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From Times Online

October 23, 2008

Is this the end for the amateur buy-to-let investor?

The Government's Rugg Report, released today, recommends licences for landlords and a business plan to get a mortgage

Rebecca O'Connor

Landlords will need a licence-to-let and a business plan to take out a mortgage, under proposals published by the Government today.

In a report that could sound the death knell for amateur buy-to-let investors, independent housing policy experts recommended a raft of measures that would turn letting property into a business rather than a bit of cash on the side.

The review, designed to root out rogue landlords who provide a poor standard of accommodation, also proposed tax incentives that could include changes to stamp duty and capital gains tax for professional landlords to encourage them to buy more properties.

Dr Julie Rugg, the author of the report, said: “We want to see a new culture of renting, where landlords view themselves as hands-on business people not hands-off investors.”

The proposals will come as a blow to struggling buy-to-let investors, who now face a dire shortage of mortgage finance as lenders increase rates and fees, or stop offering deals altogether. The number of landlords being repossessed rose by a quarter in the first half of 2008, according to the Council of Mortgage Lenders.

The licence, which could operate a bit like a driver’s licence, would mean that landlords who fail to measure up could have points deducted or lose their licence altogether and be banned from letting property.

The review said that buy-to-let mortgages should become “subject to business planning and the inclusion of strategies to protect tenants in the event of defaults on mortgage repayments by the landlord.”

A spokesman for the National Landlords Association said: “This will separate the wheat from the chaff and sift out the rogue landlords from the good ones. Investors who have become landlords to make a quick buck don’t bring in the skills that the sector needs.”

The proposals will also affect the growing number of homeowners who cannot sell their properties in the current housing market and are instead becoming “reluctant landlords” by renting out their properties, then renting themselves elsewhere.

Falling house prices are boosting demand from tenants, as prospective buyers are choosting to sit out the downturn in rented accommodation in the hope that the market has farther to fall. Demand for rental property has soared by 50 per cent in the last year, according to figures from Your Move, the lettings agency. The number of new leases rose by 4.3 per cent in September.

David Newnes, managing director of Your Move, said: “As banks stopper the bottle of mortgage finance, potential buyers have to stay in rented homes for longer than they have in the past. In spite of the large number of rental properties coming onto the market, we are seeing the strongest tenant demand we have ever had.”

A joke surely, from the same government that encourages poor quality housing by giving grants to landlords with substandard property, By all means regulate standard of accomodation but why not fund it by withdrawing grants?

ps, kent,

Of all the stupid and misguided reports by government committees- this has to take the cake ! What will happen to single home owners - who need to relocate for work but dont want to give up their primary home ! Why dont we save money by disbanding these committee and fire the lot.

Chottu, London,

LLs in Scotland already have to conform to HMO Licensing which costs in excess of £1k a year on top of the initial requirements costing not less than £5k,and every year brings more expensive rules and regulations. What percentage of LLs are considered dodgy?

SI, Edinburgh, Scotland

This is so predictable. Regulate to death things that are easy, & ignore the gaping holes in inter-bank lending. Applying for a BTL mortgage is already a submission of a business plan - you have to show how you're going to repay. Haven't they got anything better to do? Like stimulating the economy?

isabella, london,

This may increase rents? That's not good.
Not sure about the value of 50% demand increase. This figure has come from one agency only, and there are something like 3 to 5 times (according to agency) the number of properties for rent around here compared to 6 months ago, and they're not shifting.

Np, England, UK

I think I agree with this, even though I am planning to become a LL myself.

There are many dodgy LL and I currently rent from a developer who does not care about the property or my heating bills. Perhaps struggling sellers could contract a licenced LL.

Tony, Belfast,