Landlords feeling the pain – time for a different approach?

As we continue to emerge from lockdown the long term effects on the Private Rental Sector can only be guessed. With the Government furlough scheme not expected to extend beyond October 2020 and bank support via its mortgage payment holiday due to end at a similar time it comes as no surprise Landlord confidence is at an all-time low.

The National Residential Landlords Association (NRLA) conducted a survey[1] of over 4,500 current and active landlords to determine the direct impact Covid-19 is having on their rental income and ability to manage their properties. 

Rental Streams & Loss of Income

More than 54% of landlords have experienced some form of income drop in at least part their portfolio as a direct result of Covid-19. This income loss is now starting to become substantial

Distribution of landlords’ lost income across their portfolio

Mortgage Holidays and Rent Guarantee Insurance

Very few landlords have applied for a mortgage holiday, although there is a greater proportion giving an application some form of consideration. If a substantial proportion of those “considering” an application feel the need to do so or more tenancies slide into arrears, then this proportion could rise into something quite significant.

By and large rent guarantee insurance has been, so far at least, an irrelevant factor to landlords

Likelihood of landlords applying for a mortgage holiday

Landlords own financial position

A substantial proportion of landlords (22%) have themselves experienced significant reductions in employment income and opportunity,

A considerable number of landlords also rely on their properties for their own rental income and these landlords too are often struggling. Landlords also have unexpected Council Tax bills for void properties  

Impact of lockdown on labour market position of landlords

                                                                        Base: All Landlords (excludes “other” responses

The future? 

In our opinion the Covid-19 pandemic will result in a more flexible and pragmatic approach by landlords to the current economic and social changes we’re all experiencing. It’s no surprise that rental activity has fallen compared to 2019 figures by approximately 11%[2] and while the future impact on tenant income remains to be seen, a new approach to mitigating the risk of rental arrears, extended void periods and ballooning maintenance budgets is a prudent course of action.

Typical risks to a landlord’s income….

• Existing tenants meeting current levels of rent / Single earner in household

The archetypal model for the current rental market is a single AST where there may be 2 income streams for a family residence but typically a single wage earner in other smaller properties. The impact of Covid-19 risks landlords renegotiating a lower rental for furloughed tenants or in some cases rental arrears where the single earner has been made redundant.

• Void periods increasing 

As the tenancy is approaching renewal, existing tenants may expect lower negotiated rentals or look elsewhere. Single tenants  especially, whose income has markedly dropped may be looking for more affordable accommodation that’s cheaper but doesn’t compromise on comfort and living standards

• Expenditure in maintaining property portfolio

Maintaining a property over a number of years doesn’t come cheap. Adhering to existng and proposed government regulations while retaining the properties look and feel takes a sizeable chunk from the landlords net profit  

• Troublesome properties to rent

With the increase in working from home will properties with little or no outdoor space expect a longer gap from market to rental? Maisonettes above commercial property are a prime example. With some predictions estimating “25% – 30% of the workforce will be working-from-home multiple days a week by the end of 2021”[1]changes in attitude may be on the horizon

How ROOMS® can help

ROOMS® has a history of forming close working relationships with agents, landlords and our professional clients, We deliver on our promises which is why many of our clients come to us via direct referrals. So how can Rooms mitigate the most important risks inherent within the property rental market

• ROOMS® guarantees rent to the landlord for a period of up to 60 months. Any contract length would take into account the landlords circumstances and intentions for the property
• In guaranteeing rental to the landlord voids are eliminated. No more anxiety as the tenancy reaches renewal or marketing the property again
• ROOMS® maintains, cleans and furnishes the property at our own expense. We set aside a yearly budget and adhere to all current government regulations regarding safety
• At a future point in time the landlord may wish to have the property returned to them. In this instance ROOMS® will ensure the property is in a similar state of décor to which it was received. Again at ROOMS® own expense 

Get in Touch

To arrange a no obligation valuation or informal chat please contact your local branch

Alex McDowall

Managing Director

Bromley ROOMS®

[1] NRLA Survey May 2020

[2] Goodlord Lettings Activity Tracker 2020 v 2019 YTD

[3] Kate Lister. President of Global Workplace Analytics