A round up of what 2023 has meant for landlords‍ - Total Landlord Insurance

November 28, 2023
Total Landlord Insurance
A round up of what 2023 has meant for landlords‍ - Total Landlord Insurance

A ‘perfect storm’ of factors has led to 2023 being the year we’ve reached a real tipping point in the private rented sector, with tenant demand far outstripping the supply of rented property in most of the UK.

Higher mortgage interest rates, the continuing cost of living crisis and worries about the impending loss of Section 21 have forced some landlords to exit the market. 

I've been in the industry for 32 years and I've never known such a rental crisis. Historically, a lot of landlords haven't put rents up, but now they’re panicking. And many will be whacking in Section 21s because the court system is on the brink of being broken and they worry they won’t be able to get their properties back. We've actually seen a 91% increase in Section 21 accelerated possession claims issued at court between April 2022 and April 2023.

Paul Shamplina, Chief Commercial Officer at HFIS and Founder of Landlord Action

Meanwhile, many older landlords have simply reached the end of their investment journey, having started in the late 1990s or early 2000s, and selling up has always been part of their plan.

From a tenancy perspective, a lot of tenants aren’t moving unless they have to because they’re worried about rent shooting up if they take a new tenancy, and that means few re-lets coming to market. At the same time, with huge numbers of people feeling the financial squeeze and worried about rising interest rates, fewer are buying and this is forcing tenant demand to rise. 

With an increasing shortage of available rented homes and sometimes hundreds of tenants competing for the same property, rents have been hitting record highs month on month.

With all this in mind, let’s take a closer look at what’s happened in 2023, month by month.


Fire Safety (England) Regulations 2022 come into force

On 23 January, new fire safety regulations came into force for multi-occupied buildings that fall under the Building Safety Act 2022. That’s any property containing two or more domestic premises, with common parts (e.g. hallway or stairwell) that residents would need to pass through to exit the building in case of an emergency.

The new rules have important implications, but are relatively straightforward for HMOs and flats in blocks up to four storeys, i.e. for most private residential landlords. The main change for these buildings is that a ‘Responsible Person’ must be appointed to carry out certain fire safety duties, including displaying fire safety instructions and providing information about fire doors and fire safety to residents.

If the property is in a building of over 11 metres in height, the new rules are much more complex. For more information, see our guide, ‘Cladding and the Building Safety Act 2022: What do landlords need to know?’.


Release of MPs’ report on rental reform proposals, NRLA releases data on supply shortage in East and South East

On 6 February, the Levelling Up, Housing and Communities Committee published its report on the Government’s planned changes for the market, which were outlined in last year’s White Paper, ‘A Fairer Private Rented Sector’.

The main concern was around the need for reform of the courts system prior to any of the other proposed changes being made. The report specified speeding up the time it takes to process legitimate cases, particularly those relating to rent arrears and anti-social behaviour, and also recommended that student tenancies should be exempt from plans to make every tenancy open-ended. Find more details on the response to the report here

And at the end of February, the NRLA released data showing how bad the imbalance of rental supply and demand is in the East and South East of England. In Q4 2022, 76% of private landlords in the East and 81% in the South East reported a rising demand for rental accommodation. Yet only six per cent of landlords in the East and seven per cent in the South East said they were planning to increase the number of properties they rent out, while over a third of landlords in each area intended to reduce the number of lets in their portfolios, signifying the supply crisis in these parts of the country is likely to worsen.

The Bank of England increased the base rate by half of one per cent, to four per cent.


Landmark Supreme Court ruling on RROs in rent-to-rent arrangements

On 1 March, the Supreme Court unanimously ruled that a RRO cannot be made against a superior landlord, only against the immediate landlord of the tenancy that generates the relevant rent. 

The case (Rakusen v Jepsen) had been brought by a landlord who had granted a tenancy to an investment group, which had then let the property as an HMO without obtaining a licence. The three HMO tenants had applied to the First-Tier Tribunal for an RRO of more than £26,000 against the superior landlord and, although the Upper Tribunal dismissed his appeal, the Supreme Court overruled, stating: “It would strain the language to say that a superior landlord is "repaying" rent to a tenant from whom it had never received any rent.”

The NRLA welcomed the ruling, which they said, “provides important clarity for landlords and tenants alike”.

Also in March, following the Spring Budget, the NRLA criticised the Chancellor for not announcing any changes that would encourage growth in the private rented sector to help tackle the current supply crisis.

The Bank of England increased the base rate by a quarter of one per cent, to 4.25%.


Income tax personal allowance remains frozen, while the capital gains tax allowance halves

The personal allowance for income tax used to increase each year, roughly in line with inflation. However, it remains frozen at £12,570 for the second year (and will be until 2027/8), meaning the tax-free allowance is worth less in real terms. And if rents are rising, landlords are paying tax on a greater proportion of their income than they would have done in previous years. 

In addition, for the coming year, the capital gains tax personal allowance has been slashed from £12,300 to £6,000, with a further cut to £3,000 due to take effect for the 2024/5 tax year.

You can find more detailed information about the taxes landlords currently have to pay – including in other parts of the UK – in our separate guide: ‘Advice on taxes for UK landlords’.


The Renters (Reform) Bill gets its first reading 

17 May saw the first reading of the much-anticipated Renters (Reform) Bill, although this was simply a brief description of the key points and no date was set for the second reading, where MPs can debate the contents of the Bill. Visit our dedicated guide to the Bill for an in-depth analysis of the ten key components.

The Bank of England increased the base rate by a quarter of one per cent, to 4.5%.


New data from Savills reveals two potential threats to the sector

This month, Savills published research results that revealed two significant trends in the UK:

  1. The majority of private landlords are approaching or already of retirement age. Over 1.9 million buy to let properties are currently owned by 620,000 landlords aged over 65, with almost two million more owned by landlords aged between 55 and 64. With around 4.6 million households in the sector, that’s a significant proportion of tenants with landlords who may be considering retiring from buy to let. 

This research is supported by the English Private Landlord Survey 2021, which found 63% of landlords were 55 or older, with the median age being 58 – older than for the general population! – and also data from Hamptons, which showed 73% of all landlord sales in 2022 were made by investors retiring from the sector.

  1. Landlord profits are at their lowest since 2007. Restricted tax relief for landlords and increasing mortgage costs have resulted in average net profits of under four per cent, versus 23% between 2014 and 2021. This presents a huge risk that more landlords, particularly those with high levels of borrowing, will leave the market. 

As Savills’ research chief Lucian Cook said, “there is a risk that new tenants will have less choice unless measures are taken to increase rental supply.”

The Bank of England increased the base rate by half of one per cent, to 5%.


Landlord mortgage costs set to rise further, while tenant demand has more than tripled

On 12 July, the Bank of England published its latest Financial Stability Report and confirmed that average monthly repayments for buy to let mortgage holders will increase by around £275 by the end of 2025.

Ben Beadle, Chief Executive of the NRLA, said: “Growing mortgage costs are putting responsible landlords in an impossible position. Either they leave the market at a time when demand for rented housing is already outstripping supply, increase rents, or soak up growing costs which many simply cannot afford.” Read more here

Whatever the political agenda, the fact remains that the buy to let market cannot function without private landlords, but the Treasury needs to offer the same support to buy to let as it has mortgage borrowers. Landlords also need confidence that the court system will work if they have a tenant who falls into arrears or causes anti-social behaviour. 

Landlords don’t want to evict good tenants but, sadly, many are being forced to leave their homes because buy to let is no longer financially viable for their landlords. The narrative must change. We need an industry that supports both tenants and landlords so that tenants have access to safe, good quality homes, provided by people who are incentivised to remain in the market and act in a professional manner.

Paul Shamplina, Chief Commercial Officer at Hamilton Fraser and Founder of Landlord Action

Meanwhile, Rightmove reports that the number of viewing requests from tenants for each property have more than tripled since 2019, with an average of 20 viewings for each listing in May this year – rising to 30 in the North West and 27 in both Scotland and the South West. 


Improved legal support for tenants

On 1 August, a new Housing Loss Prevention Advice Service (HLPAS) commenced across England and Wales. Tenants facing eviction or repossession can access free early legal advice and get representation and advice on the day of any court hearing. 

While this is good news for tenants, it could mean more landlords facing – and potentially losing - court battles. The threat of a large legal bill could therefore put many landlords off taking legal action. On the other hand, it gives landlords even more of a reason to foster a good relationship with their tenants and make use of mediation services, such as PRS Mediation, to avoid disputes escalating.

The Bank of England increased the base rate by a quarter of one per cent, to 5.25%.


Government issues new guidance on damp and mould and EPC ‘C’ rating targets are to be scrapped

New government guidance on damp and mould was published on 7 September, which clarifies that landlords are always responsible for resolving any issue and making sure their rental property is free from hazards.

The guidance states that landlords must “treat cases of damp and mould with the utmost seriousness and act promptly to protect their tenants’ health. Damp and mould are not the result of ‘lifestyle choices’, and it is the responsibility of landlords to identify and address the underlying causes of the problem, such as structural issues or inadequate ventilation.” 

For more information, see our full guide on identifying and preventing damp, mould and condensation.

On 20 September, Rishi Sunak delivered a speech indicating that government plans to raise the minimum EPC rating for rented properties from E to C are likely to be scrapped. Previously, the intention was that landlords would have to make sure their properties met this rating by 2025 for new tenancies and 2028 for all tenancies. However, under revised plans for meeting net zero by 2050, landlords and homeowners will now simply be encouraged to upgrade energy efficiency where possible.

This will come as a huge relief to many landlords who were faced with spending up to £10,000 on upgrades. However, it’s important to bear in mind that tenants are generally attracted to more energy-efficient properties. And if Labour come to power in the next general election, upgrading EPC ratings may be reintroduced. Our ‘Ultimate guide to having an eco friendly property’ contains lots of practical advice for landlords. 

The Monetary Policy Committee voted by a narrow majority of five to four  to keep the Bank of England base rate at 5.25% (with four members voting to raise it by a quarter of a percent). Capital Economics has forecast that it will remain at this level until towards the end of 2024, when it will drop back below five per cent.


Capital Economics


The Renters (Reform) Bill gets its second reading and rents continue to rise

According to Rightmove’s Rental Trends Tracker, advertised rents for new lets have risen to a record high for the 15th consecutive quarter. In Q3 of 2023, the average advertised rent for properties outside London hit £1,278 pcm – that’s 10% higher than a year earlier.

Rightmove says that the increase in both enquiries and rents is being driven by the ongoing imbalance between the number of tenants looking to move versus properties available. Demand is up 41% on 2019, while supply is down by 35%.


The Renters (Reform) Bill had its second reading on 23 October, just before Parliament broke for recess, giving MPs their first opportunity to debate the key points.

Before the reading, Levelling Up Secretary Michael Gove had already written to MPs to emphasise that the Government does not intend to move forward with abolishing Section 21 and various other reforms until certain improvements are in place. These include: digitising the court process, improving bailiff recruitment and retention, giving tenants better legal advice, and strengthening mediation and dispute resolution.

The Bill has now been reintroduced in the 2023-24 session and proceeded to the Committee stage, where it will be scrutinised. The Committee is expected to report to the House of Commons, which will include any proposals for change, by 5 December 2023.  

For more on the kind of changes that are likely to be proposed and detailed information on the contents of the Bill, see our dedicated guide.

Three other changes for the sector in England this month:

  • 1 October: New fire safety guidance for multi-occupied buildings that fall under the Building Safety Act 2022. Phase three of the Home Office’s fire safety reform programme takes effect, mainly in relation to the recording and sharing of fire safety information, via increased duties for Responsible Persons. For further details, visit Fire England
  • 2 October: New How to rent’ guide published. Landlords should be aware that the latest version must be given to tenants at the start of a new or renewed tenancy, otherwise any Section 21 notice subsequently issued may not be valid.
  • 27 October: Government publishes response to consultation on council tax for HMOs. It intends to amend legislation as soon as possible to make sure that all HMOs are valued as a single property for the purposes of council tax. This will reduce costs for tenants who are currently charged council tax where rooms are individually banded and allow every HMO landlord to let rooms inclusive of council tax.  

Scotland: Short-term let licensing now in play

From 1 October, all short-term let accommodation in Scotland must now have a licence before guest bookings are taken. Landlords operating without a licence could be fined £2,500 and banned from applying for a licence for 12 months. 

For more information, see the website.


Takeaways from the King’s Speech, RRB gets its second reading, a new housing minister is appointed, and the Chancellor gives his Autumn Statement

On 7 November, King Charles gave the customary speech at the State Opening of Parliament and the legislative agenda delivered two key points of interest for landlords:

  1. As expected, the Renters (Reform) Bill was formally carried over to this new session. King Charles said, “Renters will benefit from stronger security of tenure and better value, while landlords will benefit from reforms to provide certainty that they can regain their properties when needed.”  
  2. The Leasehold and Freehold Reform Bill was announced, with King Charles stating it would, “make it cheaper and easier for leaseholders to purchase their freehold and tackle the exploitation of millions of homeowners through punitive service charges.” However, the plans at this stage are focused on future, rather than existing leaseholders, and a ban on new leasehold property is set to apply only to houses, not flats.

Following this, on 9 November, the Government opened a six-week consultation on the options for restricting ground rent for existing leases. 

13 November saw yet another change of housing minister, as Rachel Maclean was asked to step down after just nine months in the job, and has been replaced by Lee Rowley. He will be the 16th Conservative housing minister since 2010 and the ninth since the initial pledge to abolish Section 21.

Further to the second reading of the Renters (Reform) Bill, on 15 November the Government published details of around 100 amendments. While most of these are minor technical changes and clarifications, two significant amendments for landlords to know about are:

  • a new clause on student evictions has been added, giving landlords the right to remove students if they refuse to leave after their academic year has finished. This will only apply to full-time students who have been renting in an HMO during the final semester of the academic year. If the landlord intends to let the property to students again and therefore needs the current student tenants to leave, they will have to issue a Section 8 notice citing the new ground (4A) and the notice must expire between 1 June and 30 September. 
  • The maximum amount of rent tenants can claim back through rent repayment orders (RROs) has been doubled, from 12 months to 24 months.

For all the latest information on the Bill, see our comprehensive guide.

Finally, on 22 November, the Chancellor gave his Autumn Statement. Disappointingly, there was no review of the Stamp Duty Land Tax surcharge or Mortgage Interest Relief that would have encouraged more property investment, and little support announced for the housing market specifically. 

However, changes are being made to boost incomes, which will particularly help affordability for tenants on the lowest incomes. From April 2024:

  • The minimum wage will rise by more than a pound an hour, from £10.42 to £11.44
  • Local Housing Allowance will be increased to the lowest 30% of nationwide rents, which will increase household support by an average of £800 
  • Benefits will increase by 6.7% 
  • National Insurance costs will reduce from 12% to 10% 

And for self-employed people, which includes most landlords, Class 2 National Insurance will be scrapped and Class 4 National Insurance will drop from 9% to 8%.

For more relevant information read our guide to ‘Renting to tenants on housing and Universal Credit.’


Renters (Reform) Bill reaches end of committee stage

On 5 December, the RRB reaches the end of the committee stage, during which it undergoes in-depth analysis and debate of all the clauses and proposals for change, and the committee reports to the House of Commons.

According to the NRLA, “It is likely that we will witness significant alterations to the Bill during committee stage. We will provide evidence to ensure that changes proposed do not undermine landlord confidence further and that the Bill as amended supports responsible landlords.”

For a comprehensive round up of all the current lettings laws, visit ‘Legislation for landlords: Everything you need to know’.

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