Finding optimism amidst market challenges: navigating 2024 as a landlord
With the New Year now in full swing, Paul Shamplina, Founder of eviction and housing law specialist, Landlord Action and Chief Commercial Officer at NRLA insurance partner,Total Landlord, reflects on the evolving landscape for landlords and offers his insights and advice to landlords looking to navigate the challenges and opportunities that lie ahead for 2024.
The private rented sector is undoubtedly evolving, with widespread reforms, rising costs (predominantly due to higher interest rates) and shifting social and political dynamics. While it's easy to succumb to despondency, I want to consider some of the crucial reasons why landlords shouldn't lose hope. I’ll be exploring how some measures, which are seemingly designed to push landlords out, are being reassessed or diluted, giving renewed optimism. I’ll also explore some strategies for navigating the current challenges facing landlords.
Obviously, interest rates are one of the biggest challenges for landlords coming off fixed-rate mortgages this year. Having risen sharply from 0.1% in December 2021 to a 15 year high of 5.25% just two years later, it is understandable that many landlords are struggling.
However, this doesn’t have to mean that being a buy-to let landlord is no longer financially viable. I understand that for some landlords, owning a rental property is only manageable when the mortgage payment is being completely covered by rental income. However, for those that can afford to also pay towards the mortgage, as long as a property is occupied by tenants who are consistently paying rent, landlords continue to accrue equity in a property they own. If property values continue to rise over the long term, as has been the historical trend, landlords can still make profits when selling.
It's also essential to acknowledge that we don’t know what will happen to interest rates in the future. If inflation decreases, there's a likelihood of an impact on the base rate.
With tenants’ rental affordability stretched, most landlords are not able to cover the increased mortgage costs by raising rents. As Rightmove recently pointed out, landlords will have to “balance priorities” to get rent prices right.
Therefore, my first point for landlords to consider this year is:
Rent adjustments and financial planning: Consider the financial implications of rent adjustments. While external factors like economic changes and mortgage rates may necessitate adjustments, it is crucial to plan and communicate any changes transparently with tenants as early as possible. Balance the need for more income, versus keeping hold of a reliable tenant.
Total Landlord’s ‘Economic and property market update’ explores what is likely to happen in 2024 and beyond when it comes to the economy and its impact on the property market.
Previously, the Government had outlined its intentions to implement new measures aimed at enhancing the energy efficiency of rental properties. The plan was to elevate the minimum energy performance rating for private rented homes from E to C by April 2028.
As you will know, last year Prime Minister Rishi Sunak abandoned these plans. He said forcing landlords to take the burden for these renovation costs was “just wrong” and in the interim the Government would continue to subsidise a transition to greener homes. Good news for landlords.
However, my advice is to:
Embrace Sustainability: While mandatory energy-efficiency changes may have been delayed, it is still worth looking at opportunities to make your property more eco-friendly. Embracing sustainability not only aligns with the growing tenant demand for eco-friendly living but can also result in cost savings over the long term. Where possible, landlords should consider implementing energy-efficient upgrades regardless of legal requirements, to attract environmentally conscious tenants and enhance property value.
For practical tips to help you improve the energy efficiency of your property, read Total Landlord’s ultimate guide to having an eco-friendly property.
Rather than assuming that legislative changes are solely targeted at landlords, it's crucial to understand the intent behind these measures. Legislation often aims to create a fair and balanced environment for both landlords and tenants. For example, while the Renters (Reform) Bill is likely to come in this year and includes several key reforms for tenants, abolishing Section 21 evictions has been delayed due to the need to make changes to the court system. This demonstrates that landlords are being heard.
Increased powers for landlords to evict tenants for anti-social behaviour or in instances of repeated rent defaults are still being brought forward as part of the Bill.
Adaptation to legislative changes: Engaging with these changes proactively, seeking advice about how they will directly impact you, and staying informed can empower landlords to navigate the regulatory landscape effectively. The delay in the ban on Section 21 eviction notices does not mean it will go away. Keep abreast of any new laws affecting landlords and tenants and adjust your practices accordingly. Leveraging the ability to adjust rental strategies, diversify portfolios, and explore emerging trends can make a substantial difference when weathering market changes.
With a key legislative focus being on the duration of future tenancies, we know that it is more important than ever for landlords to cultivate strong relationships with tenants. One common problem I see in the field of evictions is that the relationship between landlord and tenant has broken down when it did not need to. I’ve dealt with many cases which could have been prevented if both parties had been more open in their communication from the outset. I often advise landlords to start a tenancy off on the right foot by agreeing regular catch-up communications with their tenant (be that via phone, text or email etc) to check everything is ok.
Tenant relationship building: Regular communication, understanding each other's needs, and addressing concerns promptly can contribute to a positive living experience and tenant stability. Always uphold professionalism and help shift the negative narrative surrounding landlords by prioritising clear communication, maintaining well-kept properties, and fostering positive relationships with tenants wherever possible.
My final tips for being a landlord in 2024 are:
Assess your property management practices - Regularly review the service you provide, ensure efficiency, and manage costs effectively. Consider whether it's time to reassess your level of involvement and whether external support, such as property management assistance, would be beneficial.
Always remain compliant - Ensuring that all necessary legal documentation is up to date, including compliance with gas safety regulations, deposit protection, inventories and issuing how to rent guides correctly is all paramount.
Embrace technology – This can be a great way to streamline processes and save time. Consider adopting property management software for efficient communication, rent collection, and maintenance tracking. Technology can enhance the overall experience for both landlords and tenants.
Network - Engage with fellow landlords and industry professionals. Attend conferences, webinars, and local events to stay connected with the latest trends and best practices. Continuous learning can help you adapt to changing circumstances.
Finally, landlords facing uncertainty should not hesitate to seek professional advice. Consulting with legal experts, financial advisors, and other property professionals can provide valuable insights and strategies tailored to individual circumstances. Professional guidance can help landlords make informed decisions and mitigate risks.
While the challenges facing landlords in 2024 may seem daunting, adopting a proactive and adaptable mindset can turn obstacles into opportunities. Legislative changes, rising costs, and market shifts need not be insurmountable hurdles but rather catalysts for strategic innovation. By focusing on professionalism, staying informed, engaging with tenants, and seeking expert advice, landlords can navigate the evolving landscape of the private rented sector and continue to thrive in the dynamic world of buy to let.
