'I don't know how I'll support my family': landlords' retirement dreams in tatters

Hundreds of thousands of pension plans are at risk as the Government’s rental sector overhaul derails the buy-to-let business model, landlords have warned.

Housing secretary Michael Gove has announced sweeping reforms of the rental sector to boost tenants’ rights. These include scrapping Section 21 “no‑fault” evictions and getting rid of fixed-term tenancies.

Two fifths of England’s landlords have invested in property to contribute to their pension, according to the Government’s English Private Landlord Survey. Across the 1.5 million landlords, this means 600,000 people will see their retirement plans affected.

Ben Cameron*, 60, has now decided to sell his 30 buy-to-lets, a portfolio he had built to fund retirement. “It is the final nail in the coffin. The Government is derailing my pension plan. I have no idea what I will do to look after my family or where I will go for security now,” he said.

For Mr Cameron, the end of Section 21 and the move to rolling tenancies is key. One of the properties he had planned to keep was a house he lets to students. Without Section 21, he cannot guarantee that the property will be available for incoming tenants for the next university term. If tenants could leave after two months’ notice, as under the new plans, he would also be unable to find new tenants in the middle of an academic year. “Then how would I look after myself? I could go bust,” he said.

The Government’s White Paper that sets out the reforms includes plans to give landlords grounds for possession if they want to sell their property or move in themselves. They will also have new grounds for repossession in cases of extreme rental arrears.

But Charles Stevens, of Shergroup solicitors, said court delays meant that scrapping Section 21 would cause major problems for landlords even if they were guaranteed to eventually gain possession under these circumstances. “I recently served notice for rent arrears and then waited eight weeks just to receive a hearing date,” he said.

The average time between a landlord’s repossession claim and getting their property back in the first three months of this year was 55 weeks. The Government said it would target the causes of extreme court delays and introduce an Ombudsman to reduce the burden of dispute resolution. But the scrapping of no-fault evictions means that far more claims will need to go through the courts than before.

Max Armstrong, of North East Property Investment, a buy-to-let specialist, said the measures followed years of policy changes that had made buy-to-let less profitable and came alongside forthcoming minimum Energy Performance Certificate targets that could cost landlords up to £10,000 per property. “There is a worry that there will be a cumulative effect that, when you throw in the upcoming EPC requirements and the reduction in tax relief on mortgage interest, will push small landlords out of the market,” he said.

For Jess Dene*, 51, and her partner, the burden is already painful. The couple are self-employed and have built a portfolio of seven properties in the South West as their retirement fund.

“We didn’t have any money until we were in our 40s and by then it was too late to start a pension,” she said. “Our only option was property.”

But the Government’s buy-to-let crackdown and soaring house prices have already pushed back their plans. “Our aim was to have a pre-tax monthly rental profit of £5,000. We were at £3,500, but that has dropped to £3,200 following the interest rate rises. For two people, that is no longer sustainable.”

A raft of previous measures, such as new requirements for electrical checks, have already squeezed profit margins, said Ms Dene. “It used to cost £75 to renew a tenancy agreement. We just renewed one and it cost £900. The red tape costs so much money.” She is worried that a requirement for all properties to meet new minimum standards will bring additional costs in the form of paying for checks and certification.

Sarah Coles, of the investment company Hargreaves Lansdown, said: “Landlords have been cashing in and moving on as rising costs and a tougher regime persuade them there are easier and more profitable ways to make money.”

Those who sell up will get hit by inflation if they keep their savings in the bank, so former landlords could instead turn to the stock market. A stocks and shares Isa will allow them to invest £20,000 each year free of tax. Self-invested personal pensions generally have an annual contribution limit of £40,000 but allowances can be carried over for three years. Funds offer greater diversification of risk than investing in individual shares, said Ms Coles.

A Government spokesman said: “Good landlords have nothing to fear from our rental reforms, which will give tenants greater security to challenge unreasonable rent rises and poor practice. We are strengthening the grounds that landlords can use to repossess their homes where there is legitimate reason.

“We have consulted with landlords and will continue to work with them as we prepare legislation.”