âDue to the competitiveness of the market, local authorities are in competition with normal tenants. In some scenarios, they pay more than market rates, âKingswood said.
He noted a four bedroom house in Nottingham which was rented out as social housing for Â£ 850 a month. âThe normal market rent would have been Â£ 700,â he said. The owner increased his output from 7 pc to 8.5 pc. Robert Jones, Property Investments UK, a buy-to-let specialist, added: âIn the North West, landlords can achieve 8-10% returns by renting this way, when they would normally get from 7 to 8%. “
Investors are rushing to meet demand. Mr Jones, who also runs the property.xyz search portal, said interest in the industry has recently increased. Investing in social housing now represents one in 10 demand via property.xyz, which is double the pre-pandemic share. âCouncil houses are not on the agenda, and if the public sector does not provide them, the private sector will,â Mr. Jones said.
Some councils have set up private rental divisions to attract homeowners, Kingswood said. âThey contact us about our properties advertised on behalf of a tenant and will pay the deposit and the first month’s rent. They just don’t have the social housing stock. “
Renting through a housing association means that landlords do not have to pay a fee for an HMO (multiple occupancy house) license. ‘In Nottingham it saves them Â£ 980 for a license that would last five years,’ Mr Kingswood said. Representatives of local authorities and housing associations also visit properties regularly, often once a week or every fortnight.
There are, however, additional upfront costs. Social housing criteria are stricter and landlords have to pay for fire doors and alarm systems. Mr Kingswood noted a homeowner who had to pay an additional Â£ 4,000 to make a house meet specifications. âIt’s definitely worth it to miss the empty times,â he added.
Another downside is that agreements, which are based on commercial leases, will generally violate the terms of rental mortgages, which are based on properties rented under secured leases. Investors wishing to rent out properties in this manner will need to have purchased in cash.
The strategy is not well known, but investors are increasingly aware of the benefits. âIt’s starting to filter down to the general public,â Mr. Jones said.