Why a rent freeze in England just took a giant step forwards

Why a rent freeze in England just took a giant step forwards

14:52 PM, 4th November 2022, About 2 years ago 27

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Where to begin? With the media buzzwords? With various organisations calling for a rent cap in England? Or the real reason a rent freeze is coming which was revealed on Thursday (which I will come to)?

Leaving aside that there is a perfect storm brewing, is there really a private landlord anywhere in England who doesn’t believe that a rent freeze is on its way? And with it, a moratorium on evictions too.

Scotland led the way with an ill-thought-out scheme before finalising the legislation which was full of holes.

Wales tried to follow with Plaid Cymru saying that rents should be frozen this winter, and not people. That’s a clever turn of phrase and surprisingly, the Labour Party refused to impose a rent freeze saying that their Scottish friends are fearing that landlords will leave the sector – which will push rents up because there will be fewer homes to rent.

And then we come to England.

Groups stamping their feet demanding a rent freeze

We’ve had all the usual groups stamping their feet demanding a rent freeze to help deal with the cost-of-living crisis. There’s never any mention of landlords struggling financially, it is always focused on the tenants.

That’s why I was taken by a report from Crisis, which I read on Property118 about the choice of housing for those on housing benefit.

The homeless charity says that just 11% of one-bedroom homes in England are affordable to those in receipt of HB. That’s down from 17% in April.

There’s no doubt that the gap between the actual cost of renting and housing benefit rates is an issue and, according to Crisis, has grown by more than 40% in just five months.

That means there are naturally fewer homes for people on housing benefit to choose from with the situation being compounded by the fact that lots of landlords (or their lender) are not interested in dealing with those on benefits.

So, having accepted that there is a growing issue, particularly in London, with people struggling to afford to pay rent, it’s worth noting that the government looks set to impose a rent cap on social housing from next April.

There’s been a consultation to see whether it should be set at 3%, 5% or 7%.

Protect the most vulnerable households

The councils and social housing landlords have flagged up the problems that will come with this, but the government seems intent on implementing it – they say it will protect the most vulnerable households in exceptional circumstances during the year ahead.

But there’s no doubt that if it’s good enough for social housing tenants, then it must be good enough for private rental sector tenants too?

And I can’t see the government waiting until April before the rent cap is brought in for social housing tenants – I think it will come in sooner. And it will be set at 0%.

Persuaded to introduce a rent freeze in the PRS

I also think the government may well be persuaded to introduce a rent freeze in the PRS because this will play well for people on low incomes.

And, let’s face it, every landlord knows the Conservatives have not been a friend to us for many years.

We often see in the media various buzzwords like the cost-of-living crisis being splashed regularly when referring to escalating prices for food and energy and that people should prioritise these things rather than paying rent.

Well, I don’t believe they should. I think they should pay.

The government is now working on a timescale

I mentioned at the beginning that there is a perfect storm brewing, and you need to focus on what I’m about to say by understanding that the government is now working on a timescale – and that timescale is dictated by the last date on which they can hold a General Election.

That means there are some issues they need to deal with and a few supertankers they need to turn around.

Having Michael Gove back in government – he’s certainly not a friend of landlords – means that there may be some unpalatable decisions being taken that will leave landlords out of pocket.

This brings me to a perfect storm and it’s one that will leave landlords well and truly drenched.

This came to me on Thursday when I read the Bank of England statement about why they were putting the base rate up. It’s no surprise that the base rate is now 3%.

Landlords will be paying more for a new mortgage

The knock-on effect means that landlords will be paying more for a new mortgage – if they pass the ever-stricter stress testing being imposed.

That means rents will rise and they will probably increase substantially so this will become a political hot potato.

The government could put some cash into the situation to help pay rent, which has already been hinted at, but I don’t think that is what they will do.

That’s because the Bank of England statement makes clear that we are about to head into a prolonged period of recession which may see the number of unemployed people doubling and businesses going broke. This recession will end at, or near, when the next General Election must be held.

A simple solution, and one that will save the government billions of pounds, is to introduce a rent freeze in the New Year for all tenants in England, including those in social housing.

If this happens, then it is the starting gun for an election campaign and landlords will be paying the heaviest of prices for it.

Expect the rent freeze to last at least six months, if not longer.

Bound to be a moratorium on evictions

In addition, there’s bound to be a moratorium on evictions which will cause chaos in the PRS because lots of tenants will realise that they don’t have to pay rent and it could be years (I’m not joking here) before a landlord gets possession of their property.

As I said, it’s a perfect storm of rising interest rates and mortgages, fewer homes to rent and a recession that landlords can do little to avoid and all we can do is hope the government doesn’t decide that a rent freeze will be the simplest of solutions to a very tricky housing problem.

If you see me in this storm – it isn’t the rain or floodwater that I’m covered in. It’s the tears of fed-up landlords wondering what they did wrong to have such opprobrium poured over them.

Until next time,

The Landlord Crusader


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Comments

Rerktyne

9:35 AM, 5th November 2022, About 2 years ago

Right he’s the insane plot for getting rid of BTL and making houses cheap for the tenants. It began with Osborne’s attacks including the 3% surcharge. Then Gove stepped in with attacks on LLs expenses. Now we will get (already have) an end to evictions. Soon and end to ANY evictions. Then the landlord will have to actually pay the tenant to stay in his property. Then he will also have to offer the tenant the right to swap homes with the landlord. If the tenant is sexually deprived then the landlord will have to offer him his wife, daughter, son, even himself. Eventually the landlord must hand over the property and pay an acceptance fee. Ending BTL!
Mission accomplished!

Rerktyne

9:37 AM, 5th November 2022, About 2 years ago

Reply to the comment left by Rerktyne at 05/11/2022 - 09:35
Read Book III GUlliver’s Travels: it’s about impractical ideas by morons. Swift had a crystal ball.

Accommodation Provider

11:53 AM, 5th November 2022, About 2 years ago

Sorry I am a lawyer... a rent freeze is simply not possible. It's illegal. It is called theft. Inflation is much higher than rent increases so in real terms rents have decreased. Oh and rent increases have been caused by the government letting in 200 000 immigrants per year for decades now whilst not building houses. Why is the NRLA not doing anything? If this were to happen then collect money hire barrister and get compensation from the government. Inflation is actually probably twice as high as the 10% you see..dont steal my pension.......

Accommodation Provider

12:28 PM, 5th November 2022, About 2 years ago

Landlords have just barely survived covid, getting zero support and facing legal recourse delays and costs. Then Truss doubled mortgage costs overnight. Now they want to steal even more from landlords. Lets freeze civil servant salaries, freeze mortgage costs at zero percent, throw everyone out of their home, open borders hand out money, you will have nothing and work as a toilet cleaner for the state for nothing.

Martin

12:33 PM, 5th November 2022, About 2 years ago

With regard to forthcoming mortgage increases, the lenders are really pushing the boundaries.
With the recent increase to 3% of the BofE lending rate, you would expect the standard variable rate for lenders to be 1% ish above this but many have set it at 6.25% and others at 7%+.
This is a direct drive to encourage you to take one of their fixed products set slightly lower than this at 5.5% ish.
I know it's hard to believe but this could be manipulation & profiteering!!

NewYorkie

13:01 PM, 5th November 2022, About 2 years ago

Reply to the comment left by Martin at 05/11/2022 - 12:33
Of course it's manipulation and profiteering, but that's how finance works. In this situation, landlords are facing crippling mortgage costs, which are making BTL unprofitable. The obvious answer is to fix, and many were lucky enough to do so before the crunch. But it would be unwise IMHO to fix at a high rate (slightly below SVR) now, because inflation will start dropping in 2023, and interest rates will follow. Those who fix now could find themselves stuck on a high rate.

Dylan Morris

9:08 AM, 6th November 2022, About 2 years ago

Reply to the comment left by Beaver at 04/11/2022 - 17:30If landlords sell their rental properties they don’t have to sell to corporate landlords ? If I sell one of my rental houses I would hope I can chose to sell to a first time buyer or home mover. Even if another landlord wanted to purchase (might be a big corporate) and offer the highest price surely I can refuse and sell to somebody who has offered a lower figure but will be an owner occupier ?

Monty Bodkin

10:39 AM, 6th November 2022, About 2 years ago

Reply to the comment left by Dylan Morris at 06/11/2022 - 09:08
The threat is that we are going back to the disaster of permanent tenancies where landlords can't evict and are severely limited to how much they can increase rents.

The PRS was in an awful state before section 21 gave people the confidence needed to invest in housing.

NewYorkie

11:15 AM, 6th November 2022, About 2 years ago

Reply to the comment left by Dylan Morris at 06/11/2022 - 09:08
You can sell to anyone you want. But, a 'distressed' BTL sale is more likely to go to an incorporated landlord with the funds for cash buying. However, this does introduce an opportunity for first time buyers, albeit they would be likely to be outbid by a landlord with cash and the associated business benefits.

My London rental flat went to an older couple who had sold their house and wanted a London pied-a-terre, and the house I had intended to let went to a family. But, my sale last year did go to a 'small' cash investor. That said, we were not on the cusp of a property recession.

Darren Sullivan

12:57 PM, 6th November 2022, About 2 years ago

I can’t see how they can bring a rent freeze in here in England. They may have got away with it in Scotland but that market is far smaller than England. It will be a massive vote loser for the conservatives so until late 2024 I can’t see rent freezes coming in and Accommodation provider you are right there will big legal challenges here in England if Labour introduce it.

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