As the largest accredited supplier of properties to local authorities in London and Essex, Leigh Young (pictured), Co-founder of the Elliot Leigh Guaranteed Rent Scheme, talks about how a shift in mindset could help some landlords navigate the current and future market challenges.
We have, like most other organisations in the buy-to-let sector, seen a significant shift in landlord sentiment over the last few years, with one of the biggest driving forces being fear.
Fears over how the changes already brought in will financially impact them, such as the Tenant Fees Act and cuts to mortgage interest relief, and worries about the impending changes such as scrapping of Section 21 and implementation of minimum EPC requirements.
When we started Elliot Leigh 20 years ago, it was with the view of alleviating fear for landlords. As landlords ourselves, we could see the impact of void periods, refurbishment cost and rent arrears.
Elliot [Altman] had a property in Tower Hamlets, but since it was let to students, he would only receive income for 10 months of the year, then have a two-month void period, as well as the repair costs. W
hen he offered it vacant to a local authority, he was suddenly able to guarantee his income for 52 weeks of the year and eradicate the ‘fear’. This was the start of Elliot Leigh.
Fixed rent
Our scheme was set up to guarantee landlords a fixed amount of rent each month, regardless of whether their property is occupied or not, reducing the financial risk by offering assurance of a regular income stream, and avoiding the possibility of rent arrears.
The properties, being let to local authorities but fully managed by us, attracted landlords who wanted to avoid the hassle of finding and managing tenants, as well as the risk of rental arrears or void periods.
Today, the complexities around being a landlord present a host of new, and frankly justified, fears, which go beyond voids and rent arrears.
That includes compliance, finding reliable tenants, access, legislation, eviction, financial balancing…the list goes on.
We’ve seen some landlords deciding the industry is no longer for them, but we’ve also spoken to landlords who want to evolve in order to remain as landlords. However, they can see that incoming legislation, in particular the abolition of Section 21, may reduce their security and choice.
Eradicated
But despite the impending changes, the buy-to-let market will not be eradicated. There are millions of people who rely on it for housing – in the social sector alone there are over 1.2 million households waiting for a property and nearly 100,000 households living in temporary accommodation.
Even with ambitious building plans, we are years away from being able to significantly reduce that number. Ultimately, each landlord’s circumstances, why they became a landlord, their risk tolerance, their financial position today and aspirations going forward are individual, but in my view, despite the challenges, there is still opportunity.
Desperate need
Local authorities are in desperate need of more properties from private landlords in order to address the shortage of housing in their areas.
They are responsible for ensuring that there is an adequate supply of affordable housing for their residents, and right now most are failing, causing a chronic housing crisis. One of the key ways they can change this is by working with private landlords to provide suitable properties.
Many landlords are considering existing the market over fears that new legislation will make it harder for them to evict tenants, leaving them trapped.
We know that some private landlords are reluctant to work with local authorities because they’re worried about regulation, bureaucracy, or the perceived risk of renting to tenants who may have difficulty paying rent or may cause damage to their property, but local authorities are keen to alleviate landlords’ concerns and attract them back to the social sector.
Mitigate risks
Guaranteed rent as a way to mitigate the potential risks associated with the abolition of Section 21 could be one aspect which draws landlords back in.
It will require cooperation and collaboration between various stakeholders, including local authorities, private landlords, housing associations, and tenants.
But by working together, it’s possible to address the shortage of affordable housing, offer a greater pool of safe, secure housing, as well as provide landlords with a solution which enables them to be hands-off with a stable income stream, without concerns over incoming legislation.
