Selective Licensing – Our experiences so far

Selective Licensing is currently active in North Manchester for 315 properties, this scheme has been in place since March 2017, and has required private landlords to pay Manchester City Council £750 per property to continue letting their properties – under threat of prosecution under Section 95 of the 2004 Housing Act

As one of North Manchester’s leading letting agents, we actively manage properties within this area and have had first hand experience of the process for Selective Licensing.

We are an ARLA registered agency, we are members of the RLA, NFOPP, the NLA and the Property Ombudsman Service. These are not just fancy letters, they all mean things for the way we operate and the standards to which we keep our properties, these associations in themselves regulate our activity, we hold nationally recognised qualifications in Property Lettings and Management and we closely follow latest legislation and regulations.

We do a good job.

Why then, when we pay all of our regulating bodies an annual fee to audit and monitor our activity are we paying Manchester City Council an additional £750/property to confirm what has already been proven beyond doubt by the highest authority in the Housing Market?

 

What Needed to Change?

Of the 315 properties targeted in Crumpsall, we manage or own around 40 of them so are well aware of the localised and wider issues affecting Crumpsall.

One of our regulatory bodies, the RLA, says this about selective licensing:

“An area may be designated for selective licensing either (i) if the area is (or is likely to be) an area of low housing demand or (ii) the area is experiencing a significant and persistent problem caused by anti social behaviour and some or all of the private sector landlords are failing to take action to combat the problem that it will be appropriate for them to take.”

From our experience, Housing Demand in Crumpsall is no lower than other areas in North Manchester, the entire city has high demand for housing, with a booming population and an ever expanding City Centre, affordable and accessible housing is at a high premium. Anti-social behaviour is somewhat out of our remit, we ensure the tenants renting our properties are of good standing, they keep their homes well and they can afford and do pay their rent on time, but anything above neighbour disputes of noise or rubbish, antisocial behaviour is wholly outside our sphere of influence as managing agents or as landlords. The third clause about Private Sector Landlords “failing to take action to combat the problem that it will be appropriate for them to take”, is a little vague, but as ARLA registered agents, we have rules and requirements in place for ensuring we are fit and proper persons to be managing the properties.

Was the problem the landlords, was the problem the demand for property or was the problem Anti-Social Behaviour?

 

Whats the Point?

Every property that we manage in Crumpsall has passed its Licensing Check to date, we had some disputes; at one inspection, that we didn’t attend with the council, they reported we were not eligible for a license for that property because there were no smoke alarms in the property. Immediately we called the tenant, popped round, and as they opened the door, we saw the downstairs smoke alarm in the hallway and within a minute we had checked and verified both smoke alarms in the property were correctly installed and working. When we queried the council, they admitted they had got the property “mixed up with another one”.

At £750 per property and potentially a landlords livelyhood at stake, is this really the kind of mix up that we want to be seeing by Manchester City Council?

Since 2015, If we let a house to someone without smoke alarms, we would be liable for recourse from: ARLA, NLA, RLA, NFOPP, Property Ombudsman and a £5000 civil penalty from the Government. We would be fined, our memberships stripped and we would not be able to operate as an agent.

Whilst its very positive that Manchester City Council are concerned and actively ensuring the safety of its residents, Licensing only applies to the private rented residential sector. Housing Associations/Local Authority housing is exempt, Owner Occupiers are exempt, Student Halls are exempt, live in landlords are exempt and care homes are exempt. So actually, the only properties that are liable are those which are privately rented.

 

Fit & Proper Persons

Selective Licensing essentially is a 5 year certificate to say that you can rent out one particular property. You are checked to be a “Fit and Proper Person”- essentially this is like a Landlords DBS Check, they look for:

  • any criminal convictions to do with violence, drugs, sexual offences or fraud
  • whether we have broken any laws to do with housing or being a landlord
  • whether we have been found guilty of unlawful discrimination
  • whether we have previously managed House(s) in Multiple Occupation (HMO) and broken any approved code of practice.

and they do this for every single property. Just like the ill thought out DBS checks, its a repetition of work and a waste of resources- checking this 40 times in as many days, will not produce any different results, but will keep someone busy and generate £30k of income for the council.

Why are Manchester City Council choosing to line their own pockets at the expense of landlords, agents and ultimately private rented tenants?

 

Do we agree with Selective Licensing?

Yes and no.

We recognise, accept and embrace the need to raise housing standards across the city. We absolutely agree that the rogue landlords and those providing housing that is not fit for habitation need to be cracked down on and dragged to standard.

But, we do not agree that reputable landlords, agents and those working well within the law should be further penalised to make up for the failings of others. Especially when Selective Licensing has been a scheme run in the past and was proven beyond reasonable doubt that it was at best ineffective and a major contributing factor to increasing rental rates in an area.

 

How Could it Improve?

The same scheme has, this week, been rolled out in areas of Rusholme and Moss Side, although Crumpsall was a “pilot”, it seems no changes have been made to the way the system runs and no lessons learned from implementing the initial wave of Licenses.

As the regulations and controls for rogue landlords are already in place by governing bodies, why hasn’t Manchester City Council considered teaming up with reputable and regulated agents, offered an affordable and mutually cooperative package for Licensing to ensure standards are raised and upheld by agents, and Landlords who self manage then have the option to be Licensed and monitored by the council OR use an already licensed agent who then takes liability for maintaining standards.

With over 60% of Manchester Private Rented sector Landlords already using an agent, this would give the landlords choice, the local agents an opportunity to lead the raising of standards, save the council resources AND ultimately prevent the entire burden of the cost of licensing ultimately landing on the tenants lap.

Right now, the way this scheme works, will do nothing to help tenants with affordability.

 

 

 

 

Investing in Rental Properties

Brentwood Lettings work out of North Manchester and East Manchester, we know this side of the city like the back of our hands and have our fingers on the pulse when it comes to buying investment property.

drawing-of-three-houses-where-it-reads-buy-renovate-resellThere are many ways in which a person can make a living when it comes to property investing, some of them carry more risks than others.  It goes without saying that those that carry the greatest risks are often the very real estate investment methods with the highest potential profit but slow and steady, in many cases, wins the race. Flipping houses is in the news a lot because so many fortunes have been made doing this-more than a few have been lost in this venture as well but those don’t make the news nearly as often.

Working with rental properties isn’t nearly as glamorous and doesn’t provide the almost instant profits that flipping houses might but it is also a great and very valid method of property investing that will build a steady profit over time if you plan properly.

Rental properties, in Manchester are in demand now more than ever with so many people going into foreclosure and losing the homes they’ve worked hard to build for their families. For this reason rental properties are a good thing to own at the moment, especially those that are family homes.

There are many reasons that people rent and while there are some risks involved when renting properties, the risks are much lower than the risks involved in flipping or pre-construction investment endeavors. I always make sure that all of my rental properties have a decent kitchen and up to date appliances so when getting them ready one of my first stops is to a Floform showroom. There are a few things you should consider when purchasing a property for the sake of renting however in order to make a wise and long lasting decision for your real estate investment.

location for rental property in manchesterOnly invest in rental properties in areas that people want to live in.

It may be true that you can buy property cheap in a few very run down sections of town but it is doubtful that you will turn those properties into profitable rental units. It is best to pay a little more for a more attractive address for renters. You will find that your properties are inhabited more often, which will make you more money in the long run.

Unsure? this is where we step in, we can tell you in an instant if an Area, a Street or a House is a good buy for renting or is likely to cause you problems. How? We live and breathe property lettings in Manchester, we know each and every street as if it were our own.

 

Pay attention to the types of people in the area and buy rentals accordingly.

types of tenant

It is quite possible to turn large homes into multiple smaller apartment units (according to local zoning laws) that are ideal for students. You do not want to do this however in an area that is geared towards family homes and won’t be friendly or tolerant of college students. Design the rentals according to the market you are attempting to attract.

Unsure? Again thats where Brentwood Lettings can help you, we have helped literally thousands of tenants, from all walks of life find a home in Manchester. We can tell you, the investor, more about your property, its chances of securing good quality tenants, the type of tenants you’d be attracting and how to best present your property for rental.

 

 

 Don’t be greedy.

The goal of owning rental properties is of course, to make money. At the same time if your price your properties too high you will find that they sit empty more often than not. Every month that your property is empty is a month that you aren’t making money on that property at best and a month that you are losing money at worst.

Know the market.

Study the local market for buying real estate and renting real estate. This will help with many things, not the least of which is determining whether or not any given property will make an attractive rental unit. Another thing it will help you determine is how much rent the units you are considering can bring in month after month.

 

When renting properties you need to keep your eye on the long-term goals rather than shortsighted goals.

Property rental is a marathon rather than a sprint with the greatest profits coming at the end. You will want to pay as little interest on the property as possible and pay the property off as quickly as possible in order to realize the maximum profit potential and acquire new properties. The real money when renting properties as a real estate investment isn’t in renting out one or two units but twenty or thirty. The more rental properties you own the more money you stand to make from owning them.

Build-to-let – the next big thing?

The Financial Times reported recently that owner occupation in the UK has fallen from 71% in 2003 to 63% currently. With mortgages difficult to get and house prices constantly rising, “generation rent” doesn’t look as though it will be comprised of homeowners any time soon.

And in response, a new type of landlord is entering the market. Private investors are financing the construction of affordable new homes without any intention of selling them on. Instead they want to keep them as long-term investments. Some of these schemes involve entire housing estates and much of the construction is in the North of England.

The developers include companies such as Sigma Capital, a housing developer backed by various finance groups including the Islamic bank, Gatehouse.

This trend may change the structure of the rental market in the UK. In the recent past, only social landlords such as housing associations and local councils, have been building affordable homes for rent. Strict criteria for getting these homes have meant that many people have been left outside the subsidised rental sector and have instead rented privately from landlords.

These landlords often hold just a few properties, perhaps as part of a retirement plan. Typically, they rent the property out and leave the tenants to pay the gas, electricity and any other utility charges.

The model being used by developers such as Sigma is different. In their properties, the monthly rent includes a charge for all utility bills and there is also a contribution towards some maintenance items, such as having the grass cut periodically in those properties that have gardens.

Sigma has a partnership with the house builder Countryside Properties which has built over 600 homes purely for rental and is expecting to deliver another 550 during 2017. Countryside Properties has focused on northern cities where local councils are receptive to the idea of private companies building housing on the large land banks held by the councils.

The properties being built by these investors and developers are not, as you might imagine, blocks of flats aimed at students and single people. Many of them are family houses and a significant percentage of Countryside’s properties are situated next to housing of exactly the same design that has been built for sale to homeowners.

Currently, a house on one of these schemes, with three bedrooms, will achieve a rent of £700-£800 monthly. Four-bedroom homes go for about £1100 a month, but that includes house insurance and all utility bills. The houses would cost roughly £210,000-£225,000 if they were bought on the property market.

Nor are the people renting these homes necessarily short of money. Because it is cheaper for people to rent than to buy, the tenants tend to have more disposable income. Graham Barnet, chief executive of Sigma, points to the cars sitting on tenants’ driveways as a sign of their prosperity.

It is possible that the availability of new rental stock on well-maintained estates, may raise standards across the board, as small landlords have to compete with these larger schemes and tenants. Certainly the model of the all-inclusive rent is being adopted by some landlords because it means that they don’t have to constantly deal with changes of account and possible defaults on utility bills.

And the trend for building rental properties shows no sign of abating. British Property Federation statistics are showing that the number of rental properties in progress or newly completed, has risen to 57,000 from 21,400 with significant developments in the North of England.

Stonegate Developments has a scheme for 162 new rental apartments in Newcastle and there are a minimum of 28 build-to-rent schemes planned for Manchester alone, according to the figures released by the BPF. Any letting agency in North Manchester will confirm that the demand for rental properties is there.

Across the country, Sigma is intending to build another 10,000 homes to rent in the next five years, concentrating on development sites that have good transport links so that commuters will find the properties attractive.

Certainly, if tenants get used to the idea of an on-site maintenance service which some residents of the new purpose-built developments are now enjoying, they may become rather more demanding tenants than those which private landlords are used to.

It will be interesting to see what effect this new development has on the Manchester lettings market.

Manchester – Best Property Yields in the UK

If you’re investing in property in Manchester – well done! Whether through business acumen, research or just sheer luck you are enjoying the highest rental yields in the UK.

Data from the buy-to-let lending company LendInvest, shows that the yield on buy-to-let in Manchester, at 6.1%, is the highest in the country. The yield is the annual rent a landlord can get from a property, as a percentage of the market value of the property. Of course, this doesn’t tell the whole story because capital appreciation, a rise in the price of the property, is also part of your total return as a landlord. The extraordinary rise in house prices in London has meant that although rental yields have fallen in London, because the total return on investment includes capital appreciation, London outstrips everywhere else in the country.

Realistically, many market analysts believe that this can’t go on forever, so London house prices may be riding for a fall. There has certainly been comment post-Brexit, that a lot of money had been flooding into the UK on the back of the historically strong pound and that this had led to a bubble in the price of assets such as property, particularly in London because it is favoured by overseas investors. Or as some might call them, speculators.

There is a suggestion that the fall in the value of the pound may lead to some of these investors pulling their money out, with a consequent cooling of the London market.

Meanwhile, Manchester’s economy has been growing strongly, providing a more solid basis for both property prices and the rental market, than the bubble that undoubtedly exists in London. The surge in economic activity in Manchester has been led by a large growth in private sector activity, especially in professional services and finance.

Manchester has become a key destination for large companies wanting to relocate their headquarters and it has managed to combine this with a thriving creative and digital economy. With four universities and a vibrant cultural scene, the city’s future seems assured.

With more devolution to Manchester planned, and Government investment in infrastructure taking place, the contrast with the beleaguered commuting towns of the South of England, where poor railway provision is hampering labour mobility, could not be stronger.

The 2015 population estimates provided by the council show that there are just over half a million people in Manchester; more men than women, but only just. The population bulges around the 25 – 44 age group but another 30% of the population are aged between 16 and 24. In other words almost a third of Manchester’s population are about to move into the stage of life where they are forming households, entering long-term relationships and starting families.

Many of them will be looking for precisely the type of family-friendly small houses that are a feature of North Manchester lettings, and in particular of the Moston community. They’ll be looking for rental security while they possibly have one or more children. They’re not so likely to be looking for the type of corporate development that we can see in many places in Manchester.

So although rental demand is undoubtedly going to continue to grow, not everyone is looking for a young professional’s flat in the centre of the city. And let’s not forget that many people find that personal circumstances, such as old age or problematic health, lead them to the type of community-friendly housing available in areas such as Moston, Harpurhey and Blackley.

Diversity in rental properties is the key to an area like Manchester. It would be a shame if most property was aimed at single professionals. However, while areas including Moston, Harpurhey and Blackley continue to thrive, and independent landlords are prepared to invest in providing homes, we will continue to provide for our diverse communities.

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