Rising Rents. Shortage of Properties. Landlord Bashing. What is going on?
Is it just me or do landlords appear to be under a sustained attack in recent months? I have done my best to remain calm in the face of the provocation from the likes of Generation Rent and Sadiq Khan, except its bubbling away.
Last week I read a quote from Dan Wilson Craw, Deputy Director of Generation Rent, that called all landlords ‘amateurs’. Too much for me so I have dusted off my keyboard to explain why this is not helpful rhetoric.
Like any industry or public sector, there is the minority that ruins it for the majority. It is no secret that there are rogue landlords, those that will happily rent unsafe, unhealthy homes to people in need, at the highest rent they can.
Statistically this happens in London more than it does in any other area of the UK. But this is the MINORITY. The larger part of landlords across the country provide happy homes to happy tenants.
It is also no secret that there are some rogue tenants. The ones that will stretch the law to the nth degree, not pay their rent for months on end, display anti social behaviour, refuse entry for repairs or safety checks, wilfully damage the property and cause their landlord months of anxiety. If landlords were to take the same approach to all tenants that tenants are encouraged to take towards their landlords, there would be no private rented sector. Ultimately we both need each other.
And yet Generation Rent, Shelter and other pro-tenant activist groups will have you believe that landlords are focused solely on achieving the highest rent, whilst dishing out Section 21’s like confetti. I have yet to meet a landlord who has served their tenant notice, just because they fancied a change of tenant. It’s illogical. Section 21 notices are used where there is a genuine need to regain possession of the property.
Sometimes, yes, that is because the tenants and the landlord don’t get on or because the tenants are in rent arrears but surely in a democratic society that is OK? Why must one party have an entitlement greater than the other? It is often forgotten, it feels, that landlords are not given their properties for free. They work hard, they make sacrifices, they take risks to earn the money to buy them.
I hear the argument that the more homes that are sold for investment, the less are available for those that want to buy and there is some truth in that given that successive governments have failed to build enough homes each year. That though, is a simplistic view. It does not account for a change in the outlook of the younger generations, many of whom see renting as an attractive option. By renting they are not burdened by the ongoing costs of maintenance and insurance and they have greater flexibility to move areas for example.
Now, all this on top of increasing regulation of the Private Rented Sector through the Renters Reform Bill, increased taxation and changes to the Minimum Energy Efficiency Standards have left landlords concerned that they will lose much of their rights over their own investment asset. This money invested elsewhere is unlikely to be subject to the same restrictions as the PRS and with rising interest rates begins to look far more attractive.
Introduction and implementation of significant changes to dampen buy to let investment seems to have begun in earnest around 2012 with the expanded use of Article 4 planning directives. The Deregulation Act in 2015 gave landlords more responsibility and in the same year the Finance (No2) Act introduced Section 24 taxation rules which increased the amount of tax payable by landlords with mortgages. In 2016 chancellor George Osborne introduced a stamp duty surcharge of 3% on investment properties. All of these combined were an effort to dissuade new investment in the private rented sector.
Dan Craw (the guy from Generation Rent) argues in his October 2018 paper “Do measures that discourage buy-to-let investment increase rents?” that rents are not driven by supply and demand but by the greed of landlords. If I have understood his musings correctly, he underlines this point by stating that where a landlord sells their property it does not remove another rented property from the rental market, because at some point in the chain, there is a first time buyer. This buyer would have been a renter but as they are now buying they no longer need a rented property, thus the two negate themselves.
The point missed, probably intentionally, is that most first time buyers are not currently renting, they are living with parents or relatives. Therefore where a landlord sells and removes another property from the Private Rented Sector, the result is that a) you have tenants that have to leave that property, b) the first time buyer was never part of the rental chain and c) you have one less property available in an already starved market. Dan’s paper is full of such convenient statistics supporting his superior knowledge of the rental market to those that operate within it i.e landlords and their agents.
The BBC reported last week that landlords that entered the buy to let market in the mid 1990’s when it first began to flourish, are now reaching retirement age. The initial suggestion is that those landlords are beginning to sell, reducing the supply as new landlords are not entering the market. You would imagine Dan would be happy to see these homes being sold back to the first time buyer/renters he mentioned in his 2018 article but it appears he concedes “The real problem is the chronic failure to build enough homes in places where people want to live.”
So, for me at least, it is clear that with some landlords beginning to sell up after nearly a decade of government actions to curb investment in the buy to let market, alongside a growing sector of the population needing and wanting to rent, there is a shortage of supply of property available to rent. Supply and demand and the net effect on the price is an economic philosophy nearly as old as time.
It is not just rents that have increased. Food, oil, utilities, mortgage rates have all risen sharply and all have a knock on effect to the chain below. Just as the rise in ingredients increases the costs of food, the rise in landlord costs through taxation and regulation will increase rents.
The Thatcher policy of selling off council homes has led to today’s marketplace and I find myself agreeing with Dan that “The real problem is the chronic failure to build enough homes in places where people want to live.” and this needs addressing fast. Dan won’t agree but I believe encouraging investment by private landlords is fundamental to increasing property availability.
It is no secret that many landlords have given up with the Private Rented Sector, focusing instead on short-term letting such as Airbnb. A real focus needs to be made on returning these properties to the long term rented sector. To do this the government are using more sticks with which to beat the beleaguered landlord by introducing planning, registration and increased regulation. Why not use a carrot to make the long term sector more attractive instead?
I haven’t forgotten this. It made me very cross. I deal with many landlords across England and Wales and with the exception of very, very few, all of them take their responsibilities and duties very seriously. They are a long way from amateur and given the amount of regulation they have to follow, I am often amazed at how much they do know.
HMO landlords must hold a licence and demonstrate an understanding of the law. Landlords in Wales have to register with a government department and hold a license to let and manage their properties. To obtain that licence they must attend training courses and sit an assessment.
Letting Agents are expected to have full knowledge of the many, many varying Acts and Regulations covering the PRS and will belong to a Redress Scheme requiring them to adhere to a Code of Practice. In addition many agents are accredited and hold diplomas in Lettings and Management.
I am sure Dan would be as disappointed in me if I described his anti-landlord policies and campaigning as amateurish but of course I wouldn’t make such sweeping, politically motivated, sensationist statements. Nor would I be that rude.
Enough is enough
Anti-landlord rhetoric is not helpful. It only serves to create division when it has never been more crucial for landlords and tenants to work together. Hounding decent, responsible landlords from the PRS will only lead to further shortage, increased rents and the remaining landlords will be the rogue ones.
Please note the date this article was published as the law or the essence may have changed since it was posted. You should always seek independent legal advice if you are intending to rely on any of the contents.
All resources & news