Should we have rent controls?

Judgey
but you know and I know that the developers own huge chunks of Hampshire - with outline permission - but if they built on the whole lot at once, the premium they charge on the houses over and above build cost would collapse.

And anybody who disputes the size of the premium should look on the developers websites and compare how much they charge for identical houses in different parts of the country ....

www.taylorwimpey.co.uk/newhomes/southern+counties/taylorwimpeyatabbotswood/newhomesforsale/
www.taylorwimpey.co.uk/newhomes/north+east/moorcroft/newhomesforsale/

We have to be careful about building on lots of farmland. Being able to feed ourselves in a world with a growing population we may or may not be able to feed, is part of national security.

I don't believe it is wise to separate the price of rents from the value of property by any artificial means. The best this will achieve is the widespread destruction of the private rental market; at worst it will bankrupt a large proportion of landlords through no fault of their own. For this reason, any change needs to be gradual with rent yields bearing at least a passing reference to house prices / mortgage repayments.

The crux of the problem is that we don't have enough land to build on. Consider this, where I live in rural Hampshire, an acre of land can be bought for as little as £10k. Unfortunately, you cannot build on this land as it is for agricultural use only. An acre of land, with planning permission to build on, will typically cost up to half a million quid - maybe more - depending upon location. The value of the land depends entirely on the status of its planning application.

It may be possible to deflate the housing market gently by changing the planning rules to allow a gradual increase in the area of land available to build on. No doubt this would be controversial and there would be a lot of NIMBYism to deal with, but if the government took the long view on this - say 25 years or so - we could get back to a realistic value of our houses without too much disruption.

BTW - The cost of building a house (buying bricks, employing builders, plasterers and sparkies etc) is a fraction of the cost of the land - therefore the cost of rebuilding a house is nowhere close to the value of the house.

in my area most HB tenants are renting places which are more expensive then the maximum LHA for that type of property.

This is as the LHA rate is based on the lowest 25% of the rental market, however all of that 25% is not available to HB tenants as many landlords cant/wont take tenants on hb, therefore people are forced to pay higher rents.

I would also say there is already a two tier system. WHen you walk in to a house you can see who was so desperate they would take any shithole house that the landlord was prepared to accept HB, whereas for the same price, someone not on HB would get a much better property.

And there is no shortage of tenants. It takes months to find a property even if you are not claiming HB.

AArgh - niceguy - could you please read to the end of my posts??!

You said:

"Bread, you assume that tenants are only tenants because they cannot afford to buy because landlords have scooped up all the houses.

It's much more complex than that. Many people rent because they need to be flexible. Many because they simply cannot afford it.

So if you cannot afford to buy your own place and are left on housing benefit and stuck renting, how do you suddenly go get a mortgage to buy the house then? "

I said, in my previous post:

"All this would have the effect of increasing the amount of property for sale, hence reducing prices. Which for unwilling tenants - which is 56% of them, acc to a survey I recently read - means the very welcome opportunity to buy their own homes instead.

The remaining 44% can continue to rent from the smaller selection of rental properties. "

So the answer to your point is that the 44% would continue to rent,same as before. But the reduction in rented housing available wouldn't put them at a disadvantage, because it wuld match the reduction in tenants, as the 56% buy instead.

YO Yo - Agreed, it is hard on those who own but are on the edge - the Labour govt has a lot to answer for. There is no perfect solution - but the boil needs lancing. Keeping house prices artificially high through historically low interest rates, QE, etc is crippling our economy. Banks need to write down the losses, so that confidence can be restored to the banking ystem and ordinary people can have enough money in their pockets to have something left over after paying the rent/mortgage, so thatthey can spend again and the wheels of our economy can spart to spin again. Plus this will ensure that work does pay. Currently, high rents/house prices are a huuuge disincentive to working hard - far better to not work and get the state to pay.

Bread, you assume that tenants are only tenants because they cannot afford to buy because landlords have scooped up all the houses.

It's much more complex than that. Many people rent because they need to be flexible. Many because they simply cannot afford it.

So if you cannot afford to buy your own place and are left on housing benefit and stuck renting, how do you suddenly go get a mortgage to buy the house then?

More beta - its like the free market leading to more efficient allocation of limited resources

We do not have a truely free market in rents in the UK. I am a private tenant and do not receive any benefits so I do pay a free market rent but with council houses, housing benefit and housing associations (many of which are in severe financial distress) there are a lot of people on subsidised rents.

If you cut out all the subsidies and got rid of hosuing benefit and sold off all the public housing stock then we would get a proper market for rents. Rents would fall without housing benefit asy more young single people would live with parents and more old people wouls move out of 3/4 bed houses into 1 bed flats.

athing i am indifferent to house prices personally - i am talking about the widespread consequences of house prices falls.

after a very long deep recession (much worse than where we are now) it might be better/fairer. but it might not. lots of people could suck up the low priced property & the cycle begin again.

& what political party would do this? they would go to the wilderness for decades & be memorial failures.

but the loan is not given on the rebuild value. rebuild is about 1/3 of house price.

with your approach, so noone could get a mortgage with less than 66% deposit.

You can't surely be suggesting that house prices are artificially propped up to protect existing homeowners at the expense of the young?

Oh wait...

And in the UK for the last n years, because we do not have foreclosure rules like the US, that value has NEVER fallen below the rebuild cost (not the stupid insurance one, the real one). How do I know? Simple. Look at Barratt's accounts.

The true value of any house is what someone is prepared to pay for it.

talkin - The true value of any house is the bricks and mortar cost to rebuild it from the ground up

there is no such thing as true value. rebuild cost only applies to house insurance.

if i am a bank & i reposes a house, i care about what someone will pay me for it so i can recover as much of the original loan as possible.

yoyoyo
Please READ what I said. The true value of any house is the bricks and mortar cost to rebuild it from the ground up. No more no less.

hullygully
but in the UK "Market rent" is distorted upwards by over 500,000 empty properties, thousands of private landlords not declaring their tax and lots of expats from Russia, Greece etc buying property speculatively and ramping up the prices. Let alone the amount that is owned in tax dodging offshore companies.

Sadly I agree with the government in using a cap on HB to force rents down - in that the landlords either have to drop the rent down to what HB will pay or lose their tenants - and there is HUGE oversupply of property in many towns and cities

Rachman, btw (am reading thread backwards) was a stooge and much maligned. Read Linda Grant's The Clothes on our Backs (or similar title).

the value of the tangible asset changes.

say i lend you £90k cash secured on a house worth £100k. if house prices are falling & am going to wonder if you can pay me back, particular when your house is worht

No

Hb should be market rent, not less, not more.

yoyoyo
why would the rate on a loan secured on a tangible asset increase in risk?
once the loan is below the rebuild value of the property (which is the TRUE value of any house) which is why these huge deposits are being demanded, where is the excess risk to earn the excess reward?

if risks increase the market price for a mortgage will rise. how can it be otherwise? that is also what they have all done over since the credit crunch.

you may be able to cope, i might be able to cope. that puts us in a tiny minority.

still sounds like a disaster.

yoyoyo "banks would raise interest rates".
they are not a coherent unit and some are already charging ten times base rate on mortgages.
and negative equity is only a problem at sale time (in the UK, not in some states in the USA of course).
I can happily cope with a 50% market collapse as it would make what I want to buy affordable.

bread - but what about existing home owners if house prices fell? obviously people without mortgages would be fine, but what about the majority? surely banks would raise interest rates as lending became more risky & vast numbers of people would face increased monthly mortgage payments, negative equality etc. etc.

sound like a distaster to me. previous governments should have stopped this happening but your medicine will make bad, worse.

niceguy and mooncup - i don't really care whether you view landlords as making easy money or a separate class or as 'good' guys or not - it makes no difference to my point. Which is that if landlords decide en masse - whether through frustrated greed or just rents being too low to pay the mortgages - to cease being landlords as a result of rent controls, this will not cause a rented housing shortage.

All the properties the landlords sell will instead be bought by current tenants, who will suddenly have a much bigger choice of properties to buy. As it stands, first-time buyer properties are often those particukarly attractive to landlords. Which pushes the prices up and makes it hard for first-time buyers to compete. In many cases, tenants' rent would more than cover a mortgage. But suitable properties are all snapped up by landlords. Many people become 'accidental' landlords, where they decide to rent out a propery rather than sell it when they need to move. Reducing rents would make this uneconomical to do.

All this would have the effect of increasing the amount of property for sale, hence reducing prices. Which for unwilling tenants - which is 56% of them, acc to a survey I recently read - means the very welcome opportunity to buy their own homes instead.

The remaing 44% can continue to rent from the smaller selection of rental properties.

Thanks TalkingPeace - I hadn't grasped that point about land value tax and housebuilders. I totally agree that housebuilders should have to pay for having large landbanks with planning permission! That situation is ridiculous.

breadandbutterfly - talking about grasping BTL landlords misses the point rather. Landlords are not a separate class of evil capitalists, they are people like the rest of us who respond to incentives. As niceguy says, renting out property is not necessarily easy money.