... to not understand the "Right to Buy" thing???

[MillieV]

OK. Up and down the country, and here on MN, there is talk about councils not having enough council stock, that there should be more, and we all blame it on Margaret Thatcher. But why is it that now, politicians want to follow in Thatcher's footsteps yet again?!?

One article here

Do these properties come with covenants, i.e. they can only be sold on by the original buyer to those who are also in council/social housing, and continue to be at a discount? This would be fair. However, I fear the housing stock may just be sold on at market value 5 years down the line...

Landlords should not be allowed to base the rent on their mortgage payments It should be on the size and quality of the property itself. Regulation is really needed here and more house building

Tighter control over estate and letting agents too. They are completely unregulated. My letting agents has told me that many big fat illegal fibs and there's nobody I can complain to!

Rent controls only work where there has historically been little or no property price inflation or indeed general inflation in the economy (eg like Germany).

Where house price and general inflation is historically high (eg like the UK) rent controls always result in either a shortage of available rental properties and or rental properties being let in an appalling state of repair, illegal tenancies and slumlords become prevalent.

There is a distinct lack of understanding about the cost of finance and inflation on this thread. As I said earlier it is only by deliberately ignoring inflation and interest costs in the long term that Housing Association finances appear to work. Public sector cash accounting allows 'magic money tree' finances to work so long as there is public subsidy to paper over the cracks. HAs have not built large numbers of houses because it really is economic suicide for a HA to do so - without a massive Govt subsidy. As Govt cut back on subsidy then inevitably less HA properties got built.

Landlords should not be allowed to base the rent on their mortgage payments
How exactly is that going to work, if the rental income is less than the mortgage payment? The house will be sold and lost to the rental market.

Sallying
I agree with Noddy. LLs should not base rent on the mortgage they pay. There should be a band for the relevant square metres (not bedrooms - there will be LLs/developer who will build more rooms in a small space, just because Britain is obsessed with rooms. In other countries, where the mindset is different, BTL properties are not about making money immediately. You buy a flat (or entire buildings) because you have a lot of spare cash. The mortgages are theoretically minimal. All you want is a return above cash (what your savings account would give you)... which in this low interest rate world is easily done with property.

The whole idea of being a LL in those countries is really more for your retirement. The rent you receive gives you extra cash on top of your pension. Nothing else, really.

MoreBeta - It's a chicken and egg argument though. If you have more controls, do you think there will be a lot of foreign investment? (No.) This would already depress prices somewhat. Better still - prevent foreign buyers who have never set foot in the UK to buy housing stock here.

It's sort of a Catch 22 - if property prices go up, that means things are more expensive for UK businesses who might need retail space. They will pass this cost on to customers, and prices of goods will increase, meaning wages may have to go up, etc. That's basically inflation right there.

If property prices didn't go up... and oil prices remain depressed... would inflation still go up? I think not.

Sallying

The LL who gets less in rent than he spends on the mortgage basically gets a proportion of the mortgage paid for by the tenant. As I said above, in other countries, it is not about making money now. You are basically putting your money away for when you retire.

By the time you hit retirement age, the mortgage is paid. Unlike the tenant, you now benefit from a steady stream of income that the tenant will never have.

In the UK, nobody seems to think long-term. Hence, the problems...

You'd have to think very carefully about the consequences. Not all private landlords make a big profit. Buy-to-let mortgages might no longer be economic and that could result in a much reduced number of properties to let.

but might increase the number of properties to buy.

hard caps are a bad idea. but many places have rents rising only by CPI for tenants in place.

yes, you would have to think hard about it. We have price inflation here because of supply being choked, and high demand. Hard rent caps won't help. But tenure and soft caps will help tenants in the short term and long term, but we need more houses to bring the prices down.

MilleV - that is what BTL investors do in the UK. They use the rent to pay the mortgage and then either continue renting or sell to find their retirement.

It is no different to what LL do in Germany. However, you have to be careful to take notice of the tax laws too. In Germany there is a tax advantage to owning and renting out property. There is also a rather unusual Pfandbrief bond market in Germany that funds property mortgages at very low interest rates. I am very dubious that market wil survive an uptick in interest rates.

The German Landesbank that issue Pfandbref were in a very precarious state after the financial crisis. There is a lot of hidden subsidy and tax avoidance in German property. I used to work for a German bank.

find = fund

There's a world of difference between flats in the UK and those in a lot of European countries.

Flats in the UK tend to be poor quality conversions and tiny or purpose built shoeboxes. The flats I've been in in Spain and Germany have had loads of floor space, solid so you don't hear your neighbours, maintained communal areas, e.g. park and swimming pool, storage space, underground parking, lifts. This is just normal family housing. It's a world away from the flats British people don't want to live as a family in.

Rent controls and secure long term tenancies in private rental were dropped with very good reason. 40 years ago or so it was not uncommon for one individual or one family to own street after street of rented housing in the same town. Often those properties had been passed down through the family (both in terms of the LL family and the tenant's family) with scores of sitting tenants in situ at low rents that were fixed. The properties would fall into disrepair either because the LLs couldn't be bothered and the only real value to be had was in the land and the house itself rather than in rental income, or because the houses had been left to relatives who could not sell them because of sitting tenants but did not have enough of a cash sink fund to allow for major repairs and renovations.

In contrast, council/social housing rent may well not have covered the costs of long term maintenance either, but social housing would not have necessarily been expected to break even, never mind turn a profit, unlike private rental property. If a local authority make a loss after essential maintenance costs on their social housing stock then so be it. It doesn't mean they get to massively increase the rent, or give all their tenants notice and sell the places off because they are not financially viable. This is why when people insist that their council house rent is not subsidised, I would say they are wrong in the grand scheme of things. and it's also why so many council houses are now in the hands of housing associations who can manage the books a bit better than councils ever did.

I remember (just) the days of rent control £10 rent a year for life in London and the like. There became virtually no property available for rent and council housing was virtually non existent so people had to live with parents and double up in rooms and sleep on floors. It was not some wonderful nirvana of landlords letting at a loss as charitable gestures.

Most landlords in the UK own one property they live in and one they rent out. There are a very very few with more than that but not most by any means. Many hardly cover their costs - that was the case with my daughter who lived at home and let out her first place although she has now moved into it so is no longer a land lord.

This morning I have just been offered a council house this is is not the first house I have been offered ,also this morning I have just got a letter through the door about another council house I bidder for saying it is currently under offer to someone else but if I.m still interested let them know asap obviously I don't live in London or the south east I live in the north west council housing isn't in short supply everywhere.

A huge chunk of houses bought under right-to-buy are now in the hands of private landlords, as much as 50% in some areas of London. That really pisses me off, that houses the tax payer paid for were sold off at a massive discount (again subsidised by the tax payer) are now being rented out privately for £££ more than a council rent would be, and if the tenants need housing benefit, the tax payer is forking out on average £100 pw than they would if the tenant lived in social housing.

It doesn't make any difference if people who buy through right-to-buy have to stay there for 5 years, it's just delaying the inevitable.

I know irretating it's a crazy state of affairs.

Council houses are not subsidised because there is no mortgate to pay so the costs of owning that house is smaller than that of a landlord. Really dont understand how some people really truly believe that council houses are subsidised. No they are not. LL have to charge higher rents most of the time due to their own costs being high. Why is that so hard to see?

Rent control doesn't mean that rents are ultimately fixed. You can set bands - e.g. properties with xxx sqm in this area can charge between xxx and xxx. This can go up with inflation. There should be regulations as to what standard the properties let out should be like.

When I rented in London, rent went up by way more than inflation, and landlords tended to replace a 5-year-old carpet with my deposit, when that carpet should really have been replaced by the landlord himself. A carpet in rented accommodation is worth nothing after 5 years, and I only lived in the property for 1 year.

DrHarleen

It is subsidised. The money that went into building the property was tax payers money. That money could have been used for other things that would have benefited the wider population, but instead was used to benefit only a few.

Maybe subsidised is the wrong choice of word but my point remains, tax money paid for these houses, selling them off at a massive discount is depriving the tax payer of money which could fund services for us all to use. And the fact that so many of these houses find their way in to a rentiers portfolio just adds insult to injury. Not only have we given away tens of thousands of pounds per house, we're also going to be forking out more in the long term by the increased housing benefit bill.

DrHarleen - they are subsidised when they are built. That is what council house subsidy refers to.
That is why the rent is cheaper than market rents on similar properties.
That subsidy is lost when they are sold via the RTB.

Really dont understand how some people really truly believe that council houses are subsidised. No they are not. LL have to charge higher rents most of the time due to their own costs being high. Why is that so hard to see?

it's quite simple.

A private LL won't charge less rent for a house they have fully paid off. They will charge the market rate.

Put a different way. if the government sells a piece of land to tescos for price X, but sainsbury's offers 2X for the same piece of land, is that a subsidy to tescos? In fact, by your reasoning, the government should just give the land to tescos because it is fully paid off.

The cost doesn't matter. It's the lost revenue that makes it subsidised.

Most landlords I know in London don't let to anyone on benefits. You only get a tenancy if you have a full time job and earn well and have good references etc. London and other big cities is different from other places.

Also there are lots of flats which are pretty nice in most cities which are let out. The ones in awful areas prepared to let to those in receipt of housing benefit are obviously going to be the worst of the housing stock.