@ThreeFeetTall most investments funds of which I am aware would have all of the same costs as direct investment, plus an extra layer of management fees, plus there is often extra, punitive taxation where a company owns residential housing. With a fund I would avoid the direct personal hassle but I would expect an even lower return than with direct investment in any given location.
Also, it would be very difficult to be confident that the investment fund was treating tenants fairly, since their only incentive is to make money for me and themselves. Adding a layer of abstraction does not mean removing the issues, it just means I do not see them. “Professional” management can just mean maximising short-term revenue and minimising short-term costs. Well-done professional management might be possible on a long-term basis so properties will be kept up well enough to keep good tenants who treat the properties well and pay the rent. But it is so much harder to verify in a fund than with direct ownership. I think it’s more likely to be available from semi-professional private landlords who may own 5-20 properties, live on the income, have personal connections with tradesmen who do solid work at reasonable prices in order to get the steady flow of work, and know the properties personally. But such landlords might be the most likely ones to get put off by a total elimination of Section 21, and they certainly will be the most affected by non-deductibility of mortgage interest, which will limit their ability to grow the portfolio and provide more housing.
No, the financial, social and lifestyle incentives for a retirement investor are, at the moment, just too strongly skewed against investing in decent housing for people who need it, and every time I think about it as an idea, I read something about the situation for landlords in the UK and am reminded why I should not do it.
I do agree with one of the PPs who suggested that rather than eliminating no-fault “evictions”, it would be much better to add a longer delay period so that a person who wants to get their own property back and use it for something else can do so but only after a reasonable delay so that the tenant can find somewhere else. If the tenant is enjoying below-market rent and cannot find anything comparable - well, just as I have no moral obligation to lend money to the government for 2% when gilts are yielding 4%, I also think I would have no moral obligation as a landlord to provide housing at below-market rent for an indefinite duration. Inflation exists, prices for everything tend to go up over time, including for a landlord’s personal expenses, and I think it is entirely fair for rents to rise with inflation or with costs. If wages do not keep up, then it is the wages that are unfair, not the rent. I am a tenant right now due to circumstances, and I will have nothing to say about it if the landlord puts through the RPI annual rent increases to which they are entitled.
Renting property out is risky for the owner, and I think it is fair for the owner of a property that is well-maintained and happens to be fully occupied for the year to earn more than they would on a “risk free asset”, which to be comparable to housing would need to be inflation hedged - so I would use an index-linked gilt as a proxy. If an index-linked gilt yields 1 percent plus inflation, then I think a rental property needs to yield about 2.5-3 percent plus inflation, after all costs including an accrual for the big things that need replacing every 10-20 years, in order to be worth the trouble and the risk.
I do fully support protecting fair treatment for tenants, I just do not support stuffing it to the landlords as a punishment for having worked hard, paid their taxes, and somehow saved enough money to buy a rental property. For example, I do think mortgage interest expense on a rental property should be tax deductible, just as interest expense is for any other sort of business. On the other hand, to reduce speculation and market instability, I would support a regulatory requirement for a stonking big deposit on buy-to-lets, perhaps as much as 40 percent. Having a big chunk of their own money tied up in a property might help a landlord to understand it is a responsibility as well, whereas buying entirely on borrowed money is unhealthy for everyone.
I also think that one useful regulation to protect tenants from being stuck in subpar properties and having no recourse, would be in addition to having a longer standard notice period to get a property back from a tenant (maybe 6 months for a long-term lease), to have a basic set of quality standards that every residential landlord must meet, and to allow a tenant to pay the rent money into an escrow account instead of to the landlord if the standards are not met, with the money to be released to the landlord only if they fix the issues. That would create an accumulating incentive for the landlord to fix the problem PDQ, provided there was an efficient process for settling disagreement on whether it was fixed or not. That could be done by a regulator, funded by a levy on landlords, which would increase the needed rental charges somewhat but which need not be all that expensive if the regulator were pragmatic and efficient. I think that would do much more to improve the quality of the rental offering than making it impossible for a landlord to get their property back.