Change (if not volatility) has become the norm for landlords over the last few years.  There could be even choppier waters ahead but what potential challenges will landlords face in 2024?

We are about to see widespread tenancy reforms.  Borrowing rates are likely to increase even further which means rents will need to increase for parity.  Meanwhile, the government’s Renters Reform Bill will come into being (even though it won’t confirm the future of ‘no-fault evictions’).  Even more changes to the relevant tax regimes will also prove testing.

Mortgage costs may also present problems.  Landlords with variable-rate or tracker mortgages will face high costs because of the higher interest rates.  This will likely impact the overall profitability of their portfolio.  By extension, the impact higher interest rates could also potentially lower property values which would impact on the total value of a portfolio (although, conversely, it could equally bring attractive investment opportunities to the fore).  

And if this wasn’t enough to contend with, there will probably be a General Election in the second half of the year.  This will mean even more changes to navigate if, as predicted, the result is a new government.

But the picture isn’t all bad for landlords. 

High mortgage rates will have the same impact on buyers.  This means many may delay their purchase which would drive up demand for rental property not to mention the levels of rent tenants will be prepared to pay.   

There is also talk of possible interest rate cuts by mid-2024 and mortgage rates dropping to around 4.5% by the end of the year.  This could bring some welcome financial relief for landlords.

What are the main challenges landlords will face during 2024?

Looking more specifically at the key challenges facing landlords during 2024 the landlord and tenant specialists in our Civil Law team have identified:

1. The Renters Reform Bill

The Renters Reform Bill is likely to come into force in 2024.  It will herald major changes to the way landlords let their properties to tenants.  These changes are yet to be confirmed but they are very likely to include:

  • A new Private Rental Sector Ombudsman
  • A ‘decent homes standard’ for the Private Rental Sector
  • A rented property portal providing access to an entry for every landlord and details on all their properties
  • The possible abolishment of Section 21 notices

2. Possible changes following from the Competition and Markets Authority report

The Competition and Markets Authority has been researching the rental sector, looking most specifically at ‘zero-deposit’ schemes, sham licences, and practices around guarantees.  Their findings are expected to be published in Spring 2024. 

Ostensibly the report will provide more detailed guidance and additional protection for landlords, tenants and agents but some fear it could force wholesale changes on landlords and, along with the Renters Reform Bill, further alter the balance in the relationship between landlords and tenants.

3. The end of lower Stamp Duty rates

Although the plans to return the residential nil-rate tax threshold from £125,000 to £250,000 were postponed in Jeremy Hunt’s Autumn 2022 budget, the current lower rates will come to an end on 31 March 2025. 

This could persuade landlords to either buy or sell properties before the change is made depending on their future plans.

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4. CGT tax-free allowance will drop

From 6th April the tax-free allowance for Capital Gains Tax for landlords holding all their property in their own names will halve from £6,000 to £3,000.

5. The upcoming General Election

Last month The Prime Minister said his “working assumption” was that there will be a General Election in the second half of 2024.  The private rented sector will almost certainly be a focal point for the upcoming campaigning, particularly in London and the South.

However, as we’ve said the potential uncertainty around who will be in power by the end of the year will cause landlords concern.  Will it mean the current government has to shelve the more attractive plans  they have in progress?  Or where will landlords end up if Labour come to power given they have not yet announced their plans for taxation let alone the future of the private rental sector.

However, there is also good news for landlords:

1. Pension lifetime allowance will be abolished on 6th April 2024

Last year the government announced it would abolish the pension lifetime allowance of £1,073,100 as of the 6th April 2024. 

Many landlords over the age of 55 draw up to 25% of their pensions to invest in property.  Currently this means they can only withdraw up to £368,275.  After 6th April 2024, they will no longer have to worry about higher tax liabilities if their investments do well.  

However, it is important to note Labour have said they could reverse this policy if they come to power.

2. The introduction of the Leasehold and Freehold Reform Bill

The Leasehold and Freehold Reform Bill was promised in Boris Johnson’s manifesto in 2019.  If introduced it will enable leaseholders (which equates to 38% of landlords) to extend leases on their properties to 990 years, abolish marriage value, limit ground rents, and make it easier to buy the freehold or a share of the freehold. 

We are currently waiting for the results of the consultation period which closed on 18th January to see if the proposed Bill will finally progress.

3. Energy reforms have been scrapped

The government dropped their proposed changes to energy-efficiency rules for rented properties in September 2023.  These plans included requiring all new rental properties to achieve Energy Performance Certificate ratings of ‘C’ and above by 2025 and existing rental properties to hit the same ratings by 2028. 

Many landlords were worried that this would incur significant costs and experts predicted these costs could well be passed onto tenants in a market already plagued by escalating rents. 

If you are a landlord and would like to discuss any legal issues that have arisen between you and your tenants, please contact the specialist property barristers in our Civil Law team today.

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