How will tenants cope with the landlord demographic timebomb?

To say I was stunned to find out that just 15% – that’s 15% – of landlords are under the age of 45 would be an understatement.

Even worse, a government survey puts the average age of a BTL landlord at 58 – and 63% of landlords are over the age of 55. (The median age for the general population is 39).

I genuinely believe that policymakers will have been blindsided by the recent news from Hamptons that landlords are reaching retirement age and selling up.

It was this news story that prompted me to look deeper into the situation since the estate agent says that last year nearly 140,000 PRS homes were sold by retiring landlords.

That figure will be up to 100,000 for the next few years and there will be a peak in five years or so.

But don’t let that trend set off alarm bells just yet.

Opportunity of serving a section 21 notice

Because there’s another scary figure that shows there are nearly ONE MILLION landlords over the age of 65 and they might decide to sell for a quiet life – or at least while they still have the opportunity of serving a section 21 notice to evict a tenant.

But younger landlords need to pay attention too – because rent freezes and rent caps along with restrictions on selling a rental property are the potential ways to resolve what is a growing rental housing sector crisis.

Let me explain.

This rental crisis will worsen in the coming years as more and more landlords retire and sell their properties so there will be fewer rental homes available, and the remaining ones will become more expensive.

This trend is already driving up rents in many parts of the country, and it will only get worse as the landlord demographic timebomb continues to tick.

Bought when buy to let mortgages were introduced

The issue is simple: most private rental properties are owned by landlords who are part of the baby boomer generation that bought when buy to let mortgages were introduced in 1996.

They decided to invest to supplement their income and build a retirement nest egg.

Now those eggs are hatching as landlords reach retirement age and many are choosing to sell their properties and cash in their investment.

While this might seem like a smart financial decision for individual landlords, it will have disastrous consequences for tenants in the near future.

As properties are sold off, it will become even harder for young people and low-income households to find affordable accommodation.

And there’s no doubt that the government’s recent changes to buy-to-let regulations have made it less appealing for individual landlords to continue renting out their properties.

Landlords are also facing stricter regulations

Also, landlords are also facing stricter regulations on how they can operate – and the planned abolishing of section 21 really will put the skids under the private rented sector.

These tax and regulatory changes have already led to many landlords selling their properties, and the trend is only expected to continue.

And this predicted landlord flight doesn’t even include those who will pack up once the EPC regulations are confirmed.

So, what can be done to mitigate this crisis? The government has already taken some steps to encourage institutional investors to build more rental properties, but this is a slow and expensive process and unlikely to provide a solution in the short term. Property118 reports that the BTR sector has stalled already.

Instead, the government should focus on incentivising private landlords to continue renting out their properties. This could include tax breaks or other financial incentives that make it more appealing for landlords to remain in the market.

Lack of supply and the inevitable rent rises

I’m also certain that the lack of supply and the inevitable rent rises – and I haven’t even mentioned the impact of rising mortgage rates – will play a huge part in deciding what happens next.

This could see the government introducing more regulations to protect tenants from rent hikes – such as rent caps or freezes or an eviction ban.

While this may not be popular among landlords, a government might decide it is necessary to ensure that young people and low-income households are not left without a place to live in.

Some of these issues are going to be addressed in the Renters’ Reform Bill – and should Labour get in then their rent reform charter will certainly boost tenant protection at the expense of landlords.

Ensure that rents remain affordable for tenants

There’s also another solution. Retiring landlords should only sell their properties to other landlords to help maintain the supply of rental homes and ensure that rents remain affordable for tenants.

But why should we? Why should landlords bother doing anything like that? There won’t be any thanks from the likes of Shelter and Generation Rent – and certainly no acknowledgement from a grateful government.

So, there you have it. When we look back at this period, we will see the government didn’t deal with a landlord demographic timebomb. There was no short- or long-term plan to encourage landlords to stay or even invest. Just more draconian laws that discouraged landlord investment and helped fed-up investors leave.

There’s a certain poetic justice that the groups striving to protect renters’ rights at the expense of landlords will be ultimately undone by proud and conscientious landlords cashing in their retirement fund – leaving tenants wondering why they can’t afford the few rental homes that are left.

However, there’s nothing to celebrate here. Renters’ groups and the government have consistently created a situation that made renting very difficult, and landlords have struggled to make a profit. But no doubt landlords will be called ‘selfish’ for retiring and leaving renters without homes. Of course, it will be our fault, it’s always the landlord’s fault.

Until next time,

The Landlord Crusader

Share This Article