Cast your mind back to the end of 2009, and what did you expect from this year? Back then, it really did seem like the worst was over, the recession was done and there were hints of a recovery on the cards. One year on, it’s quite obvious to anyone who is in the landlord business that lots of things have changed, but it’s difficult to say with any assurance that the outlook is significantly brighter. Certainly, the general election and the formation of the coalition government has been the source of considerable change for landlords, but the general economic outlook remains worrying.

 The ongoing economic crisis in Ireland, and worries about other Eurozone countries such as Spain and Portugal, are evidence enough that this global financial crisis is far from over. It’s this economic uncertainty, above all, that is the hallmark of the year for landlords. It has proved difficult to plan or speculate with any particular confidence.
 
A good year for letting?
There is definitely some good news to report. Demand for lets has grown throughout the year and plenty of pundits have been keen to celebrate a surplus of tenants and rising rents in some parts of the country. But every silver lining must have a cloud and the reason for this booming rentals market is, again, uncertainty in the economy. First-time buyers are deferring their first house purchase and holding off in the hope of a big fall in house prices. Other tenants are just fearful. Unemployment is forecast to rise significantly as government cuts bite. Demand is good, but it could be seen as artificially inflated and that’s no good in the long-term.
 
And it’s not all roses: the NLA and others have reported that the number of landlords suffering rent arrears has risen. For investment buy to let landlords, whilst interest rates have remained blessedly low, the housing marketing is essentially stagnant. And for many landlords, especially those who want to seize this opportunity and expand their portfolio, finance can still be fantastically difficult to get from lenders. So, in 2010 it really has been a case of “it’s the economy stupid.”All landlords will hope for a more affluent and prosperous new year in 2011.
 
Housing benefit changes
The dramatic reforms announced by the coalition government to Housing Benefit and the Local Housing Allowance will have a significant affect on landlords. The government is focussed on cutting the deficit and public spending retrenchment and the ever-expanding benefits bill is in the firing line. Housing benefits are one of the biggest expenses so it’s hardly surprising that they have attracted so much attention. It has also meant that Grant Shapps has become the most visible Housing Minister for at least a decade.
 
Details of the changes have seeped out since the Emergency Budget in June but we now have a pretty clear (if sometimes changing) picture of what they will be. In short, payments will be capped and reduced and entitlements limited: there will be no more 7 bedroom family houses in central London, for instance. Some contingency funding has been made available to Local Authorities, but many councils have expressed concern that there will be considerable turmoil. In London and the South East, in particular, tens of thousands of social tenants are expected to move as rents become unaffordable. That, in turn, is going to affect thousands of landlords.
 
One small concession has been made to landlords who reduce the rents charged to social tenants. In return for the reduction, the government has promised that rent money will be paid directly to landlords. It’s a minor help but more appreciation would certainly be welcomed by many landlords. The government hasn’t been shy in saying that they expect private landlords to take up the slack but has yet to show any real willingness to grease the wheel. More concessions to private landlords, especially those taking on social tenants, are vital.
 
Green standards
Another significant government announcement came from the Climate Change secretary, Chris Huhne but it won’t impact landlords for some years. From 2015, as part of the coalition’s promise to be the “greenest government ever”, tenants will be able to request reasonable improvements to reduce a property’s carbon footprint. This will include insulation and energy efficient appliances. It’s a good idea, but once again, there is little in the way of incentives to landlords.
 
Looking out to 2011…
In the year ahead, the Housing Benefit changes will be a big deal for landlords and the increase of VAT to 20% may well have ramifications. But we’re in the same place as this time last year, facing an uncertain future.
 
So if landlords wish for anything as they open their Christmas presents this year, it can only one thing. Economic growth and a stable period for the British economy is desperately needed because that’s really the only thing that matters for business people all over the country. But it’s hard to see that 2011 will be much different to this year. Has the risk of a double-dip recession receded? Will cutting the deficit and public spending bring the growth the coalition believe it should? Without a crystal ball to hand, we can only wait and see.

Related posts:

  1. ‘Year for landlords’in 2010
  2. Landlords ‘can expect 0.5% base rate in 2010′
  3. Pound Falls, Two-Year Yields Fall Below 1% on Unchanged Interest-Rate Bets
  4. Housing costs reportedly down year-on-year
  5. The real effects of welfare reform

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