Government plans to end ‘no-fault’ evictions
The move would prevent landlords from evicting tenants without a good reason.
Landlords could be barred from evicting a tenant at short notice without a good reason as part of a government overhaul of the rental sector.
The Government has launched a consultation on abolishing Section 21 notices for eviction. The so-called no-fault evictions, currently allow landlords to evict tenants with just eight weeks’ notice once their fixed term contract has come to an end.
The move will effectively create open-ended tenancies, which the Government claims will bring greater peace of mind to people who live in rented accommodation.
Landlords will still be able to evict tenants for reasons recognised under law, such as if they fall into rent arrears or damage the property, but they may have to go through the courts to do so.
The Government also plans to amend the current rules so that landlords can regain their property if they want to sell it or move into it.
But despite these concessions, the Residential Landlords Association (RLA) warned it could put people off investing in property.
Why is this happening?
The Government claims that evidence shows no-fault evictions are one of the biggest causes of homelessness for families.
It adds that allowing them not only leads to tenants living with the worry of losing their home, but also contributes to people putting up with poor conditions as they are afraid to complain about problems in case they are evicted.
It hopes the move will not only give renters more stability but will also mean people no longer put up with sub-standard accommodation.
Who does it affect?
The move would obviously be good news for tenants, and it has been welcomed by housing charities.
But the RLA warned the Government there were “serious dangers” if it got the reforms wrong.
David Smith, policy director at the RLA, said: “With the demand for private rented homes continuing to increase, we need the majority of good landlords to have confidence to invest in new homes.
“This means ensuring they can swiftly repossess properties for legitimate reasons such as rent arrears, tenant anti-social behaviour or wanting to sell them.”
Jeremy Leaf, a former RICS residential chairman, also claimed that no-fault evictions affected only a small number of tenants.
He said: “On the ground, we don’t find this happens frequently at all, so hope that a thorough evidence-based consultation will flush out the extent of the problem.
“This will ensure that landlords do not desert the sector unnecessarily.”
The Institute for Public Policy Research welcomed the announcement but called on the Government to go further and introduce caps on rent increases and prevent landlords from evicting families within the first three years of signing a tenancy agreement if the only reason was to sell the property.
What’s the background?
The latest consultation is part of an overhaul of the private rental sector, which the Government has described as being the biggest for a generation.
Other changes that are coming into force including banning letting agents from charging fees to tenants and capping tenancy deposits at the equivalent of five weeks’ rent.
It has also announced plans to introduce a specialist Housing Court to resolve property disputes.
Around 4.5 million households currently live in privately rented homes.
Top 3 takeaways
-
The Government has launched a consultation on abolishing so-called no-fault evictions
-
The move will effectively create open-ended tenancies
-
The Residential Landlords Association (RLA) warned it could put people off investing in property
Court ruling could open way for 3% stamp duty refund claims on second homes
A landmark court case could mean that investors purchasing uninhabitable buildings can avoid the 3% Stamp Duty Land Tax on second homes.
A recent court ruling could potentially open the way to challenges to the 3% stamp duty surcharge levied on additional homes.
It could offer an opportunity for those who have already paid the charge to request a refund from HM Revenue and Customs (HMRC) – and could set a precedent for other buy-to-let investors.
What’s the background?
Since April 2016, buyers have had to fork out an extra 3% in stamp duty when buying a second residential property for £40,000 or more, such as a holiday home or buy-to-let.
HMRC calls it the ‘Higher Rates on Additional Dwellings’ or HRAD for short.
What’s happened now?
A recent tax tribunal in Bristol found in favour of Paul and Nikki Bewley, and said they didn’t have to pay this 3% charge as they were buying a property which was, at the time, uninhabitable – even though HMRC contested it.
The Bewleys purchased a derelict bungalow in Weston-Super-Mare for £200,000 as a buy-to-let investment in January 2017.
At the time, the property was riddled with asbestos and had no central heating – and was not fit to live in.
The couple decided to demolish the original building so they could build a new home in its place.
They did so in the belief they would not be liable for the 3% surcharge for purchasing a second home.
How much stamp duty did they pay?
When the Bewleys bought the property, they paid the normal rate of stamp duty of £1,500. However, they were later told by HMRC they should have paid £7,500.
What does the law say?
According to the Housing Act of 1967, a property must have a cooking and bathing facilities and a lavatory to be deemed habitable.
What did HMRC say?
HMRC contested this and said it believed the higher rate of stamp duty was applicable on the grounds that a property was capable of being used as a dwelling sometime in the future.
What did the tribunal rule?
However, the tribunal ruled against HMRC and sided with the Bewleys, stating they shouldn’t be liable for the 3% surcharge because the property was not fit to live in immediately.
Due to the ruling, the couple ended up only having to pay the standard rate of stamp duty – a sum of £1,500.
Who does this affect?
Experts say this landmark case could open the flood gates for hundreds of claims from buy-to-let investors who paid the surcharge for the purchase of properties that needed renovation.
This could mean homebuyers who voluntarily overpaid on their tax will now seek to claw back millions of pounds in refunds from the taxman.
Specialist buy-to-let broker, Commercial Trust Limited, says this judgement suggests buy-to-let investors may have a case for exemption from the 3% surcharge if they are buying a property that is uninhabitable at the time of purchase.
It adds that potentially, this ruling could represent an opportunity for retrospective claims from buy-to-let investors who have paid the additional charge on properties that were uninhabitable at the time they were bought.
What does this mean for investors?
This verdict will come as welcome news to the ears of buy-to-let investors who have been hit from all sides recently by a combination of higher stamp duty costs, the loss of tax reliefs and stricter mortgage lending criteria.
This has made it harder for many to generate a decent income and led to many investors quitting the market.
Going forward, buy-to-let investors eager to avoid the 3% surcharge will try to look to take advantage of this loophole by purchasing properties that are derelict or uninhabitable.
What will happen next?
HMRC says it is considering the judgement carefully. But it is also expected to challenge people wherever it can – as there’s a great deal of money at stake if HMRC can force additional homeowners to pay the 3% stamp duty surcharge.
However, going forward, we could expect to see major legal arguments over what constitutes a ‘dilapidated home.
Top 3 takeaways
- HMRC loses a court case against a couple who were charged additional rate stamp duty on a property that was uninhabitable at the time of purchase
- Homebuyers who overpaid the tax in the same way could now seek to claw back millions from the taxman
- New investors may may take advantage of new loophole to avoid the 3% surcharge.
Housebuilding levels continue to fall short of government targets
Only 165,000 new properties were built in England last year.
Just 165,090 new homes were built in England in 2018, well short of the Government’s target to have 300,000 additional properties completed every year.
There was also no increase in the number of properties started during the year compared with 2017, despite a raft of government measures to accelerate housebuilding levels.
Most worryingly of all, the Ministry of Housing, Communities and Local Government figures showed a sharp fall in building levels during the final quarter of the year, with new starts dropping by 8% compared with the previous three months.
The housebuilding industry has failed to recover since the global financial crisis, with the number of new properties started in the final quarter of the year still 17% lower than the peak reached in the first quarter of 2007.
It appears unlikely that the Government will fulfil its 2015 pledge to build one million new homes by the end of 2020.
.jpeg)
Why is this happening?
Housebuilding levels are being held back by a number of factors, ranging from a shortage of labour and building materials to the length of time it takes to get planning permission on land.
The sector has also been impacted by the slowdown in the wider housing market as a result of Brexit uncertainty and stretched affordability.
Who does it affect?
The low number of new properties being built means the mismatch between supply and demand looks set to continue, which will put further upward pressure on prices.
The situation is bad news for anyone who wants to get on to the property ladder or trade up it.
Estimates for the number of new homes the UK needs to build each year to keep pace with population growth range from 240,000 to 340,000.
But housing completions have not reached even the lower end of this level since the 1970s.
.jpeg)
What’s the background?
In September 2015, the Government pledged to deliver one million new homes by the end of 2020.
But with just two years to go, only 504,650 new properties have been completed in England.
Additional homes will have been added to the country’s housing stock through conversions and change of use, although homes created in this way only reach the low tens of thousands each year.
In its election manifesto in 2017, the Conservative reaffirmed the commitment to build one million new homes by 2020, adding a further pledge to build an additional 500,000 properties on top of this target by the end of 2022.
The Government has also previously stated that it plans to increase the housing supply by 300,000 new properties a year by the mid-2020s, as part of a five-year £44 billion housing programme.
Last year housebuilding levels reached a 31-year high, but at 220,000 the figure was still significantly below this target.
In 2016, the Government allocated £1.2 billion to build 200,000 Starter Homes, which would be sold to first-time buyers at a 20% discount, but no properties have so far been built under the scheme.
Top 3 takeaways
-
Just 165,090 new homes were built in England in 2018, well short of the Government’s target to have 300,000 new properties completed every year
-
There was no increase in the number of properties started during the year compared with 2017, despite a raft of government measures to accelerate housebuilding levels
-
Building levels fell by 8% during the final quarter compared with the previous three months
Top 10 buy-to-let hotspots in Britain
Lower house prices translate into higher yields for landlords in northern England and Scotland, according to our data.
Northern England and Scotland provide the best returns for buy-to-let landlords, with some locations offering yields of more than 8%.
Rochdale in Greater Manchester topped the table for the most lucrative place in which to be a landlord, with low property prices and rents in a two-bedroom home of £738 translating into gross annual yields of 9%.
At the other end of the scale, the commuter hotspot of St Albans offered the lowest returns at just 3.7%, according to Zoopla.
Annabel Dixon, spokesperson for Zoopla, said: “Despite the challenges facing the sector, yields - particularly in North England and Scotland - match up well against other forms of investment.
“It’s no surprise that towns further south provide lower yields. House price growth has slowed, but property is still considerably more expensive in these locations, meaning that even with higher rents, the returns are more limited for landlords.”
On a regional basis, Scotland offered the best yields at 6%, followed by Yorkshire and the Humber and North West England at 5.4%.
Returns were lowest in the South West and London at 4.2%.
Where are the best buy-to-let towns?
While Rochdale topped the poll for the best buy-to-let returns, Blackpool was not far behind offering yields of 8.6%, followed by Glasgow at 8%, with Wigan in fourth place and Middlesbrough coming fifth.
Not only were all of the top 10 towns in northern England or Scotland, but they all had house prices that were significantly below the national average, contributing to the higher yields.
Middlesbrough had the lowest house prices on the list at just £84,728, offering gross yields of 6.9% despite average monthly rent on a two-bedroom property coming in at only £489.
Outside of London, towns within commuting distance of the capital offered some of the lowest buy-to-let yields, largely due to high house prices.
Although rent on a two-bedroom property in St Albans averaged £1,209 a month, typical property prices of £397,424 contributed to a yield of only 3.7%.
Croydon was not much better, offering average returns of 3.8%, while yields in Worthing and High Wycombe were just 4%.
Hereford offered the third lowest yields at 3.9%, reflecting low rents of only £635, despite a two-bedroom property in the town costing just £194,052.
Unsurprisingly, high house prices in London put pressure on the rental yields buy-to-let investors could expect to make.
Despite this, there were still pockets of opportunity in the capital.
Barking and Dagenham offered they highest yields to landlords at an average of 5.3%, followed by Newham at 4.7% and Redbridge at 4.6%.
By contrast, returns were lowest in Hackney at just 3.3%, despite rent on a two-bedroom home costing an eye-watering £1,933 a month.
.png)
Top 3 takeaways
1. Northern England and Scotland provide the best returns for buy-to-let landlords
2. Rochdale in Greater Manchester topped the table with gross annual yields on a two-bedroom property averaging 9%
3. The commuter hotspot of St Albans offered the lowest returns at just 3.7%
Top housing takeaways from the Spring Statement
Chancellor Philip Hammond delivered the 2019 Spring Statement in the House of Commons on Wednesday. We've sifted through the detail and picked out the main announcements that impact housing.
1. Funding for 37,000 new homes
Hammond announced plans to use £717m from the £5.5bn Housing Infrastructure Fund to unlock up to 37,000 new-build properties at sites including Old Oak Common in London, Didcot, Cambridge and Cheshire.
Money from the fund is given out to local authorities in the form of a grant and is used to provide the infrastructure that is needed to enable developers to get planning permission for sites.
While the funding is good news for these communities, it is likely to be a while before it leads to new-build homes becoming available to buy or rent, as the money is used at the very start of the development process.
2. Support for 30,000 affordable homes
The Government will guarantee up to £3bn of borrowing by housing associations in England to support the delivery of around 30,000 affordable homes.
The money, available via the Affordable Homes Guarantee Scheme, should enable affordable housing providers to boost their output through lower borrowing costs.
While the move is obviously good news for the affordable homes sector, the 30,000 properties the scheme will help to deliver is only a fraction of the Government’s target of having 300,000 new properties built across the UK every year.
3. More properties for Oxford-Cambridge Arc
A further £445m is being unlocked from the Housing Infrastructure Fund to unlock more than 22,000 homes in the Oxford-Cambridge Arc.
Further details on how the money will be used were not given, but it is likely to be spent on providing the infrastructure that is needed to enable housing developments to go ahead.
Housing affordability pressures in the Oxford-Cambridge Arc have intensified in recent years as the output of new homes has failed to keep pace with the creation of new jobs.
It is hoped that these pressures can be eased through building more properties to meet the growing demand.
The Government has previously committed to building one million new homes in the Arc by 2050.
4. Small builders lending scheme to launch
Hammond confirmed that the previously-announced scheme to support smaller house builders would be launched next month.
Under the scheme, which was first announced in last year’s Budget, the Government is providing £1bn of guarantees to support lending to small and medium-sized house builders through the British Business Bank.
It is hoped that the scheme will help to boost housing supply by enabling more small-scale sites to be developed through lowering funding costs for smaller house builders.
5. Planning permission reform
The Government announced plans to introduce new planning guidelines in the coming months to support housing diversification on larger sites, after a report by Sir Oliver Letwin concluded greater differentiation in the types and tenures of housing delivered on these sites would increase building rates.
A package of reforms will also be introduced allowing greater change of use between premises and a new permitted development right for existing buildings to be extended upwards to create new homes.
Finally, a green paper will be published detailing proposed improvements to accelerate the planning process.
MPs call for law change to protect leasehold homeowners
The law should be changed to protect leaseholders from being exploited by developers who are using them as a “steady source of profit”, a committee of MPs has said.
The MPs warned that some developers had imposed onerous ground rents, which doubled every 10 to 15 years, on the owners of new-build leasehold houses and flats, leaving them unable to sell their homes or remortgage.
Homeowners with a leasehold only have the right to occupy their property for a set period of time, and they do not own the building outright.
Other issues identified by the Housing, Communities and Local Government Committee included high service charges and one-off bills, unfair permission charges, the alleged mis-selling of leasehold properties by developers and unreasonable costs to buy shares of the freehold or extend leases.
The report said: “Too often, leaseholders - particularly in new-build properties - have been treated by developers, freeholders and managing agents, not as homeowners or customers, but as a source of steady profit.
“The balance of power in existing leases, legislation and public policy is too heavily weighted against leaseholders, and this must change.”
What recommendations has it made?
The Committee has called for the Competition and Markets Authority to investigate mis-selling in the leasehold sector and make recommendations for appropriate compensation.
It has also suggested making commonhold - the freehold ownership of homes within a development - the primary model for flats in England and Wales, and ending the practice of selling houses on a leasehold basis.
Other proposals include:
- Introducing standardised key features documents at the start of the sales process making clear what the tenure of the property is, the length of the lease and any ground rent or other fees.
- Limiting ground rents on existing leasehold properties to 0.1% of a property’s value, up to a maximum of £250 per year.
- Setting ground rents on new leases at zero.
- Introducing legislation to restrict onerous permission fees in existing leases.
- Creating a low-interest loan Help to Buy scheme for leaseholders to enable them to extend their leases or purchase a share of the freehold.
Who does it affect?
Government statistics suggest there were 4.2 million leasehold properties in England in 2015-16, of which two-thirds were flats.
The committee said it had received hundreds of letters from people living in leasehold properties detailing their bad experiences with developers, freeholders and management companies.
It added that many leaseholders had been surprised to learn they did not own their property in the same way as a freeholder.
What happens now?
While the committee has proposed a series of wide-ranging reforms to tackle the problems leaseholders face, there is no guarantee the Government will act on all or indeed any of them.
The Government generally has two months in which to publish its response to a select committee report, but it is not obligated to take up the recommendations.
It has, however, previously expressed concerns about leaseholds, and in October last year, it launched a consultation on imposing a cap on ground rents on new-build leasehold properties and requiring the majority of new-build houses to be sold as freehold.
Top 3 takeaways
1. The law should be changed to protect leaseholders from being exploited by housing developers, a committee of MPs has said
2. The committee has called for the Competition and Markets Authority to investigate mis-selling in the leasehold sector and make recommendations for appropriate compensation
3. It has also suggested making commonhold the primary model of ownership for flats in England and Wales, and ending the practice of selling houses on a leasehold basis