Private landlords play a key role in the UK, providing homes for around 20% of all households, many of which are financed by a buy-to-let mortgage. The profile of those landlords has changed dramatically over the last decade as various political, economic, legislative and social pressures have come to bear on the sector, and that profile looks set to modify further in years to come, heavily influenced by environmental considerations.
For some years now, there has been a lot of heat and noise generated about the journey to zero carbon in general and Energy Performance Certificates in particular. As a result, landlords have too often been painted as confused or reluctant when it comes to grasping the challenge of evolving a sustainable Private Rental Sector (PRS). Our research proves that this picture is far from accurate.
Like any responsible lender, we need to be aware of our borrowers’ mindsets and anticipate their future behaviour in order to design the products and services they will require. As a lender committed to taking our own ESG responsibilities seriously and enabling landlords to do the same, we also need to understand their genuine views and intentions when it comes to future-proofing their property investment. That’s why we decided to go straight to the source to find out who today’s landlords really are, and what they are thinking and planning. We interviewed more than 1,000 landlords and 200 mortgage brokers in the course of our research this August. The results make for fascinating reading.
A clear picture emerged of what we have dubbed ‘Landlord Leaders’ – a growing group of increasingly professional portfolio landlords, motivated by three main drivers: environmental action; societal impact and growth through entrepreneurialism. These Leaders tend to own multiple properties. They take a professional approach to managing their portfolios, thinking about their tenants and structuring their finances, with the majority prioritising limited company wrappers. They feel more confident about the future of their businesses and the buy-to-let sector than their part-time counterparts. They are committed to the sector for the long term and appreciate the value of investing in improving the quality of their properties. Indeed, many are already acting to make their properties more energy efficient.
These increasingly professional Landlord Leaders are of course investing for returns – but the long-run, sustainable returns that can be generated by sustainable properties appealing to long-term tenants, as well as shorter-term renters. They are financially sophisticated but also have a social conscience. They are to be congratulated on their farsightedness. And they deserve to be supported and encouraged by us as mortgage lenders as they strive to provide rental homes suitable for an increasingly energy-aware audience.
At OSB Group, comprised of Precise Mortgages, Kent Reliance for Intermediaries and InterBay, our new insight into the Landlord Leaders has informed our latest buy-to-let strategy, and we intend to keep listening and evolving our offering to cater for this burgeoning band of borrowers. But taking the PRS to the next level of sustainability is a huge task, which demands an industry-wide effort. Not just lenders but brokers, tax advisers, trade bodies, regulators and ideally government need to work together with landlords in order to deliver the energy-efficient rental homes that tenants demand and the planet deserves.
This article first appeared in BTL Insider.