to think my friend is a benefits cheat

[ljwales]

She has several buy to let properties that are all occupied by people in receipt of housing benefit.she regularly monitors the market and if the housing benefit will ever pay any more money for the properties she puts up the rent as she knows the tax payers will pay the increase. She's done this several times over the last few years, even though her costs have fallen massively with the interest rate drops!

But OP, in answer to your question, I don't think its possible to make a proper analysis of something without proper costs-benefits figures in front of you.

I keep hearing on here about all these profits landlords are making, and perhaps some are (particularly if they bought a long time ago and have mostly paid off their mortgages).

In reality, it goes something more like this: landlord moves out of own house for whatever reason (marriage, work) and decides to rent it. Start up costs: some new furniture, minor redecoration, gas safety certificate, EPC, landlord registration, HMO licence (if applicable, c. £600 a year where I am), agency fees (usually first months' rent).

House leases for a year to working tenants at £750 a month. Mortgage costs £500 (and that's with a big deposit). Profit = 12 x £250 = £3000, minus start up fees, so around £1800 if not an HMO lets say. Pay tax on that at higher rate, after the 15% deduction for wear and tear. Not so much a profit as enough to maintain it and the furniture, if no big costs come in such as roof repairs, cleaning up the mess left by disastrous tenants, etc.. And this doesn't include charging for time, which obviously if it were charged, would mean running at a big loss.

Then you have a void of say 10 weeks, because of timewasting potential tenants messing around. Lets just say its not exactly difficult to avoid making a profit so as to pay tax. Anyone who is efficient enough to run their business, whatever that business is, so as to regularly pay tax, is probably doing so because the alternative is running at a loss, and they don't have the personal resources to carry that loss.

As for all the criticisms of "amateur landlords" - is this not simply because in the UK we are so discouraged from actually doing anything for ourselves that someone setting themselves up as a "property expert" suddenly gains magical powers to do things better? Just look at how badly many council houses are managed and the poor standards they have got away with for years.

SirChenjin Sorry Chandlet - just scrolled down and saw your post. I agree with much of what you say, but rent controls do work in other countries - and the current situation that we have here does not go anywhere near far enough to guarantee tenants live in good quality properties. On phone and trying to hold a conversation with DD as well as type - hopefully getting across the gist of what I'm trying to say!

I know more about the Scottish market, but recently have lived in Germany, Belgium and The Netherlands (by way of explanation). The standards provided in HMOs in Scotland are so exacting (some would say ridiculously so) that they must be the highest in the world. The Scottish Government is concerned about rising rent costs and seems unable to correlate a link between the two. For example, mains operated smoke alarms with 30 minute battery back up in every room (which must be checked monthly), carpets in all rented properties for sound proofing, self closing doors to every room, intumescent fire seals round doors - there are over 35 such requirements, and even the sealant around baths is checked annually in some cities!

Whereas I've only lived with or besides young professional types in Germany, Belgium and Holland, and the standard of properties that most people renting would make your toes curl! Lack of a washing machine is hardly unknown, but damp, filth, barely fitting single glazed windows, hobs that tend to go on fire, dangerous staircases, etc, are the least of it!

Got to run but will pop back later

I do take your point/s. The Scottish Government, whilst having a rather loose grasp of economics at the best of times, is trying to reduce poverty and inequalities, and improve health here - the latest evidence is showing that improving the built environment is a very effective way of doing that (see Bambra et al, Marmot Review etc), so whilst enforcing strict rules (esp re HMOs) might cut into LL's profits it's all to the good imo (I may have just agreed with the SNP for the first time ever ) Too many LL's have got away with murder over the years.

It's not just a single pronged approach though - I'd welcome a review of the current planning legislation which skews things massively in favour of the developer, a ban or reduction on land banking, some kind of pricing review to cool the property market (not sure what form that could take, but I'm sure the clever bods could come up with something better than we currently have), rent controls (sorry!), a requirement to build far more 'starter' homes, more self builds in a better regulated building industry, a ban on HAs and LAs selling off housing stock to people who simply then sell them on at a further profit, a ban on home owners getting LA housing and renting out their own homes for the maximum HB, etc etc etc. The list is endless (in my head!)

keepitsimple0, nice idea, but where is the money going to come from for all these houses?

private sector? government? houses cost money. people will buy them. in other countries companies build houses and then sell them to people. oddly simple concept. we just need government to reduce red tape and get out of their way.

Lol lots of mn are in btl that explains the weird views!

Yes your totally right arsenic, they charge the maximum allowed making this Max the new floor, repeating this over years puts up everyone's rent. Housing benefit maybe a nice idea, but long term its creating dependency and pushing up everyone's rents. Lol at it being a free market!, housing in this country is rigged, they print money to stop it going down in value and many MPs are in the dirty world of btl so have vested interests.

Said friend has hardly any expenditure on them, she buys with long term tenants so no agency fees, they are electric only and has registered as a limited company to avoid paying 40% tax and if it all goes belly up to walk away scot free.

Yes your totally right arsenic, they charge the maximum allowed making this Max the new floor, repeating this over years puts up everyone's rent. Housing benefit maybe a nice idea, but long term its creating dependency and pushing up everyone's rents. Lol at it being a free market!,

while I defended this particular BTL because she was doing exactly what you would expect of an LL (shock! LL trying to get the most for property!), I am virtually alone in advocating an end to HB. If you think an LL using public information that's easily available to get more rent is immoral, the LL isn't the problem. It's HB.

housing is totally broken here. tenants have no security (unlike parts of the US, Canada and Europe where life on rent is plausible in the private sector), and not nearly enough houses are being built.

Lots of people want to end HB! The only people it really benefits are , grubby, private landlords. I think its something like 26billion, yes billion not million that goes into their pockets each year. Imagine the number of flats that could be built with that!

Thanks for your response SirChenjin, I'd agree with most of that.

It's not just a single pronged approach though - I'd welcome a review of the current planning legislation which skews things massively in favour of the developer, a ban or reduction on land banking, some kind of pricing review to cool the property market (not sure what form that could take, but I'm sure the clever bods could come up with something better than we currently have), rent controls (sorry!), a requirement to build far more 'starter' homes, more self builds in a better regulated building industry, a ban on HAs and LAs selling off housing stock to people who simply then sell them on at a further profit, a ban on home owners getting LA housing and renting out their own homes for the maximum HB, etc etc etc. The list is endless (in my head!)

I still don't think you can have rent controls and incredibly high standards. Someone has to pay for them. Perhaps the Scottish Government should take a proper look at what is happening elsewhere - I did notice on its discussion paper on the subject that it appeared to have a very vague notion of discussion points and demonstrated a lack of proper research, while making statements as if they were correct. e.g. when it refers to other countries with rent controls, it fails to mention that they are few and that the EMF is investigating the main country where they are in place (The Netherlands) due to excessive house price inflation (most people there buy because not only is there mortgage interest tax relief but rental properties are so dire, mainly because they are provided by non-profit making undertakings).

I really think in relation to planning, there needs to be some research on the sociological consequences of the current system ie what effect the building of large new build estates has on people and their lives. It increases car use, it probably dis-enables people from some extent to being self motivated in maintaining their own properties, something the legislation also encourages. I do think controlling land banking is desirable. I think we also need to build more terraced homes, use three storeys more and get away from massive detached houses. But since so many have been built lately, its probably too late for that.

I'll have a closer look at their discussion paper - I've had a very quick look at some of the models used in Germany for some work I've done, and whilst not perfect they are at least starting to address the issue. I suspect we'll have to agree to disagree on that one though!

Re planning - there has actually been a lot of good research (systematic review/reviews of reviews) on the built environment, with recommendations for future development. Trouble is, the developers really have such a strong hold here in Scotland (not sure about the rest of the UK) with legislation in their favour, that they can simply pay lip service to these recommendations whilst continuing to build larger scale properties on small plots of land to maximise profits and paying into the LA social housing fund as opposed to actually building social housing - a case of NIMBYism on a large scale. Of course, they argue that the LAs only release small pockets of land and so they have to maximise profits as a result...not quite true though.

Interesting stuff though

don't know why building social housing is italicised

Oh, and totally get the argument against HB.

Now I am going - should be working. Kick my backside if you see me on here again tonight!

No, my understanding (in Scotland) is that Govt can't stipulate what type of housing developers build sadly - the developers submit their plans and as long as it fits into the local plan ie x number of units have to be built over so many years it's effectively carte blanche for the developers to do what they like. The LA can come back and refuse to allow them to build the number of units they have asked for, but the developers can and do appeal, over and over again, until they get what they want, or something close to what they want. They are required to build social housing on each development, but in reality what happens is that the developers choose to pay into a social housing fund - so that the expensive developments are protected and the social housing is built elsewhere and NIMBY.

Textfan I'm also agog at the idea that there's something wrong with building flats, terraces for social housing. There's fundamentally nothing wrong with this type of property. Again in Europe not an issue and often the norm. I wonder if its cultural with terraces/flats making people think of slums/high rises when they can actually be very nice modern properties.

I guess that because so many new build housing estates are being built, that has become people's minimum ideal of what they want in life. I remember not so long ago, maybe 10 years, buying a nice 2 bed semi turn of the century house that admittedly needed work for the princely sum of £20,000. Sold it 9 months later for over £128,000. The work cost me £8000. Yet the local newspaper was constantly full of articles about how that village was too expensive for locals to buy in, in fact they would run stories with lovely pictures of young couples with children standing forlornly outside a 4 bedroom new build detached with sad faces over how they couldn't afford to buy it. Ironically, they would often be joiners or similar, which is exactly the skills set I had to pay for to get the semi fixed up. Crazy.

Scotland still also has sellers' surveys, which makes it more difficult to actually sell anything other than a newish build concrete box. At least England has got rid of them.

Yes, its true what SirChenjin says, zoning means that large developers simply appeal over and over again until they get permission for what they want, and they don't build until they do. Hence you have lovely fields on the outskirts of towns and villages running to wasteland while they wait. Then inevitably they agree to build a sports centre (usually without anything useful like a swimming pool) or make some kind of contribution (how that is different from a bribe I do not know) or pay into a social fund of some kind. But the bits in between the new housing estates, the roads, pavements, etc are often not properly improved to take account of the increased usage, and I said above, in the area I recently lived in (before moving to Belgium) doesn't even have footpaths along these local roads!

The other problem is that individuals wanting to build or extend as a result have it much harder. Its not unusual for individuals to be asked to contribute proportionately what is an enormous sum for them in comparison to a social fund, or to landscape using only very expensive brick or render or finishings, or to have to plant certain types of trees and grasses. Or in fact to be totally restricted from extending at all, while along the road a new estate of concrete boxes with not even a remote connection to the local area is being thrown up.

What we actually have in this country is very piecemeal local governmental control that varies hugely between one area and another, is difficult to find out about and doesn't promote long term investment in healthy, well balanced places to live in.

Here in Scotland we have a system which is open to a lot of abuse - the planning officers can make a recommendation, but it's the local Councillors who vote on the application. What that means in reality is that they can use their vote to get one over on the Councillors from the other party, or get their pals housing application through, or get the development moved to another location in the region, or miss technical legalities in the planning application e.g. because they don't have the necessary understanding of complex business law, and so on. As Chandler says - there is little consistency, and certainly very little consideration to the local infrastructure or any real requirement to build developments which reduce inequalities or contribute to healthy lifestyles etc.

Thatcher deregulated the rental market and encouraged amateur LLs psip

And New Labour threw a blank cheque book at HB so rents soared out of control.

Oh no - how did I miss the Thatcher bit?!

Agree Emma - New Labour did bugger all to improve things, with LLs up and down the country making a tidy profit from HB.

I'm not sure why the phrase "amateur landlords" is bandied about as some kind of insult (usually to make a political point in favour of one party or another).

There is no such thing as a "professional landlord". Unless you require that anyone handling property lettings be a qualified lawyer - that would be the only relevant professional qualification out there.

Letting agents might have to be a member of ARLA, but they are not professionals - there is nothing to stop someone fresh out of school from managing a property letting.

In commercial property, things are far less regulated than in residential. I often think many office buildings should be maintained to the same fire safety standards as HMOs, but some of them have high numbers of people working in areas without windows (fire escapes).

Social housing doesn't have the happiest history in the UK - low standards were rife, virtual "ghettos" developed, and while there were, and are, well maintained areas of council housing, even now, the standards are often very poor (HMO rules don't apply to properties let to families, so no mains smoke alarms for one thing in properties built more than 10 years ago).

Housing benefit is an odd one. Don't most people on the equivalent of benefits in other EU countries have to pay their rent out of their unemployment benefit? But then you have the problem that some would simply -pissitupthewall-- not spend it on their rent. How to persuade landlords to rent to that type of tenant (with no references/bad credit history/no deposit and not presenting well when viewing the property) without housing benefit? Some other system?

Btl landlords are a huge problem with this country and the housing pyramid scheme. Can't stand them.

My friend thought I was crazy to just pay off my mortgage, she's instead just in lots of debts and with 5 flats. Maybe it will work out for her and will be her way to become a millionaire, but ethically it stinks. I'm no leach.

But there will always be a market for private rentals. How will these be provided if not by LL?