25 Years of Buy to Let and the Clock’s Still Ticking

The year has slipped by, with few landlords realising 2021 is the silver anniversary of buy-to-let mortgages. Although private rented homes have been around for hundreds of years, the market picked up in 1996 thanks to action by the Association of Residential Letting Agents (ARLA) and two forward-thinking mortgage lenders - NatWest and Paragon. 

Between them, they devised the first buy-to-let mortgages for landlords. Since then, buy-to-let has spread from offering 2.4 million homes to around 4.4 million homes in England - equivalent to one in five properties.

Richard Rowntree, Paragon’s managing director for mortgages, said: “Since the launch as a mortgage specifically designed for landlords 25 years ago, buy-to-let finance has helped to transform private renting.

Enormous challenges ahead

“Private renting is now a vital component of UK housing, with renting no longer a last resort. Renting a private home is a tenure of choice as well as need and this is supported by the diversity of those who actively choose rented homes, benefitting from the flexibility they provide.” Robert Jordan, an ARLA past president, added: 

“We at ARLA realised that the housing market was at a low ebb; houses weren’t selling, which meant a lot of people were letting their homes to move to a new property. When the housing market picked up, those properties sold and there was a need for more rented properties to fill the gap for tenants, but we couldn’t see where we would find more homes to let. “It became clear that the mortgage options weren’t suitable, so together we designed a product, a buy-to-let mortgage, that would enable more investors to purchase an investment property.”

It’s clear buy to let is here to stay. However, landlords still face enormous challenges in 2022 and beyond - from meeting strict energy efficiency targets to a continuing overhaul of tax for landlords and ever-changing housing regulations.

Buy to let review of the year

It’s fair to say buy to let in 2021 differed from the letting industry a quarter of a century ago. But the same issues still haunt landlords - maintaining good living standards, dealing with tax, new government regulations and soaring house prices. 

This is reflected in a review of the year’s news:

  • January - The government orders builders  to scrap rip-off leasehold contracts that saddle landlords and millions of homeowners with escalating ground rents and unfair service charges
  • February - A letting agent paid £150 compensation to a landlord after failing to properly inspect a rented home where the tenant kept a goat.
  • March - Chancellor Rishi Sunak stretches the Stamp Duty Land Tax holiday in England until June 30 - and offers a 50 per cent discount between July 1 and September 30
  • April - From April 1, every privately rented home in England should come with an electrical safety report.
  • May - A South Coast letting agent and a landlord client hand £4,500 compensation to a tenant illegally barred from viewing a home because renters on benefits were ‘unacceptable’ tenants.
  • June - The government’s dream to make millions of homes more energy efficient deflates when research shows one in six homes can’t be refurbished to the necessary standard.
  • July - 83 per cent of private renters have no complaints about their buy-to-let homes, says the English Housing Survey, despite continuing hoo-ha from housing charities like Shelter about poor standards.
  • August - Data reveals Preston, Lancashire, is the best city in the UK for buy-to-let even though properties only have an average yield of 2.98 per cent.
  • September - The Stamp Duty Land Tax break closes.
  • October - Repossession deadlines in England return to pre-COVID levels of landlords giving two months' notice, while tenants must provide one month if they wish to quit.
  • November - Proposals to scrap Section 21 ‘no fault’ evictions are delayed until after Christmas; housing ministry officials announce
  • December - The average home price in England is expected to soar past the current record level of £288,000 in the New Year. Continuing double-digit growth in property values is expected.

London landlords cough up £7m in fines

Data says that rogue landlords renting out homes in London have paid more than £7 million in fines. In 2021, offenders handed over £1.076 million, according to research by property data monitor Kamma. The most active prosecuting councils in the capital were Camden, Newham and Southwark.

Kamma CEO Orla Shields said: “The lettings market is more regulated than ever before. Licensing schemes, fines and enforcement through rent repayment orders are all increasing, so it’s vital agents act to protect themselves, their landlords and of course their tenants.”

Planning crack down on second homes in Wales

Investors wanting to buy a second home or holiday let in Wales may have to apply to the council for planning permission to switch the use from the main house or buy to let. 

The Welsh Government has released a consultation proposing to change the planning system. Wales has an estimated 24,500 second or holiday homes. Find out more about the consultation.

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Investing in a Property

Investing in a private rented property can be achieved in a variety of ways. Sometimes landlords inherit a property that they then turn over to renting. Sometimes owners of properties become unintentional landlords because they are unable or unwilling to sell a property at the value the market currently dictates.