Count your blessings

There has been much gnashing of teeth and wringing of hands over this first fall in rental income in recent years, so how bad is it for landlords?
Associations will have to slice up a smaller income cake next financial year - for some of the larger landlords this will be a £2 million to £3 million reduction. It is true that this will lead to some tough spending decisions being made and perhaps some awkward conversations with lenders who are concerned about the possibility of breaching lending covenants.

However, it is highly unlikely that - given prudent business planning - this slight fall in income will push anyone to the wall.

The spectre of fewer homes (possibly up to 4,000) being built as a result has been raised by the National Housing Federation, but it will be difficult to gauge the extent to which a rental cut is to blame for this.

Figures recently compiled by the Tenant Services Authority show that associations expect their total development capacity to fall to as little as 10,000 homes per year by 2019. A drop in income will clearly play its part here, but confidence in the wider economy and the reduced appetite of banks to lend at such favourable rates are more culpable.

If anything, associations - like councils before them - should be grateful that the situation is not worse. At one time, associations were forecasting rental cuts of up to 4 per cent, which would have been much more damaging and would have resulted in reductions in services and redundancies.
Instead, associations will be able to cut their tenants’ rents without too much pain. In a time of recession - and following hot on the heels of a 5.5 per cent rental increase this year - the importance of even this slight fall for tenants cannot be underestimated.

Above all, landlords should learn the lesson of the country’s beleaguered MPs and know when to, as one association chief executive put it this week, ‘shut up and get on with the job’.