A round up of what 2022 has meant for landlords

19 December 2022

The effects of restrictions over recent years continue to be felt in the property industry. On top of that, the UK – along with much of the rest of the world – has been plunged into not only a cost of living crisis, but also economic and political uncertainty.

While 2023 will undoubtedly be a year of further upheaval and change, let’s look back on what’s happened in the rental market and affected landlords throughout 2022.

Private rents grow and the cladding crisis continues
The year started with news that private rents grew by two per cent over the previous 12 months – three per cent if London is excluded from the data, according to the Office for National Statistics (ONS). That’s the highest annual growth rate for almost five years. The best-performing region was the East Midlands, with rents up 3.6% year on year.

And that upward trend has continued throughout 2022. Over the year to September, average rents were up:

6% for the UK as a whole
6% in England
7% in the East Midlands, which has continued to lead the regions
Also in January, Michael Gove announced on behalf of the Department for Levelling Up, Housing and Communities (DLUHC) that the residential property developer industry had until early March to come up with a fully funded plan of action to fix the cladding crisis that they caused.

He stated that all necessary remediation work must be taken forward “at pace – prioritising those with greatest risks first and in all cases finding the quickest and most proportionate solution to make buildings safe.”‍

‘Levelling Up’ White Paper outlines twofold focus for housing
The Government published its ‘Levelling Up’ White Paper, outlining its plans for reducing inequality between different regions of the UK. This covers all aspects of society – from education, employment and health, to housing, transport and local communities.

The focus for housing is twofold: to increase the number of first-time buyers and halve the number of poor-quality rented homes. As well as confirming the Government’s intention to scrap Section 21 and introduce a redress scheme for landlords, this White Paper also mentioned plans to create a ‘Decent Homes Standard’ for the private rented sector.

Given that landlords already have to comply with a huge amount of legislation relating to the health and safety of tenants – including the Housing Health and Safety Rating System, the Homes (Fitness for Human Habitation) Act and gas and electrical safety laws – it’s hard to imagine what further minimum standards could be introduced.

More specific proposals relating to the private rented sector are outlined in the ‘Renters Reform White Paper’ – but in February we still didn’t have a publication date for that. (See June). The Bank of England increased the base rate by a quarter of one per cent, to 0.5%.‍

Changes to right to rent legislation are announced
In March, it was announced that changes to right to rent legislation would come into force on 6 April.

The biggest change for landlords is that you can now use certified identification document validation technology (IDVT) service providers to carry out digital identity checks on British and Irish applicants who hold a valid passport.

Changes were also made to the list of acceptable documents for non-UK nationals, and biometric card holders can now only be checked using the Home Office online service – landlords can no longer accept physical biometric cards for the purpose of right to rent checks.

Full information on the latest changes and current rules can be found on the GOV.UK website.

The Bank of England increased the base rate by a quarter of one per cent, to 0.75%.‍

The tax free allowance is frozen until the end of the 2025/26 tax year
At the start of most tax years, there is an increase in the Personal Allowance – the amount you are allowed to earn before you start paying tax – to reflect inflation. However, as was announced in 2021, that tax free allowance has been frozen until the end of the 2025/26 tax year, to help recoup some of the costs of the COVID-19 pandemic.

So, for these five years, the Personal Allowance is set at £12,570 and the basic rate (20%) limit will remain at £37,700 – meaning the higher rate threshold for paying 40% tax will be £50,270. Earnings over £150,000 will continue to be taxed at 45%.

Because the thresholds are not moving up, but inflation is still rising, it effectively means the real-world value of your income after tax is falling. At the same time, National Insurance contributions were raised by 1.25% for both employers and employees, putting an additional financial burden on many who had already suffered financially through the pandemic. However, prompted by the cost of living crisis, this rise was subsequently reversed by the Chancellor in September, effective as of 6 November!

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 ‘lifetime deposits’ idea is shelved
Notably absent from The Queen’s Speech this month was any mention of the ‘lifetime deposits’ scheme that had been on the political agenda for some time. This was the idea that a tenant would only pay a deposit once and it would then transfer between landlords when they moved, to avoid them having to potentially find a second deposit before the first had been returned to them.

This idea has now been shelved, as it seems to have proved both too complicated to set up and unnecessary, given the range of deposit protection and deposit replacement schemes already available.

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

The rental reform White Paper outlines five key proposals for the private rented sector
On 16 June, the rental reform White Paper, A Fairer Private Rented Sector, was finally published.

In it, the Government set out a 12-point plan for changes, which amounts to five key proposals for the private rented sector:

Extending the ‘Decent Homes Standard’ from the social rented sector to private tenancies.
Making three significant changes to tenancy agreements:
Moving all tenancies to ‘periodic’ tenancies, essentially scrapping ASTs and enabling tenants to give two months’ notice at any point
Getting rid of section 21 and requiring Section 8 notices for all evictions
Landlords will only be allowed to raise rents once a year and tenants can challenge the rise if they feel it’s excessive
Introducing a digital property portal for the private rented sector, which landlords will be required to join – in effect, a form of landlord registration.
Introducing better dispute resolution, which is likely to be through an ombudsman scheme for the private rented sector.
Requiring landlords to accept tenants with pets unless they have a good reason to refuse, such as the pet not being suitable for the property.
Introducing a digital property portal for the private rented sector, which landlords will be required to join – in effect, a form of landlord registration.
Introducing better dispute resolution, which is likely to be through an ombudsman scheme for the private rented sector.
Requiring landlords to accept tenants with pets unless they have a good reason to refuse, such as the pet not being suitable for the property.
In the September party conferences, Labour made it clear they had broadly the same objectives for the rented sector. However, they would go further in reducing eviction powers for landlords where their tenants are in arrears and proposed introducing four-month minimum notice periods for landlords.

The Bank of England increased the base rate by a quarter of one per cent, to 1.25%.‍

Boris Johnson resigns and inflation hits a 40-year high
Having been fined for breaking lockdown rules then surviving a confidence vote, Boris Johnson finally announced he was stepping down as Prime Minister in early July, after the resignation of nearly 60 members of his government.

However, because of the time it takes to go through the process of choosing a new leader, this marked the beginning of two months of more political uncertainty, while Mr Johnson remained in Number 10. He didn’t officially leave office until Liz Truss took over on 6 September.

Also in July, inflation – which had been on an upward trend since the start of 2021 – hit a 40-year high of 10.1%.‍

Property insurance costs are increasing by more than the rate of inflation
With inflation – the annual rise in the UK Consumer Prices Index – having been at or above nine per cent since April and then up at around the 10% mark in July, August and September, it means the cost of maintaining properties and making repairs has risen significantly for landlords. And on top of inflation, there’s also been a significant rise in the cost of wages in the construction industry due to a current shortage of skilled labour.

All this means property insurance costs have also had to increase by more than the rate of inflation, to account for the additional costs of rebuilding properties that have suffered damage.

With these spiralling costs, it’s more important than ever to make sure your landlord insurance is index linked. That will make sure the value of your policy is protected against rises in costs in the wider economy and the rebuild cost for your property will be automatically adjusted, meaning you don’t have to review it yourself every time you renew your policy.

But, unfortunately, you will see a rise in your insurance premium when you next renew – which is likely to be higher than the three per cent that you may have come to expect. Currently, index linking has increased to around 17% and is forecast to reach 20% by the end of 2022.

“I have been working in the insurance industry for more than 30 years and I’ve never seen index linking reach double figures, let alone the figures we are currently seeing.” – Steve Barnes, Head of Total Landlord Insurance
For more on the impact of rising costs, read our insurance premium and index linking Q&A.

The Bank of England increased the base rate by half of one per cent, to 1.75%.‍

Zero-rate stamp duty threshold rises to £250,000
There was good and bad news for the property market in September.

The good news came on 23 September, when the Government announced that it was scrapping the two per cent stamp duty in England and Northern Ireland and raising the zero-rate threshold to £250,000. Now, anyone buying a home for up to £250,000 will no longer pay any SDLT, saving up to £2,500. The other thresholds remain in place:

£250,001 to £925,000 5%

£925,000 to £1.5m 10%

Above £1.5m 12%

Although the three per cent higher rate still applies to the whole purchase price for additional properties costing more than £40,000, property investors will benefit from the same saving of up to £2,500 as homebuyers.

First-time buyers were also given a boost, as the zero-rate threshold for them was raised from £300,000 to £425,000.

Rates for Land Transaction Tax in Wales also underwent an adjustment, although, unlike in England, there was no benefit for property investors.

The worrying news for borrowers in September was the Bank of England’s decision to raise the base rate of interest by 0.5% for the second month in a row. This rise from 1.75% to 2.25% was reflected in the mortgage markets, where many lenders pulled products and rates for a two-year fixed product jumped from between three and four per cent to above six per cent, a level last seen in 2008.

With rates still rising as we near the end of the year, it’s important for all landlords to speak to a mortgage broker on a regular basis. That should make sure you stay on top of changes that could affect you and can continue to make the right mortgage decisions for your circumstances.

If you would like a quote or a free initial consultation, the team at Total Landlord Mortgages are always here to help. Call 0333 224 8918.‍

There are three private rented sector legislation changes
There were three changes to legislation in October:

Updated smoke and carbon monoxide (CO) alarm regulations
Following amendments to the Smoke and Carbon Monoxide Alarm (England) Regulations 2015, from 1 October:

Landlords must install a CO alarm in any room that has a gas boiler (gas cookers are excluded)
A CO alarm must be installed when a new fixed combustion appliance is installed in any home
If landlords are informed there’s a fault with any smoke or CO alarm in their property, they must repair or replace them “as soon as reasonably practicable”.
These regulations have also been extended to the social rented sector for the first time. Read more in our article, Are you compliant with smoke alarm and carbon monoxide detector regulations?

Eviction ban and rent freeze in Scotland
On 6 October, it was announced that rent increases will be capped at zero and evictions will not be enforced until at least 31 March 2023, with the legislation backdated to 6 September – the day Nicola Sturgeon announced the plans. This is part of the Cost of Living (Tenant Protection) (Scotland) Bill 2022.

Landlords can still serve eviction notices and apply to the Tribunal for an eviction order, but if the tenant refuses to leave, sheriff officers can’t enforce the eviction – except in the most serious cases, including criminal activity, anti-social behaviour and substantial rent arrears.

These measures will be reviewed every three months and can be extended for two further periods of six months (subject to parliamentary approval), so could last until 2024.

More information is available on the Scottish Government website.

In October, proposals for introducing a similar type of rent freeze in Wales were rejected by the Welsh Parliament, with the Labour Government warning that it would have unintended consequences, including shrinking the private rented sector further and leading to a spike in rent increases ahead of legislation.

“The time for a private rent freeze isn’t now. The situation is too volatile, complex and risky under the UK Government’s political, economic crisis.” – Member of the Senedd, Carolyn Thomas
Right to rent checks return to pre-pandemic rules
During the pandemic, adjustments were made to right to rent checks so that they could be carried out remotely and landlords weren’t required to see original documents. Those temporary changes came to an end on 30 September.

Decent Homes Standard Consultation
When the latest version of the rental reforms was announced, it included a proposal to extend the current Decent Homes Standard that applies to the social housing sector to private rented properties. A government consultation opened on 2 September 2022 and closed on 14 October 2022.

Liz Truss resigns as Prime Minister and another leader election led to Rishi Sunak being the 5th Prime Minister in just six years.‍

Another base rate rise is forecast for December
When the Bank of England met on 3 November, the base rate was raised by 0.75%, from 2.25% to three per cent, to help tackle inflation. A further rise is also forecast for December, with the rate predicted to reach between 4.25 and 4.75% in the first half of 2023.

This will clearly impact on mortgage rates, so it’s essential you speak to a broker as soon as possible to discuss your options.

Renting Homes (Wales) Act 2016 changes overview
On 1 December, the Renting Homes (Wales) Act 2016 comes into force, bringing huge changes to the private rented sector.

Full information and guidance for landlords is available on the Welsh Government website, but here is an overview of the key changes:

The AST will be replaced by an ‘occupation contract’ and ‘tenants’ will become ‘contract-holders’
Landlords will have to give contract-holders a minimum of six months’ notice and won’t be able to service notice within the first six months – effectively meaning an initial minimum 12-month commitment for landlords. Meanwhile, the contract holder will be able to give four weeks’ notice after any fixed term has expired
Section 21 and Section 8 notices will be scrapped and replaced with similar alternatives
New ‘fitness for habitation’ rules will include mandatory five-yearly electrical tests, bringing Wales into line with England and Scotland
There will be ‘retaliatory eviction’ provisions, similar to those in force in England
For a comprehensive round up of all the current lettings laws, visit our guide: Legislation for landlords: Everything you need to know.