Category Archives: Affordability

One in five private rented homes suffer fuel poverty

 

fuel_costPrivate sector renters are one of the groups with the highest risk of suffering from fuel poverty according to figures recently released from the Department for Business, Energy and Industrial Strategy.

More than 2.3 million families, equivalent to around 10% of households, are living in fuel poverty in England.  The situation is particularly bad for private sector renters with one in five households renting from private landlords affected. The highest risk however, at 25% of all households, was found for single parents with dependent children.

Overall Birmingham is the most affected city in terms of absolute numbers with around 60,000 households unable to afford adequate heating with Leeds, Cornwall, Manchester and Liverpool occupying the top five local authorities where households struggle with heating costs. In terms of the proportion of households classified as fuel poor, rural areas of England are the worst affected, with more than 20% of households on the Isles of Scilly classified as fuel poor. Other areas identified as badly affected include Eden in Cumbria, Richmondshire and Ryedale in North Yorkshire, and West Devon.

Officially a household is in fuel poverty if its income would fall below the official poverty line after subtracting the cost needed to adequately heat a home. It has been calculated that on average households which meet this definition would require an extra £371 to be able to adequately heat their homes.

The issue of fuel poverty and energy costs is a recurring theme in UK politics. Reacting to the report, the shadow business secretary, Clive Lewis said that the figures showed that the Conservative Party had to take action to tackle high energy prices charged by the big energy companies.

“Under the Tories’ lack of an energy plan, Britain is facing an energy bill crisis, with over 2 million families who can’t afford their energy bills.”

Mr Lewis continued to assert that a Labour government would confront the problem by increasing clean energy generation capacity and tackling energy bill rises for households.

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To date the successive Conservative governments of David Cameron and Theresa May have favored the provision of greater consumer information and the easy switching of energy supplier as a mean to reduce household fuel expenditure. These include announcements earlier this month that the business department would publish an energy supplier league table to allow consumers to better assess their energy usage and compare energy suppliers. However, some critics of these proposals note that tariff transparency has been promoted throughout the Brown and Cameron administrations with relatively little effect on reducing household energy bills.

Announcing the league table measures, the business secretary, Greg Clark, said: “Millions of people across Britain continue to pay too much for their energy. The measures announced are a positive step to help more people benefit from increased choice and competition.As the government has made clear, where markets are not working for consumers – in energy or otherwise – we are prepared to act.”

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London house prices predicted to fall 5% in 2017

London House Prices Predicted to Fall 5 per cent

Property prices in central London are expected to fall by 5 per cent in 2017 according to property data firm Rightmove.

The situation across London as a whole however was mixed with a significant variations between market conditions in prime central London and peripheral areas.  Outer London property prices are expected to see an approximate 3% increase in prices in 2017 Rightmove suggests with prices across England and Wales expected to rise by two per cent as a whole next year.

Brexit uncertainty continues to be a serious issue  with respect to property price forecasting. As yet the government’s desired outcomes and the negotiating position it will adopt following the triggering of  Article 50 to begin the two year countdown to leave the European Union remains unknown. Prime Minister Theresa May says she is committed to triggering the start of formal Brexit negotiations by the end of March next year and is expected to make announcements on the Government’s preferred future relationship with the EU in the New Year.

The disconnect between property prices in central London and the rest of the UK may be symptomatic of London’s traditional early reaction to changes in the British economy. During the 2007 global financial crisis and subsequent recession, prime London properties were the first affected by the downturn but were also the fastest to recover.

To date predicted negative economic data following the UK’s decision to leave the EU have failed to materialize. The British Chambers of Commerce revised up its forecast for economic growth next year but downgraded the outlook for 2018 due to inflation pressures and ongoing economic uncertainty about Britain’s future trading relationships with the EU. In terms of GDP forecasts, the Chambers revised upwards UK GDP growth forecast to 1.1% from 1% for 2017 after stronger-than-expected economic performance following the June Brexit vote.

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Sadiq Khan asks LSE to investigate London housing market

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London mayor, Sadiq Khan, has asked the London School of Economics to carry out a comprehensive inquiry into the impact of foreign investment on London’s housing market.

The inquiry which is expected to report back to the Mayor in the spring will investigate the dependence of property developers on foreign buyers and the number of properties kept empty.

Sadiq Khan is keen however to stress that the report is not intended to provide material which might be used to curtail the rights of overseas buyers in London.  Announcing the study, the Mayor underlined the importance of foreign investment in London but also noted that further study was needed to understand the connection between London’s property affordability crisis and foreign investment. The Mayor added that many Londoners were concerned about the number of homes left empty and the link between empty properties and overseas investors.

The current study follows numerous reports that London is being used as a safe-haven for Russian Oligarchs, Chinese Princelings and Middle Eastern Sheikhs.  Many properties in the capital are held by companies in offshore tax havens and many are unoccupied. Khan’s predecessor in City Hall, Boris Johnson, notably called for property developers to market new homes “first or equal first” to Londoners rather than to overseas buyers.

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Chancellor announces plans to ban letting agent fees in England “as soon as possible”

Letting Agent Fees
Letting Agent Fees

In his Autumn Statement today the Chancellor Philip Hammond announced plans to ban letting agent fees in England “as soon as possible” which may be save 4.3 million households hundreds of pounds. 

Currently many tenants face charges to draw up tenancy agreements, conduct immigration and credit reference checks  in addition to the payment of a non-refundable holding deposit paid before signing up to the deal.

The move comes as numerous reports have indicated that many tenants living in sub-standard housing are discouraged from moving out because of extra fee charges.  A report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees.

Nonetheless, landlords groups have claimed that banning letting fees will not necessarily reduce rental costs with landlords and letting agents increasing rental values to offset loss of income. However, renters groups assert that the ban will make it easier for tenants to compare the cost of different properties and reduce the incentive for letting agents to replace tenants.

The move is a culmination of greater regulation of the letting market and will move England further in line with  Scotland where lettings agency fees to tenants have already been banned.  Since 2015 lettings and managing agents in England and Wales have legally been obliged to clearly publicize their fees.

 

 

 

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House Prices in Chelsea fall 9.8% annually in September

London House Prices Fall

House prices in Chelsea have fallen by 9.8 per cent annually with prices for high-end homes in central London falling by 2.6 per cent in September.

Property consultants Knight Frank claims that changes in stamp duty rather than the effects of the Brexit vote in the EU referendum is the main factor for the house price decline. The firm also claims that the Brexit vote may have been “a catalyst for overdue price reductions” in the sector.

Overall the picture across London as a whole has been mixed. Some parts of prime north London have seen price falls of 7.5 for Hyde Park and 5.3 per cent for Notting Hill.  Islington on the other hand witnessed an increase in prices by 3.6 per cent. In the high-end rental sector the picture has been similarly varied with rental values for prime central London properties falling by 4.7 per cent on an annual basis with rent falls of 9.9 per cent in Marylebone and 8.3 per cent in Chelsea.

Properties are also spending more time on the market with the average number of days taken for a property to sell increasing by 14 per cent between January and August compared with the same period last year.

There are also advantages for renters in the capital with rental values also falling for high-end homes. In September, rental values for prime central London fell by 4.7 per cent on an annualized measure.

Chelsea and Marylebone notably saw rents falling by 8.3 per cent and 9.9 per cent annually.  The picture for areas further out was quite different with Areas further out saw less dramatic rent falls with King’s Cross and the City Fringe seeing average rents rise by 1.9 per cent and one per cent respectively.

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170 tenants evicted per day as evictions rise 53% in five years

Eviction Notice
Evictions up 53% in 5 years

More than 170 tenants are being evicted every day according to 2015 Ministry of Justice figures.  

More than half of the 42,728 evictions recorded in England and Wales last year were attributable to private landlords with rent arrears being cited as one of the most common factors.  Retaliatory evictions of tenants who complain about poor property standards was also a factor in a significant number of the eviction cases.  Many such evictions may have been brought forward in anticipation of laws against revenge evictions which entered into force on 1st October 2015.

It is believed that a significant fraction of the rise in evictions originated from the private rather than the social rental sector.  Ministry of Justice figures show that the majority of evictions in 2015 resulted from a section 21 accelerated procedure which are usually a feature of private landlord evictions.

This situation is set to deteriorate as increasing numbers of people are forced into the rental sector due to the housing affordability crisis.  According to information from the Association of Residential Letting Agents (ARLA), home ownership is expected to be permanently out of reach of around a fifth of people in the UK.  Property unaffordability is exacerbated by rising rents with an average renter in the North East and London estimated to spend around £31,300 and £68,300 respectively on rent over a decade.  To compound this situation further, rents are forecast to climb at a faster rate than house prices in future.

 

 

 

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High Letting Agent Fees Stopping Tenants Moving out of Sub-Standard Homes

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High agent fees are discouraging tenants living in unsatisfactory housing conditions from finding alternative accommodation according to the latest report on the Private Rented Sector.

The report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees. In addition to complaints about fees, the report also found that private sector renters are less satisfied with their tenure than owner-occupiers and council housing tenants:  overall 65% of private renters reported being satisfied with their current tenure compared to 98% of owner occupiers and 82%  of social renters.

Important findings of the report include:

  • 40% of private rented sector households were charged agency fees in 2014-2015, up from 34% in 2009-2010.
  • 18% of private renters said that they felt some of the fees charged were hidden. 65% of private renters reported paying an administration fee
  • 33% paid a finders’ fee, 7% of tenants paid a non-returnable holding fee, 5% paid a returnable holding fee and 4% paid an ‘other fee.’
  • The number of private renters who lived in non-decent dwellings rose from 1.1 million households in 2006 to 1.2 million households in 2014.

Surprisingly, despite the entry into force of deposit protection legislation in 2007 as part of the 2004 Housing Act, the Housing Survey found that only sixty four per cent of renters with a Assured Shorthold Tenancy reported that their deposit had been protected despite penalties existing for non-compliance with deposit protection rules.

Under deposit protection legislation, landlords must place tenancy deposits in one of three government-backed deposit protection schemes within thirty days of receipt or face a penalty of between one to three times the deposit amount with the penalty value determined by the seriousness and intent of the landlord’s non-compliance deposit rules. In general greater penalties for failing to protect deposits are awarded against experienced landlords or against landlords who have attempted to avoid protecting deposits for financial gain.

Despite charging  for protecting deposits being against the spirit of the deposit protection legislation the Renters Alliance has encountered numerous examples of landlords and letting agents charging renters extra fees to protect their deposits. In one landlord’s forum for example, one landlord reported charging £120 for protecting tenants’ deposits recommending to other landlords that they call similar fees “Admin fees” rather than “deposit fees” for legal reasons.

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Private landlords receive £9.3bn in housing benefit

 

housing_benefit

Private landlords received £9.3bn in housing benefit payments, almost double the amount a decade ago according to a study published by the National Housing Federation.

This situation is set to deteriorate with the decades long trend of decrease home ownership exemplified by a House of Commons research report published earlier this year which reported that 48 per cent of 25-34 year-olds in England now rent,  up from 21 per cent in 2003-04.

The National Housing Federation report found an increase of 42% in the the number of households using housing benefit to pay rent to private landlords since 2008.  Housing benefit is paid to households that cannot afford to cover rental costs in addition to essentials such as food, clothes, heating and lighting.

This situation has been exacerbated by stagnation in real middle-income household earnings with the greatest increase in housing benefit claims coming from households with net incomes between £20,000 to £28,000 per year.  Furthermore, in 2008 around a quarter of private sector tenants in receipt of housing benefit were in employment, a figure which has risen to almost a half today.

In order to address the crisis in property ownership in the UK both parties have adopted standard policy positions.  The Conservatives  have signaled a preference for supply-side solutions to improve housing affordability with little detail on easing planning restrictions and tackling construction sector skills shortages.  Labour on the other hand have suggested a combination of rent-controls and investment in social housing with few details on the practicability of such proposals.

The National Housing Federation claims that if all those housed in the private rented sector lived in affordable housing, taxpayers would save £1.5bn a year in housing benefit payments. The federation’s chief executive, David Orr has said, “It is madness to spend £9bn of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes. Housing associations want to build the homes the nation needs. By loosening restrictions on existing funding, the government can free up housing associations to build more affordable housing at better value to the taxpayer and directly address the housing crisis.”

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London renters trying to move to flat shares to save money ‘pay £2,000 in fees’

generation-rent

New research has shown that London renters looking to save money by moving into shared accommodation are paying an average of £2,000 in agency fees. The figure, mostly made up of up-front deposits and letting agent fees is almost £1,000 more than the national average.  On average London renters moving into a flat-shares  have to pay £2,043 on top of their deposit compared with the national figure of  £1,175. Around 20% of these fees are paid to letting agents according to the flat-sharing website Spare room.

A further impediment to moving also includes a six-week deposit which is now normal across large parts of the UK, up from an average of a four week deposit a decade ago. Often tenant cash-flow problems may be exacerbated by deposit disputes between landlords and tenants despite the introduction of deposit protection dispute resolution schemes in 2007.

Foreign tenants are at a particular disadvantage also in this regard with many reporting being required to pay a holding deposit in addition to paying six months’ rent in advance.  The National Renters Alliance is particularly concerned that this may encourage letting agent intimidation of tenants who have sometimes committed the equivalent of 8 month’s rent and substantial agency fees before occupying a new rental property.

Despite calls to ban or impose tighter regulation of letting agent fees as in Scotland, the government has been unwilling to impose new legislation in this area.  Letting agent charges can include drafting and amending tenancy agreements, credit checks, references and administration costs.  Across the UK 95% of people who used a letting agent paid fees. Many letting agents also charge prospective tenants holding fees for reserving rooms in shared houses.

The issue of letting agent fees is leading to more tenants to look for properties managed directly by landlords.  However, this might be a luxury for some with many areas particularly in places with high student populations where managed properties dominate the rental housing stock.

 

 

 

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Will Brexit Be Good for Renters?

Despite the pessimism of most young people who voted to remain in the EU in June, there have been some suggestions that Brexit may be good for British renters.

Whether brexit is good or bad for renters depends fundamentally on whether house prices fall relative to the earnings of renters.

Following the referendum result, Zoopla predicted that house prices may fall up to eighteen per cent. KPMG envisages a more modest decline of  5 per cent with London hit harder than the rest of the country.  Both cite possible limited future access to the European market which might make British property less attractive to overseas buyers.  Others speculate that there will be no house price fall since demand has far outstripped supply over the past few decades.  However one ought to bear in mind that over optimism in the Housing market is a constant feature of house price predictions in the UK. Few for example predicted the 2007 sub-prime mortgage crisis and subsequent recession.

The devaluation of sterling might also offset any reduction in the attractiveness of UK property due to exclusion from the single market for international investors.

On the side of earnings; before the referendum, the Treasury warned that Brexit would cut economic growth by 3% to 6%.  The TUC also warned that leaving the EU could reduce average earnings by £1976 per year by 2030.  However, it is still too early to say whether wage decreases offset house price falls.

Fundamentally the most important cause of Britain’s housing crisis is British government policy, not international investors or the EU.  The remedy, liberalization of planning laws and regulation of the letting sector, is opposed by most English and Welsh MPs.  It is therefore unlikely that Britain’s decision to leave the EU will improve or worsen the lot of private sector renters.

 

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