Many Private tenants face choice between heat, eat or paying the rent...... But how can landlords help?

The current headlines talk about a cost of living crisis and how many households are edging into fuel poverty, but what is fuel poverty and how many people are really effected.

What is fuel poverty

Until recently, the standard definition of fuel poverty was when a household needed to spend more than 10% of its income on fuel

However, in June 2013, the Department for Energy and Climate Change (DECC) published 'A framework for future action’ which set out the Government’s intention to adopt a new definition of fuel poverty for England.

This new definition states that a household is said to be in fuel poverty if:

·         They have required fuel costs that are above average (the national median level), and

·         Were they to spend that amount they would be left with a residual income below the official poverty line.

This also uses a fuel poverty gap - i.e. the difference between a household’s 'modelled' (average) bill and what their bill would need to be for them to no longer be fuel poor

What does it mean for landlords?

The only data currently available is from 2020 so I expect in reality, these figures are now much higher.

Households living in privately rented accommodation are most likely to be fuel poor (25.0%). Despite only 18.7% of all households privately renting their homes, 35.4% of all fuel poor households live in private rented accommodation.

This is a worrying time for landlords, with the rising cost of energy and tenants unable to afford to pay utility bills, they will have to start making decisions on what they pay their money towards.

Is rent gong to suffer?

It is predicted that come the winter more and more tenants will priorities heating over housing with many either paying only partial rent or skipping payments, in an attempt to rob peter to pay paul and keep their homes warm and their food hot.

What can landlords do?

The knee jerk answer to that would be, improve the energy efficiency of your rental stock, but we all know this isn’t always financially possible for landlords and can be extremely disruptive for a tenant.

Tenant may not be aware of the financial support that is available to them and as a landlord prevention is better (cheaper) than cure, so it may be worth arming yourself with the knowledge that could help your tenants pay their utility bills, which in turn will mean they wont have to skim off the rent.

Many utility providers have their own grant scheme that will pay off the customer’s debtor or pay a good % towards the debt.  You can normally find more details on the supplier’s website.

Tenants could also be eligible for Warm Homes discount scheme

Let’s take a closer look at the different utilities:

Gas and electric arrears

If tenants don’t pay your gas or electric bills, their supplier can apply to Court to get a warrant to enter their home to fit a pre-payment meter. 

Many gas and electricity companies have their own customer support schemes that can pay a grant towards arrears or write off the debt in some cases.  For example:

·         British Gas Energy Trust

·         E.ON Energy Fund

·         OVO Energy Fund

·         npower Energy Fund

·         Scottish Power Hardship Fund

·         EDF Energy Customer Support Fund

·         Bulb Energy Fund

 

But it isn’t just Gas and electricity that tenants could be struggling with

Water arrears

If a tenant falls behind with their water payments, the water supplier can’t disconnect them

However, they can start court action to get debtors to pay the arrears back, and in some cases apply to deduct money straight from benefits payments through a scheme called Waterdirect.

Water companies also have a range of support funds for those who are struggling to pay

·         WaterSure

·         Anglian water assistance fund

·         Severn Trent water charitable trust fund

·         South East waters helping hand

·         Thames water trust fund

·         United Utilities

·         Yorkshire Water

In addition, most water companies have payment support schemes, such as social tariffs (special rates for people on low income or receiving specific benefits).

·         Affinity water – LIFT

·         Anglian water – LITE

·         Essex & Suffolk water – SupportPlus

·         Thames water -WaterHelp

To name but a few………….

 

It is always worth contacting the utility supplier direct to ask what funds they have available.

In addition, if the tenant is vulnerable they can also ask to be added to the Priority Services Register.

This is a free service provided by suppliers and network operators. Each energy supplier and network operator maintains its own register. To get on it, you need to contact the energy supplier

There are also Government schemes that could help

•             Winter Fuel Payment – An annual one-off payment to help pay for heating during the winter

·                 Local authority funds

Ø  Discretionary Housing payment (DHP) (£140m)

Ø  Household Support Fund (£500m)

Ø  Homelessness Prevention Grant (£310m)

Ø  Flexible Homelessness Support Grant (£200m)

Ø  Council Tax Rebate (£432m)

Ø  Discretionary Fund (£144m)

Ø  Prevention of Homelessness funds

Ø  Financial inclusion grants

Can all be used to help pay towards both energy bills and rent arrears.

•             Cold Weather Payments – These are one-off payments to help pay for extra heating costs when it’s very cold.

•             Warm Home Discount Scheme – £140 off the electricity bill under the Warm Home Discount Scheme if you’re either:

o   getting the guarantee credit part of Pension Credit

o   or on a low income

All of which are worth trying.  If your tenant can deal with the utility bills, that is one less worry for the them – and will release extra money for paying rent

Are we creating a class system in Housing- Is rent up front creating economic discrimination.

Part 2

Following on from my article on the use of empty homes and the average cost of renting vs income, I looked at what barriers tenants have when finding a property to rent other than affordability.

Many peoples lifestyles have changed post-covid, many now work from home, many now have a better work/life balance and enjoy or want to enjoy a garden more than the commute to work.

But what are the reasons so many tenants are finding it so hard to secure a property, is it really lack of supply, well in peaks and troughs quiet possibly, so lets look at some numbers.

ARLAs monthly report showed that each of its agents branches had on average 9 properties available to let, and that the average applicant for each property was 10.

But what has been reported by agents and landlords alike is a growing trend of Rental gazumping.

In the current property climate, many rental properties will fly off the letting list and that can result in rental gazumping as landlords have so much choice of who they decide to rent to. Landlord and agents recognise that this is a problem for a number of prospective tenants but willingness to rent gazump should not be the sole criteria for who gets to rent a property.

Applicants who have savings or the bank of mum and dad are in a financial position to offer the landlord the security of 3 or 6 or even 12 months rent upfront and possibly more that the marketed rental value.

Many landlords work to cashflow and the bonus of a lump sum rent upfront can make one candidate look much more attractive than another, in turn for agents, if their commission is based on the rental income achieved, surely someone offering a higher rent and a lump sum payment is the idea tenant.

But is this short sighted and is this creating a class system within our housing market based solely on economic discrimination, purposely excluding eligible renters who just can’t afford the lump sum up front but can clearly afford the monthly rent.

In contrast, Agents will set the value of the rental properties, wanting to achieve the highest rent for their client the landlord, but ultimately to achieve the highest commission, so are they inadvertently driving up rental prices

Is the Housing market glass half empty.. or does the cup runneth over

 Part 1.

We are in a housing crisis, the media tells us this on a daily basis, Shelter tell us this ( so it must be true, right)

But what is the real cause of the housing shortage, is it genuinely a lack of properties for people to live in

Government council tax base figures released in November 2021, recorded there are 238,306 homes in England that are classed as long-term empty homes. This means that they have been left vacant for more than six months.

According to recent Shelter figures More than 274,000 people are homeless in England in 2022

During the Autumn Budget, the chancellor, Rishi Sunak, announced that up to 180,000 new and affordable homes will be built annually.

Now I am NOT good at maths… but that would tell me that is we brought back into use the current empty homes, then the new and affordably homes build would only need to be 35,694, that’s only 19.8% of Rishis promise, now that has got to be good for the tax payer.

Now I am very aware that to bring empty homes back into use, is not an over night project and will still cost money, so lets look at some average costings:-

·         Building cost in England for a new build property are between £1,750 and £3,000 per m2

·         the floor area of the average new three-bedroom home in the UK is 88 sq m

·         So, the average cost of a New build 3 bed house at the lowest end would be £154,000

·         The average total cost of renovating an existing empty 3-bedroom house is around £76,900

Empty Housing (England) briefing paper was published 21 October 2020 to set out how empty homes could be brought back into the housing market…. But like all great Bills this one never made it across the line.

In contrast the Scots are, as usual way ahead of the property game with the release of the Scottish Empty Homes Partnership (SEHP). This provides tools for developers who wish to bring an empty property back to life, including a really helpful Empty Home Value tool

In the first year of reporting figures SEHP, saw number of empty homes reduced by 7.5% all of these properties where brought back into use either in the private or social sector.

Would the Governments money not be better spent paying towards refurbing empty homes, rather than flooding the market with new build properties that are actually affordable to the average Jo.

Lets look at rental prices

Office of National Statistics found for April 2022 states the average rent in the UK is now at £1,103, up 10.6% on the same time last year

Early estimates for April 2022 indicate that median monthly pay was £2,076.

Now to qualify for a rental property, most letting agents and landlords look for the tenant to have an income of 3 times the annual rent or around 36% percent of income to be spent on rent.

But with these figures the average tenant would be paying 41.5% of their gross income on rent, meaning a person or couple with the average annual wage of £31,887.88 can’t actually afford the average home.

So are we pricing tenants out of the housing market?................