The housing crisis and landlords

[MadgeMarple]

Hello, I am curious about the housing crisis and rents and not a little anxious as have young adults this will impact.

I was listening to R4 at lunch (you and yours maybe?) and the discussion was about the awful state of the rental market in England (I think Scotland has different, new laws and I'm not sure about Wales).

There was a landlord lamenting the rise in interest rates and the awfulness of mortgage tax relief being cut in 2015. If interest rates get to 6% lots of landlords will sell.
He lists a room in a shared occupancy house and 30 seconds later his phone is ringing with people enquiring about it. Within 24 hours 150 people have contacted him.
Someone, maybe from the Opposition, talked about how there just aren't enough homes now, due in part I think to successive changes/cuts in social housing.
And a bloke from some landlord association also talking about how everyone hates landlords etc.

Cut to a young man in London who is moving to a new house with his mates, rent has risen from £750 to £950. I don't even think it's a nice house (he said they had to drop their expectations). They had to audition for the place and the landlord had his pick of tenants (and can charge what he wants I assume). He will spend 40% of his income on rent.

What I don't understand is why there is a lack of rental stock? I understand landlords are selling up but I don't really get why. If places go so quickly, are not that great, and make a fortune why is this still a bar to being a landlord? Or are they just really greedy and want even more money and tax relief etc?

I read on the front of the Times today (too tight for a subscription) something about Truss considering scrapping the affordable housing quota imposed on developers which seems crazy given the lack of such homes. This is an idea from the levelling up minister to promote growth. Seems pointless doing everything to promote growth if people can't afford to live, or have anywhere to live.

If you can't afford it, don't be a landlord. Don't mess around with people's shelter and expect sympathy when it doesn't go your way.

my mortgage will increase from £1020 to £1700 by 2024 when my mortgage deal expires. I had a 15% deposit when i bought and have been overpaying £1000 every month. But thats the effect when interest rates go up to 7%; even overpaying has a limited impact, your repayments will still go up. There is no way to get out of this unless someone buys my flat. Thankfully we can afford it. Many people can't. They will lose their homes and probably still be in debt to the bank.

Renters can move out if they can't afford the rent..

My ex neighbour is barely breaking even renting out her flat. Actually losing money. She is a higher rate taxpayer. So is my DH which is why i am determined not to be a landlord and will rather sell at a loss to upsize than be a landlord. I guess she is keeping it for the long term trajectory but then again no one knows what will happen in 20 years.

She bought her flat at a lower price than me too and had lived there for 7 years before moving so presumably has a lower mortgage balance. its stupid to be a landlord nowadays.

I have every sympathy for anyone with a mortgage. But I have equal sympathy, if not more, with renters. Where do they move to? Rentals are in v short supply. I don't think it's as easy as "renters just move if you can't afford it". As this thread has shown, affordable & available homes to rent are now a pipedream for many in this country. Surely if someone has been paying a mortgage for x number of years and have to sell because they can no longer afford it they will have some equity, which is more than renters would have.

Move out to where? The abundance of affordable properties they previously chose not to rent?
Do be quiet

If interest rates reach 6% and house prices dip, there's no chance that landlords will be selling. They won't want to lose value on their 'investment'.

If there is a dip in house prices I think we will see more rental properties, not fewer, as nobody wants to sell in a falling market. Just the other a day a house that was up for sale was pulled off and advertised on the rental market instead.

rental prices would go down during a recession. i mean, during the pandemic, rents in central london dropped 20%!

i am not saying there would be an abundance of affordable properties but surely you understand that when you have a mortgage, its a long term debt that you cannot get out of regardless of what happens. If i was renting, i would just move back with my MIL if i cant afford the rent, but now that I own, its slightly more difficult as I would have to rent out my flat in order to even pay the mortgage. And there is no guarantee that rent will cover my new mortgage. So I might as well not move out. I guess i could take in a lodger but i live in a pretty small 2 bed flat and in a recession, many lower income earners might have left london anyway and the rents would have dropped correspondingly.

they would sell when all their BTL mortgages are 7% or 8% and they have to refinance and can't find tenants who would pay the increased rent...

Any respectable landlord is in it long term. If they have been letting for 10 years then their property/ properties will have roughly doubled in value. Rents are going up. Landlords and other investors only see recessions as opportunities. Unlike the general public who panic and get scared. Many people get rich in recessions.

I sadly inherited a mortgage-free house earlier this year. I want to be able to retire there - it's my old home, but I still have >> 10 years to go first. It needs a scary lot doing to it right now and I can either sell (in which case no retirement house) or rent it out in the meantime, and after fixing-up, to rotational staff at the 5-mins-away local hospital. I'm not at the mercy of mortgage rates and so can rent it at a decently cheap level that doesn't have to hike every time the BofE raises rates.

I'm happy to break even. I don't care about profits, just want it well-insulated, as eco as possible and with a family in it, preferably with a cat or dog as lots of places won't accept them.

BUT
I've asked this before - how the blazes do I do it ethically? I've started by ordering new windows because of the new energy ratings, and will work my way through a new kitchen and roof insulation. There's a desperate local need for short-term rentals to the hospital staff with families who rotate about while they train. Rents are set by the hospital per property type.

I am terrified that this is so not the right time to start renting out, but there are going to be so many people who don't have anywhere else to live and might find a cheap rent eco house a blessing.

Speak to your local housing officer or the local union rep - they may be able to guide you in good places to advertise.

I get my tenants from a local housing officer (I was only ever meant to have one friend of a friend temporarily).

If you get a good link with people then you’ll find you don’t need to advertise as eventually you’ll be in a situation where when Mary leaves Sarah needs a place and then when she leaves Steve and his family etc etc.

Firstly, renters are renting because they want that level of flexibility or they simply can't afford to buy. Offering BTL homes for sale for owner only simply won't work.
Secondly, there is already a disincentive for anyone to buy a second property, whether as a holiday home or a buy to let out for a family member to live in- the government charges much higher stamp duty for that as a penalty tax.

OP you’re asking why can’t LL just make less money - if LL aren’t making enough money to make the business/time/effort worthwhile then they will sell. Why would they undertake the responsibility of letting a home with its associated risk if there was no gain, and worse if they’re in deficit after all the necessary costs. So what you really want is the service private LL provide but at cost price.

These private LL are providing a service like any other, if they get priced out of the market who will provide this service of a maintained home and accommodation without the need for a deposit, general maintenance costs and long term commitment. Not everyone wants to or can be a homeowner.

I also inherited a property. I could have sold it, but I will make more money by letting it out for the next few years first. The money I make from it will be used to see my son through university, as he starts next year. I am not an evil person, I am not a 'sinner' as someone said above. I believe that most people who have said nasty things about landlords on this thread would actually do the same as me if the opportunity arose.

What I was asking was if rents are increasing massively (the example I heard was a £200 increase per month, per person) and there were hundreds of people queueing up to rent such homes/rooms why were LL also saying they can't afford to be LL?

A PP said good LL are in it for the long term. If you're not an "accidental" LL I think there's some truth in this.

What I was asking was if rents are increasing massively (the example I heard was a £200 increase per month, per person) and there were hundreds of people queueing up to rent such homes/rooms why were LL also saying they can't afford to be LL?

Different LL’s.

I have no mortgage on mine. So even if my insurance goes up I don’t have to increase rent to break even. That makes a massive difference to the affordability of being a LL.

@JustLyra totally agree - it’s the highly leveraged that will be feeling the pain. Of 6 properties I own 2 outright and 4 with 50% mortgages. I managed to fix for 5 years at the back end of last year. Repayments are around £300 compared to rents of £1000-£1400. I hardly ever increase rents for renewing tenants as it makes very little difference to me. I’d rather keep the good tenant.

That's very cheap. My 2 bedroom flat is HA and it's £470, I'm in one of the cheaper areas of the country too. Similar properties on the private rental market are around £700-£800.

Where I live the renting situation is dire
Shitty nasty rooms at £700 a month and more
you have to sell yourself to the landlords on line with photos

Also lots of people that want to budy up to share a household so say 4 sharers can’t do this unless the landlord is willing to pay extra fees as HMO and more checks so they can’t rent them

The family that bought my late parents house were paying £1700 a month for a 3 bed Victorian Terrace - I can’t quite get my head around that much for a badly insulated mid terrace house .

My son has just bought a 2 bed / 2bath flat to live in and is going to rent out the second room to a friends brother who works as airline crew and needs to move in January / Feb

He had to start looking in Sept to put out feelers to see if anyone had room next year otherwise he couldn’t take his job .

It’s a tricky one because it wouldn’t be good for the tenants if the only LLs were unscrupulous ones with large portfolios as very often (in my experience) they’re the ones that just don’t give a shit.
They can also be problematic for tenants in that you can’t rock the boat with them too much if they own 90% of properties in the area.

At the same time though LL’s who can’t actually afford to be LL’s are a massive problem. My niece was in one where the boiler went. The LL was lovely, but ultimately couldn’t afford to fix the boiler, let alone repair it. It puts tenants in a vulnerable position.

But it isn’t about not affording it

You would put yourself in breach of your mortgage terms and conditions.

But it is though. The mortgage is part of the gamble.
You shouldn't be taking risks with someone else's home unless you can sustain it. Just plain selfish.

If Landlords sell up prices will fall. Many renters will then move into their own homes freeing up rental properties. Non-professional landlords have not created housing, they have just cornered a lot of the exiting stock. There should be incentives for building new homes for rent, but no incentive for buying an existing property just to let it out

It doesn’t work like that.

If prices tumble then mortgages get withdrawn.

For a lot if people in rented they can’t get a mortgage or they don’t want one and they certainly don’t want to buy and be responsible for maintenance or many many more reasons.

Eventually there will be only big companies who are responsible for the rented sector and slum landlords who will make a fortune picking up those that don’t want to live in a rented house for the rest of their lives and just want accommodation for a few months or a couple of years.

I remember renting before Section 21 and it was grim.
People don’t remember what it was like trying to rent somewhere. Having to queue to grab a shit hole that you paid money for
People didn’t want to rent places to you because they couldn’t get the place back so houses stood empty.
Landlords had few rights. The 1980 housing act brought in assured shorthold tenancy agreements and slowly things began to change.
I really don’t think people have any idea of how bad the rental sector can be.

Student accommodation in the pictures I have seen is a double bed and en-suite bathroom. All clean, bright and cheerful.
Someone I know had a cupboard. There just wasn’t anywhere else. He used to get woken in the night when people would trip over his feet on the way to the loo
The Young Ones house wasn’t far off the student accommodation I knew in the 70s

Landlords are selling now and have been since covid restrictions ceased, resulting in rents increasing by 15%+. No sign of property falling. And yes as pp said, it's an issue of mortgage availability and the eligibility criteria has just become tighter.

So not sure some of the economic outcomes predicted are logical or even understand the basics of the housing market.

Do you have an interest only mortgage? If you don’t, then consider changing to one so that you can keep your lovely tenants.