In Focus (2023 Qtr 1): The PRS, property markets and the economy

Introduction

Each quarter the NRLA consult with members on a range of topics across the Private Rented Sector (PRS). The Quarter 1 survey typically focuses on welfare related issues, and recently this has centred on the roll-out of Universal Credit (UC). 

At the same time, with the PRS facing a range of difficulties and challenges, the quarterly consultation programme has taken a more flexible approach in asking landlords about the pressures they face at any given moment. With PRS reforms either being delivered or in the pipeline in both England & Wales, the consultation programme allows the NRLA to "deep dive" into aspects of the reforms.  Presenting the landlord perspective gives policy makers a better understanding of the likely impacts their policies will lead to.  

For this Quarter 1 consultation, over 1,200 landlords took part. The NRLA provide the largest regular independent landlord survey in the UK. 

Finally, this quarter the NRLA presents a new look report, with an even stronger focus on key findings and comments from landlords. 

Landlord confidence

Note the LCI in the report is based on a new scale - the methodology is identical and previous surveys are 100% aligned. NRLA researchers have simply adopted a new scale which goes from 0-100. Note the revised scale recordings are in parenthesis. 

Landlord confidence grew slightly this quarter from -33.2 (33.4) in Quarter 4, 2022 to -28.0 (36.0).  This growth has come entirely from England - in Wales, confidence fell.

The confidence score recorded in Wales - -46.2 (26.9)- is the lowest score yet recorded by the LCI since its inception in 2019. 

Other key findings from this quarter's LCI include: 

• A record proportion of landlords are now planning to sell and at least reduce their portfolios (if not exit completely).
  • Almost three times as many landlords are now planning to sell as planning to buy. 
• One-landlord-in-five (20%) reduced their portfolios in the last twelve months.

That this level of property-exit is being recorded at the same time as demand and rents are rising, highlight the negative factors and outlook underpinning landlord decision making.

Universal Credit

Over 40% of landlords who responded in this consultation stated they let at least one property to a hosuehold with a member who claimed UC. 

• This figure has doubled since 2018. 

After several years of improved performance and satisfaction, this year has seen an increased proportion of landlords finding problems with the DWP:

• A higher percentage of landlords report problems with arrears - including arrears accrued following a UC claim.
  • 40% of claims are dealt with in eight weeks or less.
  • However, in the last year, one-landlord-in-ten has had to wait over 26 weeks for a claim to be fully resolved. 

There are aspects of performance which have improved:  

• An increased proportion of landlords report the APA application (which facilitates housing payments direct to the landlord) was "Easy".
  • This is up from last year (23%) but still lags behind those who report the system as "difficult" (41%). 

Landlords and BTL finance

One section of the consultation reports on landlords with BTL finance. Almost 60% of landlords have at least one property on BTL finance. 

Many landlords with BTL finance have Terms & Conditions on that finance which include a minimum interest cover requirement. As interest rates rise, so landlords need to put up rent to meet that cover requirement. 

Many landlords have fixed rate BTL mortgage deals which are due to expire. Over 40% of landlords with BTL fixed rate deals state that once that fixed rate deal ends, they will be forced to put up rents. 

A significant proportion of landlords - almost one-in-eight (of those who have BTL finance) - find themselves effectively subsidising rents out of their own pocket to keep mortgage lenders happy. This group of landlords fear rents will have to rise beyond what they feel the market can take - often as a result of these T&Cs.

Tenant afordability

Landlords were asked about their tenants and the difficulties their tenants were facing as the cost of living crisis unfolded during the winter of 2022-2023. 

The research shows landlords will typically support tenants where tenants had approached landlords. Landlords also reported on the strategies tenants had employed to get through the winter.  Top of the list was the act of turning the heating off for longer in certain rooms. This strategy however often has consequences - almost a third of landlords report tenants reporting issues such as damp or mould. 

Nick Clay Research Manager

Nick Clay MSc, PgDip is the lead researcher for the NRLA. He previously worked for the RLA where he introduced the Landlord Confidence Index. Nick takes responsibility for the Research Observatory's content and rigorous approach to data analysis. He is a Certified Member of the Market Research Society.

Nick was formerly a Senior Economist for a multi-national consultancy. He has expertise in business support and entrepreneurship. He has written academic research, undertaken evaluations and developed strategies for business support organisations across England & Wales.

See all articles by Nick Clay