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.

@Schnooze it's already interest only. We're in London so despite having a lot of equity the mortgage is still getting on for £300k.

I'll avoid selling as long as I can, but realistically I can't afford to subsidise her by hundreds of pounds a month.

The bottom line is that rental properties need to cover their costs and provide enough income to make the time and effort involved worthwhile. Once the numbers don’t stack up, landlords will sell.

So, rising mortgage payments, increased costs related to safety regulations and energy efficency requirements and potential aggro and costs involved in it becoming more difficult to regain possession of the property, just make it less attractive.

For some who bought long ago or who are prepared to weather possible losses in the short term in hope of big rises in value and capital gain, they might sit it out. But otherwise, why would you? Private Landlords are not a social service pricing housing as a form of charity work. Why would anyone expect them to stay in the market and keep their properties if they can’t afford them and they don’t make any money or even losses?

So lots have sold. They find they are not making much if any money and mention of increased EPC requirements which could cost tens of thousands to meet, make many more who ere already marginal, decide to jack it in.

The properties might be sold to private home owners who will live in them. That’s great for those people but one less rental property available.

And will the government solve the issue by supplying more social housing? No. So more tenants chasing fewer properties …it will always drive prices up, like anything else.

So when people complain about LLs, as a generic group, they should think carefully. yes, there are bad ones who want to take rent and not maintain a decent property. But most are not like that. It is often the good LLs who do spend the money on maintains the properties and meeting all regulations who will be hit hardest and find they aren’t making any money and then need to sell.

The current housing market isn’t suddenly going to throw up huge amounts of social housing. So orivate rented will continue to be needed. But if government actions and market forces make it not viable for LLs they will leave the market. And then who will be hit worst? The LLs might have lost their rental income (but gained a wedge of cash from their sale) but tenants have got less choice and higher prices. They are the biggest losers from it. LLs priced out of the market by costs and regulation can sell up and walk away and live in their own houses and forget all about it. Tenants will always need somewhere to live. So unless the market and government ensure that there is still money to be made, people will exit the market. It’s quite simple.

To a point, government wants LLs to sell. They felt there were too many BTL LLs. As we know, LLs are often unpopular and are easy scapegoats for lots of things. Attacking LLs in government policy is an easy way to win popularity. But government will be sorry if so many LLs sell and the UK rental stock is significantly reduced, leaving people who need to rent with few options and hugely inflated prices…driven by demand and supply. And at the moment with so many selling, it looks like this is happening and so things will get harder for tenants.

What tenants need is a decent supply of well maintained housing. That’s imply is dropping.

Is anyone else thinking of all the threads there have been where landlords come on and justify themselves because they are such wonderfully philanthropic people providing public services? Only now, when it’s convenient, they become hard-headed business people again.

I have had several landlords: 1 was reasonably decent about repairs. He also hated the increase in buy-to-let’s. The rest haven’t given a monkeys. Most of the houses were mouldy and damp, several landlords tried to cheat us or cause us hassle, and every single one has tried it on to steal our deposits. We were lucky: I knew other tenants living with holes in windows and one where the wiring could have caught fire. I would love to know the source of this confident assertion that most landlords are decent. No one I know renting would agree.

We have two properties because my self employed husband doesn’t have a pension. We were lucky to have a small amount of money to invest

we have new tenants in one - a little bit older - we have been found three times in two weeks - same day - due to issue they have had. In each case it’s because they cannot work the oven control etc.

we freshly repainted the property for them after the previous tenants after only two years. It’s in a nicer state than our own house.

we remain friends with our ex tenants.

but we still need to make some profit. I don’t know why that’s hard to understand. We are not wealthy, multiple landlords. We are the kind of people who should be able to rent out because we are responsible and caring people.

Yes there are asshole ones but that's often what you need to be to be successful in a capitalist society

Would you call "being successful" if you're such an asshole landlord that you end up with a tenant that is so p1ssef-off that no rent is paid at all any longer, and it takes only 2 years to get the property back?

It might sound strange to you but, leaving any moral aspect aside, being fair and honest simply makes good business sense.

@DaSilvaP I genuinely don't understand what you're trying to tell me but I am sorry if that was your property you couldn't get back.
There's crap landlords and crap tenants.

I wasn't my property - it's only a case I know of.
My point was that your assumption "you need to be an asshole to succeed" is for short-sighted people.
As for solving the housing crisis, I very much doubt that the current version of the Labour party will be of any use - they so afraid of being labelled "far-left" that they won't any different from the current lot.

@DaSilvaP I think you kind of do though unless you're very lucky to get nice tenants and everything falls in its place. Your case proves that true, no? Even if you're a kind landlord, you get messed about by politicians who send interest rates spiralling, don't replenish lost labour so repairs are expensive, and you're stuck with tenants that don't pay. I can see how you'd quickly become a bit hard hearted even if you started off with genuine kindness.
I am not a landlord nor will I ever be, but I can definitely see both sides of the coin after reading this thread.

@DaSilvaP As for short sightedness, the whole thing is! Selling off council properties, not regulating rent or landlords, artificially low interest rates, not building new stock, allowing uncontrolled foreign investment in housing. It was all very short sighted and created it's own set of problems which have short sighted solutions.

A lot of council properties are actually owned be BTL landlords and the local council lease them for a number of years to let to tenants.

Councils don’t own all the properties they rent

Just to be clear, the ex council houses were purchased from the council by the resident tenants entitled to buy them, they were then within their rights to sell them at a large profit (thanks to their large discounts). Any buyer/landlord buying them to live in after that or to rent them out as a family residence had to pay full market value, second property tax and capital gains tax on any profit in future.

@MacarenaMacarena In the village I grew up in during the 1970s, all the council houses were owned by the local estate owner/farmer and he leased them to the council. This was a long time before council houses were sold off.

i have been visiting housing digital's news page to keep up with all of the recent housing and developing news. there are some good articles on there about housing development projects which are planned.

I never understand the “barely make a profit” comments. There’s a huge profit at the end when the mortgage is paid off/you sell and get the equity surely?

So I think it varies a lot. There are professional landlords with multiple properties. Maybe some of those don't look after the property and its just a cash cow, but I can only speak for myself.

I had to move for work and the sale of my home fell through on the day of exchange. It simply wasn't viable to wait for it to sell again- we had both given up our jobs and had everything set up 250 miles away. So we rented our house out and the rental income pays for our new home where we moved to. Or it did.

Our mortgage payments on both houses are due to literally double in 6 months time. On the rental.property that means we will only break even after we pay the mortgage, insurance etc.

We will have to sell it which wasn't the plan. We cashed in our pension to pay the deposit on the house we live in now, so the rental property became our pension. At the time we felt we had no choice ( apart from being unemployed in our old location and not being able to pay the mortgage there)

It really annoys me how all landlords are seen as evil. My tenant pays £200 a month below the market rate, we put a new kitchen and bathroom in 2 years ago ( which cost a years rent), all repairs are arranged within 24 hours. I feel terrible that I need to sell but I just won't be able to afford to keep it.

Depends how long you’ve had it and how much you’ve made from the rent on it (ie any losses to offset, as well as costs of improvements). Don’t forget you also pay 28% CGT on anything you make on the capital.

Also depends whether the capital value has in fact increased. At least one of my flats has a lower market value than when we bought it, mostly due to the overbuilding of apartment blocks in the area in the intervening years which has depressed prices.

Years ago there was a lot of council/social housing. Families often lived 2-3 generations under one roof.

Now

Lots and lots of people are divorces meaning both Mum and Dad need a family sized house in order for the kids to spend 50/50 with each parent - that immediately has a bug impact on the amount of houses available.

Social housing has been sold off putting more pressure on the private rental sector

People can make so much more money doing AirBnB so they do that instead of renting long term, again greatly reducing the amount of available housing stock for normal renters

People from abroad buy up new build apartments etc and then leave them empty as an 'investment' as historically they have been able to make millions on flats and house in places like london but dont want the faff of renting them out.

Families have become much more separate and old people no longer tend to move in with family instead staying in their 3/4 bed until they need to move into a care home.

There became much more stigma on house sharing or staying home with parents until you married (although that trend is rapidly reversing with the cost of rents!) so people wanted to rent their own place.

It is harder and harder to afford a mortgage/deposit again increasing the amount of people looking to rent a property

All of the above have contributed in the decrease of availability of rental properties. I haven't included immigration as we have always had immigration and i dont know how todays figure compare to say the 50/60's.

@VanCleefArpels love your name. I'm a huge fan of the vintage Alhambras ;)

Elderly people in big houses - do you mean the ones that they've paid for and could end up selling to fund their care? Or the ones they'll bequeath to kids who can then sell to fund their own house this not taking a rental property?

Honestly what DO you want property owners to do - downsize to suit the economy after years of paying off a mortgage? Different topic but how will renters fund their care in years to come with no assets to sell?

Those who have a btl mortgage could have an interest only mortgage

Honestly what DO you want property owners to do - downsize to suit the economy after years of paying off a mortgage?

@1980sfookup

Yes. Why not? They will still have an asset to fund care albeit a smaller one and released funds for inheritance/care fees/living costs, what’s the issue with this?

If there were huge profits to be made then huge numbers would be renting out their properties.There is also Airbnb now - so possibly less profitable renting , unless you are in a prime spot which rents all year, but no hassle with getting tenants to leave. In Scotland the rules are skewed to protect tenants so landlords are selling.

I think you could get a cheaper management deal. We are completely hands off - our agents do everything; I’ve never met our tenants - we pay 8%. I negotiated down and they agreed as there is a lot of competition in our area. We are also very good landlords; we allow pets and have contractors who fix anything, on the day that it’s called into the agent. We haven’t put rents up this year, either due to the cost of living. Not all landlords are awful; some provide a great service.

The issue as I see it, landlords talk about profit/loss in terms of monthly. At the end of the day they want to make a monthly profit, they whinge if they’re only breaking even. They bleat on about how hard done to they are, while never mentioning the assets they own at the end of the term. Anyone who think someone else should buy them their asset and no cost to them monthly is greedy and entitled.