Sub-letting could be great for the PRS and buy-to-let investors

Sub-letting could be great for the PRS and buy-to-let investors


Why you should welcome new reforms outlined in the 2015 Budget that now mean tenants have the opportunity to sub-let space in rented property.

As the nation last week digested the words of George Osborne during his Budget speech, there was a change that went somewhat under the radar that has been the cause of much discussion amongst landlords and property experts.

On page 51 of the Budget statement, under the heading ‘Support for the sharing economy 1.193’, the Chancellor outlined support for tenants in the private rented sector (PRS) to be able to sub-let space or a spare room in the property they live in. Here are the details:

“Building on the recommendations of the independent review of the sharing economy, the government will:

Make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.”

So in short, the government wants to prevent landlords from inserting clauses into tenancy agreements that forbid sub-letting on a short-term basis.

This has caused a lot of concern amongst property owners in the PRS. The chairman of the Residential Landlords Association, Alan Ward, described the reforms as “a nightmare in the making” and highlighted initial areas of concerns, such as immigration statuses of sub-letters, what would happen in the event of the initial tenant moving out, and added pressures on local parking outside properties.

Of course, we must wait to discover further details and the intricacies of these changes and how they will be implemented and managed before any definitive arguments can be made. But these reforms could actually be a positive move for tenants and investors alike.

Help with the housing crisis

The UK’s in the midst of the biggest peacetime shortfall in housing since the 1920s, with around half the number of new homes actually being built to keep up with demand. Whilst the main political parties announce targets of how many homes they’d like to see built over the next five years, allowing more people to live in the properties we already have offers some kind of solution to the problem in the here and now.

Sub-letting a spare room could offer a more cost-effective renting solution for these people who may be trying to save money for the long term.

Sub-letting and the need for transiency

As we outlined earlier this month, there has been a generational shift in property attitudes in this country. More people than ever actually prefer renting over buying to fulfil a more transient lifestyle, with 75% of workers now prepared to relocate to a new city to find work. Sub-letting, then, is a great solution for tenants that need the freedom to be able to move about with little notice.

But these reforms further highlight the clear undersupply of property in the PRS built specifically for this new demographic.

A buy-to-let opportunity

Sub-letting is not a long-term solution in the pursuit of transiency. Along with hotels and serviced apartments, compromises with sub-letting would have to be made on the part of the tenant, in areas such as living space and maintenance.

Therefore, this shows the demand for buy-to-let property in the PRS that meets this end-user requirement and creates a new opportunity for property investors.

pensions 2015 buy-to-let

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