There should be an upper limit on rental prices

[HereLiveIAmNotACat]

Am I the only one that thinks the property investment industry is horrendous and shows how awful, greedy and selfish mankind can be? Surely there should be laws around this? Or caps on the maximum profit a homeowner can make per month relative to any mortgage on the property?
How can it be right that rental prices are ludicrously above mortgage prices purely for the homeowners to benefit from someone else paying off their mortgage and make a pretty penny on top.. then moving on to their third, fourth houses etc..meanwhile renters are stuck forking up more than they can afford with little chance of ever making it onto the property ladder due to the impossibility of saving up whilst paying rent.
Unless you were fortunate enough to have a property in the 80s before inflation/money from family you’re screwed really.
Just means less and less rental properties being available. The rich getting richer the poor getting poorer. And it’s always ‘oh it’s brilliant we’ve paid that mortgage off and are making such and such per month renting out..we’re now moving to a much larger house in a much nicer area’ as if that’s something to be proud of?!

(Yes- bitter renter here)

Lethargic actress.......because there is a massive shortage of family sized council properties...we all agree it is a big problem.
Social housing is not free as you said BUT it is noticeably below market rent and secure...and because of that is very sought after.
It costs a huge amount in tax to subsidise council housing and as a taxpayer l would like to see council houses and flats used effectively ie going to those who need it most.
A single person has less need of a three bed, than a single mother of three children or a low income family.

@vivainsomnia

All the desperation and twisting to justify forcing poorer people to pay for the luxuries of the rich is sickening. Just what we expect from perfidious Albion: but sickening nevertheless No justification, just facts, where are yours to support your claim? Don't bother looking, you won't find them!

Which particular claim did you have in mind?? You can go on right move or zoopla to see how house prices went up, tripling and quadrupling over a few years at the turn of the millennium. You can check when buy-to-lets were encouraged and really got going easily on google, and easily see that wages at the time did not similarly go up. Or you can look up any of the myriad of stories warning about growing generational inequality and how only the bank of mum and dad can help people buy housing now.

It is a fact that landlording is a fundamentally unequal relationship that requires someone willing to take money from someone else's work to fund their acquisition of assets, and that the person supplying the money eventually walks away with nothing, while the landlord keeps the asset and any profit extra. That's what it is. That's why you do it.

Also, the fact of the British Empire and the exploitation of the working classes it required is fairly well established. It involved long working hours in poor conditions with few breaks, holiday or sick pay, or other rights, some of which are beginning to seem familiar. Some fool tried to claim that that hadn't existed earlier as well.

@ParsleySageRosemary I think that was the Industrial Revolution to be fair. Though a lot of the wealth of the industralists was derived from cotton farmed by slave labour and imports from various parts of the British Empire. The positive outcome of the Industrial Revolution was the founding of the labour party and trade unions, and workers gradually became emancipated and got more rights. This was also against the backdrop of the fear of communism i.e. the British aristocrats were very shaken by what happened in the Russian Revolution and they certainly didn't want to be shot in a cellar like dear cousin nicholas. So they said yes to more rights for the plebs and then the post war consensus was that of solidarity and rewarding common people for the sacrifices in the war under the heavy shadow of the Cold War (with the constant reminder that if the common people did not have a decent standard of living, more might go to the communist cause)It is no surprise the gradual decline of Russia and the communist bloc coincided with Reaganomic, Thatcherism and Neoliberalism in general; when there is no threat of communism, there is little need to appease the little people, it is better to convince the workers they too can be bosses. While communism is a failed system, it was useful in the sense that it did remind those in power of what might happen if they let inequality get out of control. In a world where capitalism is the default system, there is no incentive to resolve inequality. I suppose populism is the new communism, but those in power have unfortunately embraced it like in the UK re Brexit.

@ParsleySageRosemary House prices went up when the central banks all over the world decreased interest rates, making investing in housing an attractive asset class. If you think that 15% interest sounds bad on your own property, can you imagine how it is like for a landlord with 10 of such mortgages. A lot of the landlords on these threads would be bankrupt if interest rates shot up like that. They also would not be landlords if interest rates today was 15%.

However, it is very difficult to wean the world off low interest rates when that has been the default since the last financial crisis. Start a thread here about higher interest rates and everyone who is an owner occupier will jump on it and accuse you of wanting to steal their home they worked so many years to afford. My own interest rate is 2.05% and the maximum I can afford is probably 8%.

@ParsleySageRosemary I wouldn't say that landlords don't provide you with anything, they provide you with a place to stay. You don't think hotels profit off the income derived from your labour and leave you with nothing do you? They are also businesses who take your money, possibly to invest in more hotels.

With a rental, you
(a) get a place to stay
(b) no financial risk; when you buy a property, you have to put down tens of thousands of your hard-earned money and possibly lose all of it if you can't pay the mortgage. My deposit was £70k or almost all our savings at that time. If you rented and couldn't pay the rent cos you lost your job, you could move out and your savings would be intact. if you were a savvy investor, you could probably outbeat the returns on most properties in england. I don't know how to invest which is why I bought property.
(c) flexibility. Want to move country or city for a job change? You can do so if you rent; if you own, you have to rent it out and if you can't find a tenant, you would be paying your own mortgage plus your rent in the new place- thats why a lot of people don't do it and hence they probably lose out in the job market. my DH has rejected offers to move to frankfurt cos we are tied to london due to our flat .
(d) I am sitting in my home office with no heating as our boiler broke down. I have to pay for all repair fees. I probably have to replace my boiler at some point at the cost of £2k. If you are a renter, you don't have this.

The main advantage of buying is
(1) stability- invaluable if you have kids. it is why I bought but the flipside of stability is that you are kinda stuck there. I bought just before the pandemic, and if I was a renter, I would have loved to move to somewhere pretty outside London for a few months just to try it out but not as a long term thing. Or perhaps even rent in a European city with DH and work remotely. I couldn't do that with a mortgage to pay and I don't have the resources to be a landlord.
(2) Place to live for free for retirement- in all honestly, if you live anywhere down south, you could probably buy something small with cash in your 40s and 50s and then you would have a free place to stay. The main areas where people really struggle to buy are in London and the SE anyway. So why be indebted for the rest of your life and take on financial risk just to have a place to stay in retirement

The rent we charge is more than the mortgage, yes. Having paid tax, maintenance, fees, and taking into account unoccupied time between tenants (during which time we also pay the council tax), the profit we make per month covers a meal out on the weekend and perhaps a takeaway pizza on a Wednesday.

Where we'll make serious money is when we eventually sell it, in ten years time - which is a gamble, of course - and even then we'll pay tax on the capital gains - that is, on the increase in value during the time we weren't living there ourselves.

So, for us, this way of investing for the future is more acceptable than, say, playing the stock market or buying gold. Yes, we hope to make money from it. But we're not doing it off the back of the tenants. We're just providing them with somewhere nice to live.

I said to our current tenant, "Why would you rent a house like this, rather than get a mortgage and buy one?"

It would not be fair to tell you their precise answer, but what it came down to was that they had other priorities, and so renting our house was what they wanted to do, and what we wanted to have them do. Everyone's happy.

You sound like a decent landlord and it’s nice your tenants are there through choice. I’m glad you mentioned that you’re likely to make serious money off it in years to come. Something very few landlords on this thread seem to recognise!

The profit you (not PP directly but any landlord) get at the end of it is paid for entirely by somebody who receives nothing.. i find that concept bizarre and in most cases abhorrently unfair.

If you look on rightmove you will notice the general decor and upkeep of rental v for sale houses is miles apart. Most landlords don’t care about the tenants or upkeep they just care about the profit.. an unfair system

What do you mean it’s paid for by somebody who receives nothing?

Of course renters receive something, they get a place to live!

They often get to live in a place of their choosing that they want to live in but can’t afford to buy in. They get the benefit of someone else taking the financial risk. They get to not worry about the cost of maintaining the roof or the boiler, or upgrading the energy efficiency, or any of the other costs.

YABVU. Our mortgage is cheaper than what the market rent would be BUT we spend so much on upkeep. Yes, we will benefit from capital appreciation and paying off our mortgage but owning is without a doubt in my mind more expensive than renting. Maybe different on a new build 🤷🏻‍♀️

@LethargicActress

What do you mean it’s paid for by somebody who receives nothing?

Of course renters receive something, they get a place to live!

They often get to live in a place of their choosing that they want to live in but can’t afford to buy in. They get the benefit of someone else taking the financial risk. They get to not worry about the cost of maintaining the roof or the boiler, or upgrading the energy efficiency, or any of the other costs.

A tenant pays £800 per month for 35 years renting (a total of £336000) at the end of the 40 years they receive NOTHING.

A homeowner pays £800 mortgage for 35 years (a total of £336000) at the end of 35 years they have a house they can sell for (likely) more than the £336000 so they have money or own the house outright. Ideal.

A homeowner that lets a property out has someone else pay their mortgage and some, at the end of 35 years they still get the value of the house plus the profit they have made, the tenant gets nothing.

I’m not sure what’s hard to get? And you think the tenant is ‘benefitting’ by not having the worry about the cost of a boiler etc?! Really?!

@isthisit83

YABVU. Our mortgage is cheaper than what the market rent would be BUT we spend so much on upkeep. Yes, we will benefit from capital appreciation and paying off our mortgage but owning is without a doubt in my mind more expensive than renting. Maybe different on a new build 🤷🏻‍♀️

You think owning is more expensive than renting as you’re including upkeep in the expenses. But you recoup the cost of the mortgage/upkeep when you pay it off and sell up. You’re paying upkeep for yourself as it’s you who will see that money back. A tenant gets nothing back.

Not to mention the state of the majority of rentals..

@HereLiveIAmNotACat

I bought in 2019, Mortgage £1k per month (5 year fixed rate), deposit of £58,800- 15%.
the market rental for my flat is £1400-£1600. Service charges are £150 per month.

£1400-£1150=£250.

I am paying £1k mortgage per month, plus overpaying another £1k to reduce my mortgage. Ok, so at the end of 5 years (end of my fixed rate), i estimate my mortgage balance to be roughly 250k based on Martin Lewis mortgage overpayment calculator.

My interest rate is now 2.05%. Great if interest rates drop. But if they rise to 5%, my mortgage would be £1262 so if you count the service charges, it would be the same as rent. If they rise to 6%, my mortgage would be £1425. The fact that it could rise by so much is not completely crazy given that the base BOE interest rate was 5.5% in 2007 (and mortgage interest rates tend to be higher).

It would be astonishing if the interest rate does not rise in the span of a 35 year old mortgage. Certainly it would be unprecedented. I am not saying it can't happen but if you look at history, there is a reason why banks stress test any mortgage applicants to check if they can withstand rise in interest rates. This is a risk people take when they buy their homes, that their mortgage could become unaffordable. If a renter's rent is unaffordable, they can downgrade, it is painful, but yes it can be done. If a home owner can't afford the mortgage, they would have to sell the house (and usually if there is a sudden interest rate spike, there would be plenty of people who also can't afford the mortgage and would also sell, plus the potential buyers can't afford to take out mortgages either). If they can't sell, the bank would foreclose and they lose everything, all the equity they had in the house. it is game over. If its not your primary home, the risk is even greater as BTL mortgages tend to have higher interest rates.

Of course an interest rate rise would be good for home owners with a lot of equity and first time buyers as it means they can buy/ move up the ladder more affordably but the flipside is that they could lose everything if they can't afford the rise in their mortgage from higher interest rates and are also in negative equity. There is therefore no guarantee of recouping your deposit or even making a profit. Yes if they stuck it out for 35 years, they would probably make a profit, but a lot can happen in 35 years.

@onlychildhamster

Thank you, your post is interesting and I can see your viewpoint entirely.

I still think it isn’t a fair system: the risk is yours to take and the likelihood is you will recoup some, if not all/more than the money you put in. You have a good chance of that happening, a renter has zero chance from the onset. There’s no good outcome for a renter, their money is gone forever.

Renters also rarely have the choice to downgrade if they cannot afford rent. Estate agents have strict rules with credit checks/guarantors/minimum incomes plus deposit/holding fees, it’s not easy. With inflation increasing the rate it is it’s unlikely a cheaper downgraded property would even be found.

I really don’t know the answer that would fix this, but in my mind it would make sense for something like homeowners being responsible for at least 50% of their properties costs. The renter to pay the remainder 50% for fees for using the property. At least it would seem a little more fair and be a deterrent to multi-home BTL landlords using property as investment with no understanding/ lack of empathy towards the tenants being exploited.

A tenant pays £800 per month for 35 years renting (a total of £336000) at the end of the 40 years they receive NOTHING.

A homeowner pays £800 mortgage for 35 years (a total of £336000) at the end of 35 years they have a house they can sell for (likely) more than the £336000 so they have money or own the house outright. Ideal.

The answer to this paradox lies in thinking about why the renter didn't do the obvious thing and choose to pay £800 a month in mortgage and achieve such a much better outcome at (apparently) no additional cost!

@Tabitha005

Housing should never be for profit, in my view - ever.

A friend is currently fighting her landlord who wants to increase the rent by 13% - without having done anything to rectify the fact the property is uninsulated and therefore unheatable to anything above 12 degrees. I strongly suspect the EPC has been rigged to 'pass' the property on a minimum rating. Landlords like this provide nothing in the way of value or responsibility to their tenants and need stamping out.... but, of course, when they're enabled by unscrupulous letting agents who, similarly, couldn't give a fuck, they're afforded a certain level of protection.

But if there's no profit nobody would bother to rent houses out.

Blame the banks for allowing the by to let mortgages, I've only just found out they can be interest only. Rent is crazy.

@HereLiveIAmNotACat I don't really understand your solution. For me the only solution would be state controlled housing a la Singapore- state built subsidized homes for rent and for sale to individuals who can't otherwise afford private housing (in Singapore this is 85% of the population ranging from poor to upper middle income; basic 3 bed flat of 1000 square feet to upmarket condos with tennis courts of swimming pools all built under state auspices). Singapore has a 92% home ownership rate as a result, my dad is a landlord in Singapore but does commercial BTL as it's more profitable than residential BTL.
It is very hard to regulate the private rental market other than stuff like banning no fault evictions and unreasonable fees. Mainly because someone has invested 20% deposit or tens of thousands in a house; if the tenant ruins the house or refuses to pay rent and it's hard to evict, that's the money gone down the drain if the rent is not paid and the landlord can't pay the mortgage as a result. The bank would not allow that; they are the ones extending the mortgage and they want to ensure that the mortgage would be paid reliably; they would lose money if they have to foreclose on the property. Banks were the reason why many BTL landlords could not rent to social tenants as it was prohibited in their mortgage. Unless you ban BTL, but I know of no free country which has done this. You can ban companies owning houses, you can ban foreign investors (New Zealand has done this but the house prices are still crazy), you can levy high taxes on BTL (UK is doing this with limited effect; everyone knows you can just form a limited company and that saves on tax), you can have lots of rules for BTL landlords like in Germany (I have rented in Germany, supply is a problem). All these restrictions have limited impact if house prices stay high and interest rates are low. People buy houses rather than have it sit in the bank. And then they will rent it out.

Folk like me, forced into early retirement need that money, and at £610 a month, minus agents fees, it’s crap!
Yet where it is and condition, it is what it is, rent not gone up for yrs too

@bloodyhoodedeyes

Blame the banks for allowing the by to let mortgages, I've only just found out they can be interest only. Rent is crazy.

Any mortgage can be interest only.

To the poster who said housing should never be for profit. What about food, electricity? These are all essential but totally for profit. What’s the difference with housing?
And to the op who said that the renter gets nothing at the end, that’s a completely diff argument than saying rent should be capped. Renting is renting, there IS nothing at the end. Same as if I hire a car for something or use some office space. That’s how it works and that can’t ever change, we hire things out for people to use for a time, whether that’s short or long term. Rent being capped is a completely different argument

@IDontThinkSoNo I guess it's very easy to increase the supply of food through importing and everyone has different tastes so it's easier to economize. Electricity has regulated price caps. However it is not easy to increase the supply of housing. You cannot force a pensioner in a 5 bedroom house living alone to sell up and move to a smaller property. When you try to build some new housing in a nice suburb, the local NIMBY suddenly develop a fond attachment to the local field, it is where they proposed to their wives 40 years ago so under no circumstances should it be built on. The Tories have lost by elections over this like in amersham and chesham. Housing can also be easily bought by foreign investors who leave it empty; no overseas investors buy up all the artichokes in Sainsbury! So given the supply of housing is finite esp in the areas people's jobs are in, people get angry at BTL landlords when they are only one part of the problem. There are more bedrooms than people in London, and this isn't because of landlords. It's because, as mentioned upthread, the rise of single person households and the fact people are living much longer.

[quote onlychildhamster]@IDontThinkSoNo I guess it's very easy to increase the supply of food through importing and everyone has different tastes so it's easier to economize. Electricity has regulated price caps. However it is not easy to increase the supply of housing. You cannot force a pensioner in a 5 bedroom house living alone to sell up and move to a smaller property. When you try to build some new housing in a nice suburb, the local NIMBY suddenly develop a fond attachment to the local field, it is where they proposed to their wives 40 years ago so under no circumstances should it be built on. The Tories have lost by elections over this like in amersham and chesham. Housing can also be easily bought by foreign investors who leave it empty; no overseas investors buy up all the artichokes in Sainsbury! So given the supply of housing is finite esp in the areas people's jobs are in, people get angry at BTL landlords when they are only one part of the problem. There are more bedrooms than people in London, and this isn't because of landlords. It's because, as mentioned upthread, the rise of single person households and the fact people are living much longer.[/quote]
I don’t disagree with what you’re saying. My point was really that someone said housing should never be for profit. loads of life essentials are for profit and we don’t have an issue with that. I agree that renting is problematic for a number of reasons but completely disagree that housing shouldn’t be for profit when pretty much everything else in the world is, including food.

I honestly don't know why people would want to be landlords. I worked for a lettings company and some tenants are absolutely horrible, you never know what your likely to get or if they'll treat the property with respect.

What is OP's view on landlording and living in?

I have a lodger that gets me extra money. I don't need it to pay my bills but it gives me extra money to overpay the mortgage and save. Lodger pays less than renting a whole property but has fewer rights as a tenant and can be evicted easier. I've effectively doubled the occupancy of my house as otherwise I would be alone in a 3 bed.

What is the morality there? Leaving aside whether I am a good landlady or not (you only have my word that I am).