Most landlords in Northern Ireland are small-scale, but experienced

In October, The Northern Ireland Housing Executive (NIHE) released key findings from their Private Landlords’ Survey. The survey highlighted the increasing importance of the Private Rented Sector (PRS), which has been the second largest housing tenure in NI since 2009 and continues to grow. The survey looked at:

• how landlords entered the sector;
• letting practices;
• awareness and experiences of welfare changes;
• respondents’ future plans, and
• advice and help available for landlords.

The survey showed the sector is characterised by smaller landlords who own 1 or 2 properties. Most landlords managed their own properties and almost 3 out of 4 respondents had been a landlord for 5 years or more, suggesting landlords tend to be relatively experienced.

The survey took place before the COVID-19 pandemic and does not consider the pandemic’s effects on the housing market.

Reasons for becoming a Landlord

The majority of landlords surveyed intentionally entered the letting business. However, almost 3 in 10 of those surveyed identified themselves as “accidental landlords”, letting property as a result of chance and circumstances. In most cases, these persons had inherited a property and then decided to rent it out.

The most popular reasons for becoming a landlord given were:

• A long-term investment to contribute to pensions
• An investment for both rental and capital return

Many landlords clearly view the PRS as being a relatively stable financial investment, which could explain part of the sector’s continued growth.

Landlords’ preferred tenants

Landlords indicated a preference for tenants who are young professionals. Student renters were the least preferred group. High numbers of landlords reported that a major concern was anti-social behaviour within and damage to their rental property. Student renters are, often unfairly, more commonly associated with such risks. Few landlords were willing to consider letting a House in Multiple Occupation (HMO) with only 9% considering it a future possibility.

Affordability

Affordability is an issue for many landlords and tenants alike. One-third of respondents owned their rental property/properties outright. A similar proportion said they depend on rental income to cover their mortgage repayments.

More than half of respondents said they rented to people either on housing benefit (40%) or the Universal Credit housing cost element (16%).

More than half of the respondents were not aware of local housing allowance (LHA), the system which restricts the amount of benefits paid to a recipient. Few landlords were aware of the many changes made to the LHA system since it was introduced in 2008.

Almost 40% of landlords would not rent to people in receipt of benefits

Worryingly, almost 4 in 10 of respondents said they would not be willing to let to people on UC/HB in the future. The most common reasons given by landlords for this include:

• Worried it won’t cover the full rental charge/greater risk of delayed/unpaid rent by tenants

• Perceived greater risk of anti-social behaviour
• Payments being made directly to tenant not the landlord
• Demands from other types of tenants

Housing Rights believes that any blanket refusal to rent to people in receipt of benefits could be viewed as unlawful indirect discrimination and could lead to legal action.

Increased likelihood of rent arrears amongst tenants in receipt of Universal Credit

The report finds that those who receive the UC housing cost element were more than 4 times more likely to be in rent arrears compared to those who pay all their rent themselves. Rent arrears continue to drive many tenant evictions and make landlords less willing to rent to people on benefits.

Housing Rights has previously highlighted that an unexpectedly high level of private renters in receipt of Universal Credit in Northern Ireland have payments of the rental benefit paid directly to them, when they often expect the payment to be made to the landlord, as is the default position. Tenants often assume that the rent has been paid directly to the landlord, and inadvertently spend the rental benefit on other household items.

Lack of awareness from landlords about welfare changes re-emphasises the importance of continuing to make information and advice available to landlords, to inform their decision-making about letting to and supporting these claimants. Landlords in need of advice on benefits can contact our Landlord Advice helpline.

Landlords willing to offer longer tenancies, with certain caveats

Two thirds of respondents said they would be willing to offer tenancies, or continue to offer tenancies, of more than 12 months in the future, while 15% were not sure. Landlords gave the following suggestions to encourage them to offer longer tenancies:

• Make it easier for them to remove problem tenants
• Financial incentives (e.g. tax cuts)
• Changes to mortgage restrictions

Personal reasons such as retirement were the most likely cause for ending their time as a landlord, but poor returns from rent and anti-social behaviour were also reasons landlords considered leaving PRS in the future.

Some of the qualitative comments made by landlords and included in the report are provided below. 

• “There is not sufficient protection for landlords.”
• “Over-regulation of landlords and increasing the tax burden on landlords will increase rents for tenants and push landlords to sell when there is already a shortage of private lets.”
• “I think there may be greater demand for rental property as I expect Brexit to have a very negative impact on the NI economy and therefore impact on peoples' ability to enter the property market.”

As more and more people live in the PRS, this survey highlights the need for providing a sustainable future for landlords and tenants through help, advice and recognition of the challenges faced in the sector.