As I open my copy of Property Investor News one of the first pages I come to is Landlord News and there are four headlines. The first reads ‘Over 800k renters are in arrears’, then ‘Company fined for failing HMO’, next is ‘Landlords losing over 50% of rental income’ and finally ‘Landlord jailed for trying to illegally evict a tenant’. On one page we see all the issues effecting Landlords currently and there is nothing remotely positive.
I appreciate that Covid has brought a unique asset of circumstances that the Government has had to legislate for but from what I have seen so far it is all in the tenants’ favour. A tenant has the option to not pay their rent with the caveat that a Landlord can do nothing until they are six months in arrears. The Landlord can then start a legal process and we have seen that the courts are hopelessly behind and there is little chance they will reduce the backlog any time soon. It is reasonable to expect that a Landlord will not have any form of resolution within a year at least. This has resulted in Landlords resorting to desperate measures, which is not acceptable, however, somewhat understandable.
Throw into the pot the tax hike sole trader Landlords are having to stomach and all of a sudden landlords are looking to off load their once income generating assets as now they could be costing them money instead, particularly if funded in some way.
The vast majority of landlords in this country own one or two properties and it has been a way of supplementing income to create a better living standard. With the changes in taxation let’s see how this has affected those part time landlords.
As we can see these part time landlords have seen a 35% drop in their income for no reason whatsoever other than they have tried to improve their lifestyle. When you factor in a mortgage payment of £187.50 per month on each property, we can see that there is a positive cashflow using the old tax system however using the new regime the landlord will be losing money on a monthly basis which is simply not sustainable. The net effect of this treatment of Landlords has to be a housing crisis as landlords seek alternatives to the standard tenant model.
If you are reading this Landlord news and find yourself in this trap, then contact us and we can discuss possible solutions for you.