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How Landlords Are Affected By 2015 Pre-Election Budget

How Landlords Are Affected By 2015 Pre-Election Budget

How Landlords Are Affected By 2015 Pre-Election Budget

During the pre-election budget last week, Chancellor of the Exchequer, George Osborne MP announced some significant changes that could have a detrimental impact on landlords the UK’s private rental sector (PRS) and residential property owners.

Below are the highlights of the pre-election budget that are of relevance to landlords and property owners:

  • £13 Billion (GBP) sale announced of the mortgages of UKAR – Northern Rock and Bradford and Bingley (Mortgage Express) to reduce national debt which followed the bailing out of the banks.
  • Introduction of 20 new housing zones.
  • The economy of the North grew faster than the South during 2014.
  • The UK has the highest rate of employment in its history!
    Employment is growing fastest in the North West, Yorkshire having the biggest employment.
  • Living standards are higher in 2015 than 2010.
  • Inflation forecast downgraded to 0.2%.
  • Low interest rates to be “locked in”.
  • Original target of debt reduction set in 2010 budget has been met.
  • 13 years of rising national debt has now been stopped.
  • UK achieved the largest and most sustained debt reduction of any major economy according to the IMF.
  • Government borrowing is falling.
  • The wealthy are making the biggest contributions to reduce debt.
  • End of austerity in 2019.
  • The annual tax return is to be abolished. New digital tax accounts to be created.
  • The personal tax free allowance has been raised to £10,600 (GBP) and will be raised to £11,000 (GBP) in 2017.
  • The higher rate tax threshold will rise to £43,300 (GBP) by 2018.
  • Class 2 national insurance contributions abolished for self-employed.
  • Stronger measures against tax avoidance and tax evasion.
  • Review of avoidance of inheritance tax through deeds of variation.
  • New penalties for tax evasion and those professionals who assist them.
  • Crime down 20%.

There was some good news contained in the 2015 pre-election budget too:

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Gov Insist Direct Payment Deal Is Bringing PRS Rents Down

Lord Freud, the Government welfare reform minister, has claimed that the majority of UK landlords of benefits tenants have dropped their PRS rental prices in return for getting direct payments.

Government Out Of Touch On PRS Rents

Government Out Of Touch On PRS Rents

The “out of touch” statement does not reflect what is really happening in the UK Private Rental Sector or the rise of PRS rents and is giving misleading information to existing landlords.

The Government temporarily extended the discretion of local authorities to make direct payments to landlords last April when caps to Local Housing Allowance (LHA) were introduced, paying a maximum of £400 a week for a four-bed property.

Private sector landlords were told that they could only receive direct payment for tenants claiming benefits if they lowered their PRS rent. This simply is not true!

According to the essential landlords handbook written by theLHAexpert.com – UK Landlords can still receive direct rent payments for tenants claiming benefit if the tenant is classed as vulnerable.

Speaking at the National Landlords Association (NLA) annual conference, Lord Freud said “The measure has been very successful. In London alone, a third of claimants who tried to renegotiate their rent received a rent cut. This arrangement will stay in place for housing benefit claimants, prior to the move to Universal Credit. There has been no mass exodus of people moving out of city centres or widespread homelessness because of our housing reforms.”


Hmmm… I was under the impression that some local authorities had been criticised for shipping families out of their boroughs, in a bid to avoid local authority overspending on PRS rents…and London is the worst culprit!

In a report titled “Between A Rock And A Hard Place: The Early Impacts Of Welfare Reform On London”,by the Child Poverty Action Group and Lasa, a welfare rights charity, found that many councils are actively considering obtaining accommodation elsewhere, while others believe that making up private rent shortfalls will leave the authorities with gaping holes in their budgets. The report also predicts that 124,480 London residential households will be hit by a combination of cuts to Local Housing Allowance, the new benefit cap which means no household can claim more than £26,000 a year in total, and under-occupation penalties.

According to a survey in the Guardian, some London councils are already acquiring properties in Kent, Essex, Hertfordshire, Berkshire and Sussex, and are considering accommodation in Manchester, Hull, Derby, Nottingham, Birmingham and Merthyr Tydfil in South Wales.

This is despite guidance issued by former government housing minister, Grant Shapps telling councils in May 2012, that they must “as far as is reasonably practicable” offer accommodation for homeless families within the borough.

Prime Minister David Cameron told MPs last January at Prime Minister’s Questions that housing benefit reform had brought private rent levels down, a claim repeated last month by, newly appointed, government housing minister, Mark Prisk.

Local councils in London say that because of buoyant demand, Private Rented Sector (PRS) landlords see no reason to drop rents for benefits tenants, and that many landlords have already refused to accept applications from tenant’s claiming benefits.

So Mr Cameron does refusing tenant’s on benefit qualify as reducing LHA rents?

Just because there has been a drop in Government and local authority spending on LHA payments, it does not support the Governments claims. The real truth is that the Government are putting the squeeze on the UK PRS as they fear that landlords will make more profit than the government can either control or even tax.

Such a shame that the people who are supposed to be in charge of our country are so out of touch with the real world, especially in the wake of Friday’s post about “Record Rental Prices”.

Many Local Authorities are struggling to crack down on rogue landlords because of a lack of public sector funding.

The Chartered Institute of Environmental Health (CIEH) surveyed a number of local authorities across the UK and uncovered an alarming number of failed prosecutions against bad landlords due to public sector cuts.

One local authority stated: “We generally have no budget to prosecute.”

Another local authority said that it had been unable to take anything through to the prosecution stage since 2009 because their legal department was so small.

A third council said that it had “practically disbanded its  private sector housing team”.

In other areas, one environmental health officer was expected to cover the large geographical area of 2 local authorities, following a restructure.

Head of policy at CIEH, David Kidney, said: “This survey confirms our worst fears that many councils are finding it increasingly difficult to conduct investigations due to cutbacks in government housing expenditure. This is impairing the ability of EHOs to tackle abuses in the private rented sector. As we have said, it makes no economic sense to cut back investment in housing. The equation is a simple one: poor housing leads to poor
health which needs to longer NHS queues, which end up putting a further squeeze on the nation’s resources. The Government’s obsession with cutting spending is putting some of the most vulnerable people at risk. We must have an informed, evidence-based discussion about housing in this country.”

 

Home insurers and the UK’s coalition Government are still arguing over paying for flood protection, meaning Millions of homeowners and Buy-To-Let Landlords are facing uncertainty over house prices, mortgage availability and the validity of their insurance policies.

Buy-To-Let Property Owners In Flood Risk Areas Fear Worst

UK Landlords With BTL Property In Flood Risk Areas Fear Worst

If the UK Government fails to meet the demands of insurers to reinstate flood protection cuts then insurance cover for millions of homes, including buy to let rental properties, could be withdrawn from June this year.

Although insurers pledged to offer insurance premiums for properties at risk of flooding, it was on the proviso that the UK government would invest money in flood defence protection.

The agreement is set to run out on July 1st 2013, but Millions of pounds have already been cut from flood defence budgets earmarked for improving sea walls and river banks.

Insurance policies starting at the end of June 2012 could be withdrawn for properties in high flood risk areas if an agreement isn’t reached, as the policies would be in force after the date the current agreement ends.

Flood defence protection is a priority for all residents living near to waterways, lakes and rivers, many people in flood-prone areas now have the added worry that their properties may be difficult or even impossible to insure later this year.

Some insurers are already warning that property owners in high flood risk areas, might not be able to renew their cover after the end of June this year, because their new insurance policy will extend beyond the 1st July 2013 agreement cut off date.

Not being able to obtain insurance cover will blight property values in many areas, as mortgage lenders may not offer funding and in many cases the properties will be very difficult to sell on.

Many home owners and buy-to-let landlords could also risk breaching stringent mortgage conditions that require them to have buildings insurance in place for the life of their mortgage loan.

Business Development Director for SearchFlow, Richard Hinton, said “Buyers will be able to obtain flood insurance for the next few months, but the long-term prospects of properties at risk of flooding are potentially bleak. Buyers purchasing in high-risk flood areas face the possibility of very high premiums, significant reductions in value, less access to mortgage finance and even action taken by the mortgage lender due to breach of the mortgage agreements.”

Check if you have a property at risk by going to the Environment Agency flood pages

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