Buy-to-let has suffered a series of body blows recently, but is heading for what could be a real knock-out punch.
The market has struggled as landlords adapt to a three percentage point stamp duty surcharge on additional properties, as well as being unable to offset all their mortgage interest against tax, among other blows.
But what’s coming down the tracks now is much, much more serious for these property investors – the proposed end to Section 21 orders, or “no-fault evictions”.
In April Government launched a consultation on scrapping these orders, which let landlords evict tenants within two months for any reason.
The only alternative, Section 8 notices, take several months, involve going to court and only allow evictions for certain reasons.
Obviously losing Section 21 with no proper replacement is bad for landlords, who would lose the security of being able to easily evict problem tenants.
But it is also terrible for buy-to-let mortgage lenders in a way that none of the previous Government assaults on landlords have been.
Firstly, a lot of landlords have warned this is the final straw and they will think about selling up. Secondly, lenders are likely to tighten their criteria as the risk of lending to landlords rises. No-one in the market wants to see the number of landlords fall, then the number who can get mortgages drop too.
Unfortunately, Government is going great guns for ending Section 21. The tone of the original proposal was unusually punchy, and was less “should we do this?” and more “we’re doing it unless you can give us a 24-carat reason why we shouldn’t”.
There was also no mention given in the consultation about what would replace Section 21, which does not bode well.
Mortgage lender trade body UK Finance, has said nothing on the topic publicly. This is not exactly unusual, as UK Finance apparently took a vow of silence on most issues related to homeloans as soon as it swallowed up the old Council of Mortgage Lenders.
But to an extent UK Finance’s hands are tied with this. It looks undiplomatic if it publicly bashes the Government proposals, and risks whipping up panic among lenders and landlords. Far better to put in a quiet response to the consultation and hope to sway the relevant policymakers that way.
One possible ray of sunshine for landlords and lenders is the very long duration of this consultation. It opened on 22 July and closes on 12 October, which implies that Government might actually be interested in getting a range of considered responses.
But another is what happens to plans to end Section 21 now Boris Johnson is Prime Minister.
While Mr Johnson is currently motoring ahead in the opinion polls, he cannot be complacent about any majority at the next general election.
Around 70% of National Landlords Association (NLA) members voted Tory in the last general election. However, only 16% would do so now, according to a NLA poll in May.
It seems unlikely that the Conservatives would push through the suggested changes and abandon their heartland landlord voters, as well as those close to them.
The only wildcard is that veteran policy wonks (no offence if you’re reading this) tell me renters’ votes are highly switchable to the party spouting the most pro-tenant policies. There is a risk that the Conservatives play the numbers game and side with the bigger voting pool.
A bigger question is whether the new regime would oppose the end of Section 21 on ideological rather than practical grounds. Will this new Government want to back an idea so strongly endorsed by Mr Johnson’s predecessor, Theresa May, and which obviously has gone down like a lead balloon with so many Conservatives?
Landlords and the wider buy-to-let market will be praying that Mr Johnson is lacing up his boxing gloves to fight in their corner.
Sam Barker writes about money for the Telegraph, and formerly wrote for Money Marketing, Mortgage Strategy and Insurance Times.
