Private Tenants – will new rent/tenancy controls reduce security & supply?

[Isitmebut]

The Labour policy to introduce private rent controls immediately, to include mandatory 3-year tenancies, rent increases only in line with CPI inflation and landlords may have restrictions on their rights to rent/sell – can surely only reduce the private rental housing stock.

The basic purpose of a Buy To Let is to receive income; an income to live on, supplement other savings, whatever, but at the very least, the rent has to cover the landlords mortgage funding costs and other known costs like building insurance – and hopefully prudently some cushion against rental ‘void’ periods, when no rent is received by changing tenants, or longer (maybe months) advertising the property.

So whether the UK Base Rate is at a current all time low since the Bank of England was formed, or when the Base Rate and 1-10 year yield curves ‘normalise’ as they eventually will, how can ANY landlord have any certainty/security of their own in ‘match funding’ their mortgage costs versus rent received, if new rules dictate rents can only go up by the CPI inflation rate (that may differ by a wide margin to the 3, 5, or 10-year mortgage rates on offer) - and the landlord is locked into a 3-year Tenancy Agreement unable to do anything about it?

Below shows the increase in the private rental market from 2000, and rise in renting over ownership, since 2005 – if private landlords had any sense of investment self protection, due to those controls and god knows what else is to follow - surely like any investment where conditions fundamentally change, they should sell up as soon as possible?
www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10800343/Labours-rent-cap-row-how-renting-has-grown-in-charts.html

P.S. Surely the time to even consider this is when building 200,000 new homes a year, not scratching around for ideas to fund them?

I think this entirely depends on the scale of their btl business, affordability and reasons for doing so. I let my property and have moved in with my partner, so it was not bought with the original intention of letting. I wouldn't be selling up just because of 3 year tenancies and inability to increase rents. I bought the house on my own and could afford the mortgage out of my wages on my own, therefore have no major issues if the interest rate rises and I couldn't increase the rent. I have not increased my rent ever (it is 15% below market value) and also pay council tax, TV licence and broadband to keep my good tenants. I see my house as my pension (don't have a normal pension)/insurance should anything go wrong in my relationship.

I do think some btl landlords would sell up though, particularly those with housing benefit tenants.

I let a flat, the points mentioned above is what I do anyway. I don't think people's homes should be used as profit making business venture, so DH and I decided to never ask our tenant to leave unless she wants to (she is a good tenant) and to put the rent up only slightly every 3 years.
It is time for the government to do something about regulating the rental market.

Looks like an excellent set of proposals to me.

I'm not sure there's a violin tiny enough.

Something needs to be done about it and I am glad Labour are taking it on.

The UK rental sector is under-regulated compared with most of europe, and many people renting in the UK live with high rents, and insecurity.

Sounds like an excellent idea to me.

Sounds good to me. Tenants deserve more rights. If landlord's don't like it they can sell can't they?
And not all landlords are in it to rake the money In. My landlord hasn't put the rent up in 8 years.

You sound just like my landlord Helen. Wish there were more like you!

My landlord hasn't put up the rent in 5 years. The one before that only did it once, slightly, when she remortgaged, and that seemed fair enough.

I think increasing security for tenants and making it harder for people to buy up properties to let out without doing anything to maintain them is a good thing.

I also think council tax should be always home owner's responsibility - they can charge it back to tenants but continue to pay in void periods.

I find it shocking how unregulated the market is and how insecure it is for tenants. I currently have a good landlord, by luck, but I'd prefer rights and responsibilities like they're the norm in Germany.

On the Sunday Politics I’ve just heard that across the country, rents have not risen faster than inflation and that landlords don’t have to offer a 3-years Tenancy its by negotiated, so what is the difference now?

Furthermore, re my point of landlords ending up receiving less rent than their mortgage cots, Andrew neil suggested to protect themselves, they might hike up the rent at the beginning of the 3-year period, which kinda defeats the object.

If Labour/Miliband is concerned about inflation linked costs to the ‘Generation Rent’ they helped form through the 2000’s, can they confirm that unlike their last 13-years in power, Council Tax will not go higher than inflation – or is this a policy to help cushion the masses to their future Council tax rises?

Here is an example of a fairly typical low band home those on low incomes might be living in;

Council Tax increases Band D from 1997/8 to 2009/10

North East……...£782 to £1,479 an increase of 89%
North West…....£798 to £1,441 an increase of 81%
East Midlands….£705 to £1,454 an increase of 106%
West Midlands….£701 to £1,388 an increase of 98%
Yorks/Humber…..£710 to £1,380 an increase of 99%
London………...….£651 to £1,308 an increase of 101%
East of England..£639 to £1,450 an increase of 127%
South East……...£641 to £1,437 an increase of 124%
South West……..£667 to £1,1462 an increase of 119%

I let three houses, they are homes for three families, I have a good relationship with my tenants. It's a win win situation.

If it is made financially unviable to keep my money invested then I will put it elsewhere. That won't help anyone.

Rents are high compared to mortgage rates because interest rates are so low. If interest rates were higher I would leave the money in the bank.

I am a homeowner and I like this idea. The cost of moving if you can't physicallying move yourself is so expensive.

The tax payer is funding private landlords mortgages. I would rather my council tax fund things for the vulnerable in society instead.

I've commented on the other similar thread that this is all smoke and mirrors, and with one exception there are NO changes.

I do agree that the tax break on BTL mortgages seems wrong. And if I had an alternative for my earned cash, I would not be a landlord. But I'm a long way from retirement and inflation is much higher than savings rates.

if this site is right, here are Germany's tenancy rights and responsibilities. Not too much difference except harder to evict. Now, I wonder what the effect of that is?

www.expatica.com/de/housing/Renting-a-German-property_103803.html

be careful what you wish for.

Does Germany have such a housing shortage as we do?

Someone mentioned Ireland, if the Dublin government, it wasn't that long ago they were bulldozing half complete housing developments as built an oversupply that was holding back the prices of homes that crashed after the 2007/2008 financial bubble came to an end - so no lack of supply there either.

The fundamental problem is that whether homes or energy, no matter how populist a policy may be, it is very both irresponsible and dangerous trying to control the private sector BY ORDERING the private sector to take potential financial losses - when there is already basic lack of housing/rental supply and no 'Plan B' to take up the rental slack, when small private landlords sell, as many will have to.

If the taxpayer funding private mortgages is an ideological problem for the Labour Party, then why oh why through their own policies (or lack of) fail to significantly increased the housing supply and let the public/private rental mix get so distorted?

Especially when there was so much taxpayers money available back in the 2000’s to finance/encourage public and/or private building and a warning (pre EU 2004 citizen ‘big bang’ warning) via a report Labour commissioned, that our housing supply across the public and private sectors, was ALREADY desperate?

The (2004) Barker Housing Review: key points
www.theguardian.com/money/2004/mar/17/business.housing

For a political party who irresponsibly screwed up UK housing supply so royally when the last time we had so many European’s arrive over so shorter period was 1066, to now say the way ahead are policies to REDUCE the private rental stock - when they have still have no idea how to fund/provide the 200,000 a year homes recommended (to Labour) by Barker in 2004* - is both politically perverse and over the next few years, will further fail the ‘generation rent’ they created.

I'd suggest this Rent Control policy is less 'smoke and mirrors' and more like 'shuffling the deck chairs on the Titanic', as each chair slowly falls into the sea, limiting supply.

Making it harder to evict = secure tenancy, i.e. knowing that no one can turf you out with 2 months notice unless they've got a good reason ( apart from tenants defaulting on payments or otherwise breaching contract pretty much the only accepted one is "Eigenbedarf" - when the landlord or their dependents want to move into the dwelling themselves. Tennant's have much more freedom to decorate as they wish (and are contractually obliged to do so at certain intervals) - knowing that you don't have to worry about how long you can stay makes it easier to decide to invest in paint and wallpaper. Landlords also have much stricter obligations re keeping the property in good repair, update it in line with energy efficiency guidelines etc.
There is much less pressure for people to strive for owning their own home, as they can regard their rented home as "home" much more easily. And property prices and rents are much lower compared to the UK.

if you have a fixed-term tenancy in the UK you can't be 'turfed out' without reason. It is only rolling tenancies that have 2 months notice.

the decoration thing is interesting. Tenants here can decorate the place if the landlord agrees, although after a bad experience I'd get it done myself by a professional. If the tenant wants more than the standard magnolia and was signed up for a while, then no problem, it is only paint.

your big point is the lower prices. Perhaps the Germans don't all want to live in one city?

Rolling ones are the norm though aren't they? So far I always had contracts which after the initial 6 months period became rolling.

Tenants want longer Term Agreements, Private Landlords for non payment security and funding options do not tend to like longer than 1-year - there is ANOTHER way to give some tenants ALL of what they professionally want from landlords that was not always currently on offer i.e. longer agreement, better condition inside, better maintenance etc ;

“Pru plans foray into UK rented housing”

www.ft.com/cms/s/0/a35a999e-9893-11e2-a853-00144feabdc0.html#axzz330iRnEwP

“The Prudential is to become the first UK institutional investor to enter the UK rented housing market in recent times, paving the way for the growth of a corporate-backed letting market at a time of acute housing shortage.”

This was an old article, so I have no idea whether they would be scared legless from investing under a new property State Control parliament where anything can be thrown at you - but for those parties offering 200,000 a year new properties but not the first clue how to fund/encourage them - wouldn't institutions from the private sector be a big part of the answer to fund, build, and offer long term Tenancies to tenants?

No government can really improve all services without getting on with, or using, the private sector for some provision of services, especially one with a somewhat reduced £87 billion annual government deficit/overspend - and whose main other option is to increase taxes and hope they get a sniff of the project, rather than disappear down a fat government black hole on the way. IMO