to think we need new taxes on Buy-to-Let

[AgaPanthers]

Over the last 15 years the number of new homes built in Britain is equal to the number of new homes under private rental. In other words, buy-to-let is in effect taking all new homes (though obviously some existing homes are going into btl and some new ones into owner occupiership so it's not a 100% match).

But there have been vast rises in the number of private tenancies, sharp falls in the number of owners with mortgages, and the consequences are many, from tattier streets (landlords don't spruce up homes with sitting tenants, the tenants don't want to plant the gardens because they might be kicked out next year) to families having to move house mid-school year because the landlord is kicking them out.

Today it's announced that the number of people made homeless from private tenancies has trebled in five years, and that private landlords are now the leading cause of homelessness. www.bbc.co.uk/news/uk-27940701

AIBU to think that this has resulted because of all the people piling into buy-to-let because it is deemed as more attractive than the alternatives (bank accounts, shares, small business, etc.), and that therefore we need new taxes to make buy-to-let far less attractive, given the social problems it causes?

Couldn't agree more!

Iseenyou: what would happen to the people who don't want to buy / can't buy? We would most likely have more owner occupiers, if the 4m private rentals went up for sale at affordable prices, which is a good thing but what about the people who want to privately rent but can't because all the private landlords have sold up? Where would they live?
I don't think that landlords are doing anybody but themselves a favour but I do think that we need private landlords as there is a shortage of social housing properties and not everybody wants to be an owner occupier.

I'm struggling with some of the perceived truths on this thread. Taking houses back from private LL's does not mean that people can afford to buy them . That is a massive leap of logic.

A decade ago, it was possible as a young professional to save enough for a deposit and by shopping around to secure a competitive mortgage. That's how I was able to buy my first property.

The banking crisis and the global recession have made borrowing much more difficult. The lending criteria has changed completely both for first-time buyers but also for companies trying to borrow for housing developments. The knock-on effect is that less people can get mortgages and less development companies can see builds through to completion meaning there is less new housing available.

That isn't the fault of private LL's and even if you chased them all from the country and took over their properties, it still wouldn't mean that people could get mortgages or that house building would be kick-started.

To some extent I kind of agree with you, APlaceInTheSummer, in that I don't see why we have to futz about trying to indirectly affect what we want to affect through the market.

We need more homes - we should build more homes
we need housing to be cheaper - we should cap rents

Most private landlords do not touch housing benefit claimants with a barge pole. We never did. My daughter letting in London doesn't - she lets to two young doctors who are not yet ready to buy and will be int he stage of their career where they have to move around all the time in terms of towns and jobs. I would not be against forbidding private landlords letting to housing benefit claimants and then much looser rights for local authorities to build in cities in in fills and the like - most people want to live in cities not on green build, particularly those on low wages as they don['t want high travel costs.

If the 4 million private lets were suddenly subject to legal prohibition they would sell or move into those properties. They would do what people did in the rent Act days too which is leases to companies - we have a lot of leases locally to the armed forces as well as big companies moving staff around the world and in my own case closer to home my daughter will take up occupation of her own flat in a year or two anyway once she can afford it.

I am a LL. I bought a flat in a scuzzy area of east London in 2004 (the sort of area where people set cars on fire). When I moved in with my then boyfriend, I kept the flat and let it out in case things didn't work out. I worried that I wouldn't be able to afford another place in London.

Now I keep it as an investment, some years I make a small profit, some I make a small loss. As my name is not on the Deed for the house I live in, I choose to keep this extra security. Even if taxes were to be increased, I am not convinced that it would change my behaviour.

Aga: you said "I'm not confused in the slightest, I can tell you that the place I rented 10 years ago for £850/month is now about £1000 (roughly in line with wages) whereas the capital value has doubled."

This is precisely why we have not bought a second buy to let - the maths just doesn't work any more round here. Our rent is only just now slightly higher (£50 per month) than it was for our first tenancy in early 2002 but the capital value is probably close to double. Do you not think, Aga, that if what you say is true, the BTL market will be becoming increasingly unattractive as an investment?

It should be, beingfrank, back in the day, say 1997, you could make double digit returns from rental properties, and perceived wisdom was that this was you needed for it to be viable as a business. And probably it's true, when you compare to other businesses.

The trouble is so many people have jumped in and suddenly a mere 5% yield is acceptable for many, and you get people saying that they are losing money month on month and only speculating on capital growth. The trouble is that it hasn't put people off yet. Far from it, in fact people come from overseas to lose money year on year on renting out property in the UK.

Something has to change, but falling yield hasn't done much, I suspect a large proportion of landlords don't even understand what yield is.

Other countries have housing co-operatives owned by the tenants collectively with reasonable rents. We should have fair tenancy terms and tax rules that favour mutual ownership and discourage buy to let investment, and an economic policy aimed at bringing down house prices to a stable multiple of rents.

missymayhem We should have fair tenancy terms and tax rules that favour mutual ownership and discourage buy to let investment, and an economic policy aimed at bringing down house prices to a stable multiple of rents

Why? Most countries don't actually do that. I can only think of New York actually. Which isn't a country.

But would it include social housing and those co-operative landlords too? Because as far as I can see, council housing gets away with way lower standards and longer repair times than private landlords do, they don't have to be licensed like HMOs and they are just as unlikely to be unqualified.

JaneParker I would not be against forbidding private landlords letting to housing benefit claimants

That's not a bad idea actually. No objections to that. But they should also be licensed and annually inspected if they are let to families with children, and made to have mains operated smoke alarms with battery back ups, tested monthly and fire resistant self closing doors with illuminated escape routes, like HMOs.

AgaPanthers I suspect a large proportion of landlords don't even understand what yield is

Sorry, err what? Who the fuck couldn't understand what a yield is, particularly when in a btl application for years you have had to give proof of yield so as to prove ability to pay. And if you were that thick, you could google the word for its meaning. Not that its a particularly difficult word to understand. Yield. Jesus Christ.

Personally speaking, I'm a lawyer, far more relevantly qualified than the average letting agent, and can run rings round most people telling me what to do with property. But is there any chance you could stop with the castigating of large swathes of society as being (a) slum dwellers and (b) thick. In fact, you have told me that I am the former which is news to me. You're coming across as somewhat odd really.

All that would happen if you increased taxes on private landlords is that they would set up companies. The problem with that is that companies can be wound up leaving debts unpaid as they benefit from limited liability.

Plus some would invest abroad instead. For instance in Germany. Yields tend to be higher because although rents are lower and tenants stay for longer, it is perfectly possible to pick up a 10 bedroom fully let house in a small town for £150,000 or so. Running costs also tend to be lower as tenants are expected to do repairs themselves, other than replacement boilers and windows every period required by the local council.

I repeat again. High prices in the UK market are not solely caused by btl landlords. People spending unearned and relatively untaxed inheritances is also a major cause, as is the planning system which allows for far less self build than in many other countries in Europe.

Also many people want to rent short term, in shared properties, and other people cannot afford to maintain properties themselves.

But I suspect it benefits the government to have people out there who will tow the line of attempting to whip others into a frenzy about this supposed great injustice.

The trouble is so many people have jumped in and suddenly a mere 5% yield is acceptable for many, and you get people saying that they are losing money month on month and only speculating on capital growth. The trouble is that it hasn't put people off yet. Far from it, in fact people come from overseas to lose money year on year on renting out property in the UK.

so why are they betting on capital growth?

As others have said, this all makes sense once you accept that the supply is woefully inadequate for the demand. The number of dwellings being built vs the number of new arrivals is out of whack and has been for years.

a BTL tax may have some effect (though I am not convinced) but it won't touch the problem. We need to build more houses.

I don't see that it's a supply and demand issue. We don't have great overcrowding or homelessness. Prices of a commodity can soar without underlying demand changing.

...because that commodity always costs a certain base price to supply.

Is there really any cheap, guaranteed way to provide property to those without unlimited funds? The Soviet Union didn't manage it in a communist system.

And I don't mean ignoring everyone but families who want to let houses long term.

If you let people build their own homes on any given plot of land, that would probably would work. (Given that land in the UK is very cheap, unless it is designated for building, in which case it multiplies in value up to 1000x.)

Alternatively, pass a planning rule that makes it compulsory for 15% or 20% of all new builds to be self builds...

And rethink the zoning system which grossly favours big commercial developers.

Obliging local councils to bring vacant building stock back into use with an emphasis on conversion to residential would also create more social housing.
In fact, that's almost the theory behind the reforms introduced in April. Although they focus more on the council selling the vacant properties to developers for private, affordable housing rather than keeping the properties within council ownership and creating more social housing. Either way, there is a surplus of vacant Council-owned properties that could and should be used for housing rather than being allowed to fall into disrepair which is the current situation.

It's not in the right place a lot of the vacant stock. Go back to where I am from (NE) and you can pick up houses for under £50k and some a lot less than that and sometimes you have whole empty streets with run down properties sold even for £1 but no jobs. People want to live in City Centres. London is partly dealing with this by letter a good few offices to be converted back to homes where they were originally a house and areas with space and derelict land like east London was, docklands etc and Paddington being in filled. We probably need about 10x that level of infilling. When I applied to buy a London lavatory to convert the Council were not interested.

Running costs also tend to be lower as tenants are expected to do repairs themselves, other than replacement boilers and windows

I think that kind of policy could help if introduced here. Landlords would enjoy the reduced hassle of being called every time something very minor (such as a tap washer) needs fixing and they would appreciate tenants who get on and just fix stuff.
Tenants would realise that fixing stuff isn't beyond them and it might make them think that they could be a home owner themselves as it isn't as much headache as they imagine.
Rents would have to be reduced to reflect the tenants new responsibilities and maintenance costs though.

inthedark - optimist. maybe in some instances, but in others they will take the reduced rent and then not fix anything. if someone is quite happy to damage your property, trash doors, damage carpets, make a mess....do you really think they are going to mend tap washers and maintain the place?