation model to help resolve disputes during notice periods; a redress scheme which could link compliance records with Unique Property Reference Numbers (UPRNs) to negate the need for a landlord register, and an alternative to discretionary licensing.
Impact of the Healthcare and Social Levy
The recently announced Healthcare and Social Levy, although only temporary, will impact on most landlords.
The initiative, to raise funds for the NHS and social care, comes into effect in April 2022. These costs are currently covered by national insurance contributions (NICS). Landlords do not currently pay NICS on rental income, as letting a property is considered an investment rather than a business. However, the new tax will apply to workers on the payroll, the self-employed, and investors / landlords drawing more than £2,000 a year in dividends as a company director or shareholder.
Energy efficiency in rental properties
Currently, 80% of private rented households have gas central heating and while the Government does not anticipate that all landlords will make the changes immediately (the complete transition is expected to take14 years) the grant is intended to provide an incentive.
Heating buildings is one of the largest sources of UK carbon emissions, accounting for 21% of the total and so this initiative is regarded as a significant step in ending the UK’s contribution to climate change by 2050.
Additionally, a change in legislation from 2025 will mean that landlords cannot let a property which does not have an EPC rating of C or above. According to research published in November, 17% of landlords have made efforts to improve the energy efficiency of their property (22% in the case of portfolio landlords). Of the landlords that had undertaken a refurbishment, 22% had replaced the boiler and heating system, 23% had replaced windows and 18% had installed new white goods. The same research demonstrated that tenant demand is boosted by landlords making changes in the interests of the environment: 10% of private renters said that they would stay in their property for longer if the landlord made changes to energy efficiency; 18% said that they would agree to a rent rise in these circumstances.
According to Government data there are currently 13 million homes in England and Wales currently with an EPC rating of D or below.
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