Here are some of the ways removing the eviction ban will affect the housing industry.
What Was the UK Eviction Ban?
This was a ban on rental property evictions introduced by Prime Minister Boris Johnson during the rise of COVID-19. It aimed to protect people who lost their jobs or experienced income cuts due to the pandemic. Eviction notices were also extended to six months. Landlords were not allowed to remove tenants with COVID-19 symptoms or who are self-isolating.
How the Ban Impacted the Property Industry
Reducing evictions supported residents impacted by the pandemic. However, it also shifted the mindset of buyers and sellers. Here are some of the ways the eviction ban influenced the housing market.
1. Raise in Rental Prices
With more people staying at home, there was a lower supply of housing. The Help to Buy Equity Loan Scheme added to the housing shortage in England. This program allowed first-time buyers to borrow an equity loan of up to 20% to buy a newly built property. They also don’t have to pay interest for the first five years. This made it easier for newcomers to enter the housing market.
The property demand began to outweigh the supply. With the housing market more competitive, renting has become a more appealing option. This led to a rise in residential prices.
During the pandemic, the U.K. also had a job retention furlough scheme that aimed to help companies that had to lay off employees during the shutdown. It allowed people to receive 80% of their regular wages without working. This provided a security net for renters but may cause landlords to raise the rent. However, property owners must give you one month’s notice of the increase.
The eviction ban added some additional stress for those looking to rent properties.
2. Higher Occupancy Rates
Overcrowding rates have increased in London. This can be especially hard on families with small children or the eldery. It can also put a strain on landlords to keep up with multiple maintenance requests.
3. Increased Financial Burden on Property Owners
Landlords lost income since tenants were able to reduce their payments. This made it harder for them to pay off their mortgage and left less money to run everyday building operations. To keep the space safe and habitual for renters, landlords have to pay certain costs.
The Private Rent Sector Landlord COIVD-19 Loan scheme helps property owners that need financial support. It offers interest-free loans for landlords whose tenants are having trouble paying rent due to the pandemic.
4. False Sense of Tenant Security
The eviction ban caused many renters to feel like they were safe from being told to leave. While it protected them at the time, it didn’t create a long-term solution. Once the ban was lifted, Tenants were asked to pay back their debts. This is concerning for those still trying to get back on their feet.
The ban may have caused some people to use their saved money on other expenses. So, when it’s time for repayment, the funds may not be easily attainable. However, the government has been providing relief packages to help with economic challenges.
5. Increase in Commercial Investment
More people could afford to stay home due to the ban. Also, the pandemic has added more challenges to moving. With residences seeing higher occupancy rates, commercial investing has become a popular trend.
How Lifting The Ban Will Affect the Property Industry
As the world begins to open up again, the eviction ban is being lifted. The government lifted the ban on May 31, 2021. Here is how the residential industry will be impacted.
1. Landlords May Began to Lose Tenants
COVID-19 caused many people to lose their jobs. It also increased financial challenges. However, the eviction ban allowed tenants security even if they couldn’t keep up with rent.
With the ban lifted, they are now at risk of being evicted. This is concerning for those still in the same financial situation. For landlords, the ban could lead to them losing multiple tenants, leading to financial strain. Many property owners rely on renters’ income to help pay their mortgage.
2. More Pressure to Sell Properties
Some landlords may feel pressure to sell their property due to the increase in vacancies. That will lead to lower income, and a mortgage may add even more stress. Some landlords also may want to sell properties due to tax relief changes.
In April 2020, landlords couldn’t deduct mortgage expenses from rental income to reduce their tax bills. Instead, they earned a credit based on 20% of their mortgage interest payments. This provides fewer rewards for higher taxpayers, who earned 40% relief.
We are currently in a seller’s market, so the demand for housing is higher than the supply. This means properties on the market are being purchased quicker. You could sell your residence for an additional source of income.
When selling your rental property, consider if you want to do so as occupied or vacated. Tenanted properties can attract professional investors who want to earn income from day one, while vacant ones can attract a wider set of investors.
3. More in-Depth Tenant Screening Process
Some property owners have tightened up their tenant screening process because they want to make sure occupants are financially stable. Higher income and a good credit score are important factors for renters to have. To make up for lost income, landlords also need to ensure they have a steady source of revenue.
4. Increased Financial Security for Landlords
With the eviction ban in place, many tenants were allowed to pay partial rent. Knowing they couldn’t be evicted, some of them embraced this opportunity. However, many landlords faced financial instability of their own.
Without receiving full rental payments, many of them lost income. This was especially tough on those owning a single property unit. The lifted ban allows property owners to gain back some financial stability.
5. Landlords Can Better Keep up With Maintenance
With the ban lifted, landlords can start getting back some of their lost income. They can use it to pay for repairs and maintenance of the property. Fixing broken appliances or HVAC systems are common repair requests.
Property owners also need to keep up with outdoor maintenance. This includes landscaping projects, like mowing the grass. Having good curb appeal can make your building more attractive to prospective tenants.
6. Changes in the Eviction System
Landlords will have tough decisions to make as the eviction ban is lifted. They can now be more strict about rental payments. However, going through the court system to repossess property may take longer. Courts will require information about a renter’s financial situation and ask you to give the tenant an advanced notice of eviction.
Due to an expected increase in eviction cases, the courts may only focus on more extreme situations. So unless you’re facing serious issues, this should be your last option.
Working with a letting agent can help manage repayment concerns. These agents act as facilitators between you and your tenants and can suggest ways to get payments back on track (in exchange for an agent fee of course). For example, the agent may propose digitally recording all installments.
Keep in mind that open communication is key. Having a good relationship with your occupants can make payment negotiation go smoother. Using meditation can be less costly than going through the court system.
7. Increase in the Need for Homeless Services
Some people may find themselves with nowhere to go if evicted. Most are getting back on their feet, but some still face financial challenges. They may not be able to repay prior rent leading to an eviction.
There has been increased funding for the Pathway Care Navigators charity group that supports those impacted by homelessness. The No Second Night Out Initiative aims to help those who were put onto the streets for the first time. Caseworkers work directly with the homeless population to understand the route of their situation, whether it’s finances or personal relationships.
The Ministry of Housing also continues to fund the StreetLink program, which was created in 2012 to report instances of homelessness in local communities. People can use an app or the website, and coaches then offer assistance and intervention.
8. Need for More Government Assistance
With tenants unable to pay rent, landlords also face financial pressures. They need to work with contractors and staff members to keep their properties running. Reduced income creates an unhealthy cycle of missed payments.
In this case, the government may need to provide more economic assistance. When COVID-19 hit, the government spent £6 million of emergency funds to support homeless charity organizations directly affected by COVID-19.
Those with low income can apply for universal credit to help cover living costs. You must be located in England, Wales or Scotland.
The government has also offered mortgage holidays, which is when monthly mortgage payments are put on pause for a set time. You can apply for a holiday for up to three months. These are available for homeowners and landlords whose tenants have been impacted by COVID-19.
Some banks may even offer loan and credit card payment holidays to help people get back on their feet. In this situation, you could receive a payment freeze for up to three months.
Energy companies are also rolling out schemes to help with the effects of the pandemic. They may offer free top-up cards, payment breaks or reductions, debt repayment plans and extended payment times.
9. More Opportunity for Renters
The lifting of the eviction ban may cause more spaces to become available. This can be beneficial for those with a steady income looking to rent. Landlords are looking to fill vacancies, so they may offer a lower price or additional amenities.
With the current seller’s market, there is stiff competition for homebuyers. This has led to an increase in bidding wars. Properties also aren’t staying on the market long.
With the housing market more unpredictable, renting can be an excellent first step. It can also help you save up for your dream home. This is especially beneficial for college students who are just entering the workforce.
Eviction Ban Lift May Cause Changes Within the Property Industry
The U.K. eviction ban helped out those who were financially struggling due to COVID-19. It also removed some of the stress of having to house-hunt in the middle of a pandemic. The lifted ban lessens the financial strain for landlords but may lead to higher tenant vacancies.
The full effects of the lifted ban are yet to be seen, and it will be interesting to see what the future holds.