“Fools rush in where Angels fear to tread” should serve as a warning to me, but I am going to do my best to explain now why there is a shortage of rental stock – especially of larger family homes – in Harrogate and elsewhere in England.
There is, understandably, in my view, a widely held perception by local landlords that Whitehall is most unhelpful when it comes to the PRS (Private Rental Sector) and this viewpoint has been given further credence in the recent rental white paper, which confirms abolishing Section 21 ‘no-fault’ evictions and proposing a transition of all tenants under assured or assured shorthold tenancies into one system of periodic tenancies. This means that a tenant will be able to leave at any time giving just two months’ notice, but landlords will be required to present ‘reasonable circumstances in which to end the tenancy. We can also add to this the change in tax policy to phase out of tax relief on BTL’s (Buy to Let) mortgage interest. Finally, the introduction of mandatory green upgrades, including the requirement for an EPC rating of C or above and the eventual phasing out of gas boilers, along with the impact of rising interest rates and inflation on landlords with mortgages, means today’s BTL market is not for the faint-hearted.
All of the above counter currents deter both professional and accidental landlords and have reduced supply.
Inevitably the shortage of rental stock puts tenants under considerable pressure, particularly those on lower incomes. With more competition for premium properties over the different price ranges, ‘rental bidding wars’ can occur with the advertised rent the minimum bid amount.
In contrast, and in the midst of the current overheated rental market, Llandlords can choose from a sizable pool of tenants. However, how does a savvy landlord choose the best tenant when there are multiple applicants? Let’s remember that the tenant who can move in straightaway and pay the highest rent may not be the best in the longer run. It’s not all about getting the highest rent, it’s more about making an informed decision and selecting the right tenants. Inevitably the financially best placed tenants will usually be the most successful in securing better accommodation, pushing past some of the less appealing tenants such as those with smaller incomes or those with children or pets. Ironically, this outcome runs counter to the rental reform white paper proclaimed intention of establishing a ‘fairer PRS for all’.
Landlords, for their part, should look to the horizon and be aware that under the proposed reforms, periodic tenancies could arrive in a couple of years’ time. Although tenancies at the moment tend to last longer (after the arrival of Covid) landlords should in times to come, be asking themselves how likely it is any tenant likely to stay long term. If a landlord goes for the highest earner but moves out after three months, they are back to square one. Matching the right tenant to the property makes very good business sense, and landlords may decide to accept a lower rent to secure an ideal tenant and not go for the highest bidder.
Some final words for landlords – it’s even more important going forward to build up a clear picture of a prospective tenant through stringent tenant referencing and also understand that it makes good sense in a more uncertain world to take out low cost rent guarantee insurance to protect against tenant arrears or worse especially as inflation and living costs increase going into the winter months.
Here in Harrogate, a very small number of landlords are exiting the rental sector as demand is high, rents are strong and the capital growth on property is exceptional. Being a landlord here makes great economic sense – as does instructing a very good Letting Agent ( I recommend Myrings !!!).
If you are a Harrogate homeowner or involved in the local property market in any way, then please contact us for a free no obligation chat about the above and the property services we provide in residential sales and lettings. When it comes to rentals, we would steer you towards a chat with Mr Richard Chapman – our new Lettings Manager.