New Year, New Laws - What will 2018 have in store for landlords?
Article Posted - 9th January 2018
Looking back at the NLA's 2017 New Year blog, you would be forgiven to think that time stood still for a whole year. In reality, the snap general election called by Theresa May was the equivalent of smashing a big PAUSE button on the work many Government Departments were undertaking. As such, many of the changes listed last year are still yet to come to fruition!
Nevertheless, we will try again to predict the major changes you can expect/dread over the next 12 months (and beyond).
Section 24 Continues (England & Wales)
Despite our consistent insistence, the Government are yet to see the error of their ways and reverse George Osborne's soon-to-be calamitous policy of restricting landlords' finance cost tax relief (aka. Section 24).
The changes are being phased in gradually over 4 years, with the first stage having started last year. Section 24 continues this phased introduction from April this year, so by 2020 100% of finance costs will be restricted to 20% tax relief only.
Last year we commissioned Capital Economics to examine in detail the impact this policy is going to have, and they conclude:
- The ‘average' buy-to-let property owned by a higher-rate tax payer is set to make £850 less profit annually after the withdrawal of mortgage interest rate relief.
- Once the policy is fully implemented, rents could be pushed up by over 7 per cent nationally over four years to cover some of the costs. This is equivalent to £250 each year or 1.4 per cent of households' annual gross disposable income.
- Withdrawal of mortgage interest relief will hit net returns and some landlords will therefore decide to either sell up completely or reduce the size of their portfolio. We estimate that the total size of the buy-to-let PRS stock will fall by 46,000 properties.
- Landlords will absorb some of the increased costs which will reduce their spending and investment. Landlords are set to lose a total of £400m annually.
You can find out more here: www.TaxingHomes.co.uk
Mandatory HMO Licensing Extension (England & Wales)
After initially consulting on plans in 2015, then again in 2016, the Government finally confirmed in the final days of 2017 that the scope of HMO mandatory licensing will be extended:
- It will apply where certain HMOs are occupied by five persons or more in two or more households, regardless of the number of storeys.
- This includes any HMO which is a building or a converted flat where such householders lack or share basic amenities such as a toilet, personal washing facilities or cooking facilities.
- It also applies to purpose built flats where there are up to two flats in the block and one or both are occupied as an HMO.
- The new rules will be introduced in two phases. Most likely, the regulations will come into force in April 2018 with a 6 month grace period for landlords to comply before enforcement action is taken against them.
Minimum room sizes will also be introduced to mandatory HMO licenses, as well as duties on landlords to provide adequate facilities for the proper disposal and storage of domestic waste.
Read more about the announcement here.
Crackdown on Rogue Landlords – Database & Banning Orders (England)
After introducing some of the enhanced enforcement powers provided by the Housing & Planning Act 2016 earlier this year (civil penalties and extended rent repayment orders), DCLG has announced that Banning Orders and the Rogue Landlord Database will come into force from April this year.
Following a consultation the Government has confirmed which offences will be considered Banning Order Offences. From April 2018, someone convicted of these offences can be added to the database of rogue landlords and be barred from renting properties.
You can see the Government's response to the consultation here. A full list of Banning Order Offences can be found on the draft regulations here.
This leaves only a handful of powers introduced by the Housing & Planning Act that are yet to come into force, including electrical safety checks, mandatory client money protection for agents, and a new abandonment procedure. As discussed later on, these are in the works!
Minimum Energy Efficiency Standards (England & Wales)
The Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 set out the requirement for domestic private rented properties in England and Wales to have a minimum Energy Performance Certificate (EPC) rating of E.
- From 1st April 2018, landlords will be prohibited from granting new tenancies for properties with an EPC rating below E. This includes extensions and renewals of existing tenancies, or a tenancy becoming a statutory periodic tenancy following the end of a fixed term shorthold.
- From 1st April 2020, this restriction on landlords letting out sub-E rated properties is extended to cover all existing tenancies for properties in scope of the regulations.
Currently the regulations allow landlords to register a 5-year exemption to the standards if they cannot fund necessary improvements through third-party funding (such as a Green Deal loan, Energy Company Obligation (ECO) funding, or a local authority grant).
The Government is currently consulting on plans to scrap this exemption and replace it with a “cost cap” of £2,500 from April 2019. This will mean that landlords of F or G rated properties will have to pay for the first £2,500 of improvements, although the vast majority of improvements are expected to be below this level.
Importantly, the method of assessing energy efficiency was amended late last year to account for new evidence showing solid walls were more energy efficiency than previously noted. This means new EPCs for solid walled F&G rated properties could give a better result than previously.
General Data Protection Regulation (GDPR)
The General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679), which comes into force in the UK from 25th May 2018, is a regulation by which the European Parliament, the Council of the European Union and the European Commission intend to strengthen and unify data protection for all individuals within the European Union (EU).
Despite the intention to leave the EU, the Westminster Government has confirmed that the GDPR will be brought into UK law.
GDPR enhances the protection afforded to individuals and will require landlords to have a policy in place which they adhere to without fail. The vast majority of landlords will already be following best-practice, but may not be adequately documenting their efforts and could therefore be caught out by this change in public policy.
The NLA will be publishing a guide for our members shortly so they can ensure they are compliant well ahead of the regulation's May enforcement date.
Universal Credit Reforms (England & Wales)
The Autumn Budget last year provided for some minor amendments to the Universal Credit regime that is continuing to be rolled out across the country:
- From January 2018 those who need it, and who have an underlying entitlement to Universal Credit, will be able to access up to a month's worth of Universal Credit within five days via an interest-free advance. The government will extend the period of recovery from six months to twelve months.
- New claimants in December will be able to receive an advance of 50% of their monthly entitlement at the beginning of their claim and a second advance to take it up to 100% in the New Year, before their first payment date.
- From February 2018 the government will remove the seven-day waiting period so that entitlement to Universal Credit starts on the first day of application.
- From April 2018 those already on Housing Benefit will continue to receive their award for the first two weeks of their Universal Credit claim.
New Universal Credit choices were made available by the Scottish Government from 4 October 2017 to people living in Scotland making a new Universal Credit claim, in full service areas. The choices are to:
- be paid monthly or twice monthly
- have the relevant housing costs in the Universal Credit award paid to themselves or to their landlord
Keep an eye out for more changes….
The Government has indicated that a number of policies will be consulted on, while other consultations have already started. Additionally, some consultations have closed and we expect further action to be taken throughout the year, including:
- Draft Tenants Fees Bill (England) – Currently undergoing pre-legislative scrutiny with an inquiry being undertaken by the CLG Committee. The ban is unlikely to come into effect this year.
- Longer Tenancies Reform (England) – At Autumn Budget 2017 the Chancellor announced that a consultation will soon be launched on what can be done to get landlords to offer longer tenancies. We wait with baited breath….
- Smoke & Carbon Monoxide Alarms (England) – A consultation ending today into the 2015 regulations, possible changes following the review later in the year.
- Electrical Safety Requirements (England) – After a recent DCLG working group recommended no more than 5-yearly electrical safety checks, the Government announced there will be a full consultation on the plans in due course.
- Agent Regulation & Client Money Protection (England) – Consultations recently ended on agent regulation and mandatory client money protection for agents. We await the Government's responses to both.
- Landlord Redress (England) – Initially announced by Communities Secretary Sajid Javid at the Tory Party Conference, he has since announced the possibility of a single Housing Ombudsman, so we await an official consultation on the Government's plans for landlord redress.
Scottish PRS Reforms
Following the launch of the new Private Residential Tenancy regime last month, which replaces the previous tenancy system and ends “no-fault” repossessions, more changes are ahead for the Scottish PRS this year.
From early 2018 the Scottish Government will also commence the regulation of letting agents by bringing into force:
- mandatory registration of letting agents – applicants will be required to be assessed as ‘fit and proper' to undertake letting agency work and meet minimum training standards to be admitted to the letting agent register. Agents need to be registered by 30th September 2018, and the register is expected to open for applications in early 2018.
- a statutory letting agent code of practice which comes into force on 31 January 2018. It sets out the service standards that letting agents must meet and will give tenants and landlords the ability to challenge poor practice.
- a new means of redress to the First-tier Tribunal for Scotland (Housing and Property Chamber) – landlords, tenants and Scottish Ministers will be able to go to the tribunal where there has been a breach of the code of practice. Where an agent has failed to comply with the code, the tribunal must issue an enforcement order setting out the steps the letting agent must take to rectify the problem.
Going forward, the Scottish Government is also looking at amending the repairing standards to bring it closer to the standard required in social rented housing, as well as introducing a minimum standard for energy efficiency in the PRS. These plans were recently consulted on and you can read more about that consultation here.
New Welsh PRS Regime
Change is also afoot in Wales, where the Renting Homes (Wales) Act 2016 is expected to come into force in late 2018. The Act will bring in a new Welsh Standard Contract to replace the current Assured system. A consultation is currently underway on the requirements the Act places on properties to be “fit for human habitation” at the start of a tenancy and throughout.
In addition, the Welsh Government has announced that it too will be banning letting fees to tenants, and a consultation has already closed on this policy. Expect more details in the coming months.
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