Is BTL the reason many people cannot get onto PL?

[Bananallama858]

Simply this.
Had a really interesting chat with someone recently who felt very strongly that the reason it is so hard nowadays for people to get onto the properly ladder is because there are a huge amount of greedy people who are buying properties to rent out. And if they limited the amount of properties that were bought through BTL scheme then perhaps housing prices would reduce therefore making it easier for many people to buy their first home. Would be really interested to hear people's views on this.

Yes, of course there is always going to be a demand for rental properties, and that demand will cover all price ranges from extremely basic to outlandish luxury. But it doesn't take a genius to work out that there will be more demand in the lower price range than at the top.

I agree that a number (no idea how many) BTL landlords are ex council tenants who bought their properties at a massive discount, waited the statutory 3 years and sold them at an eye-watering profit and then fucked off with that profit. Many will have bought an investment property for themselves with the profit and might even, wouldn't you know, have let it to a friend or family member who is being subsidised with Housing Benefit to pay their mortgage.

I mean - how absolutely fucking bananas crazy is that whole situation? But our various Governments have just sat back and let it happen. I can't wholly blame the Tories even though I'd like to.

Round here? On the whole, yes. No flats or 2-beds to buy that would be within the range of FTB but as many as you like to rent. And of course the rent is about £150 a month higher than the cost the mortgage would be.

Surely those of you who dislike BTL don't believe everyone who doesn't want to or can't yet buy should be in council accommodation

Why not? Social housing was originally intended to provide secure, good quality homes for normal working people who couldn't find the deposit for a mortgage. What's so horrific about that?

Surely those of you who dislike BTL don't believe everyone who doesn't want to or can't yet buy should be in council accommodation, and there should be no private rental?

Why not? Singapore, that bastion of free trade and capitalism, manages to house pretty much everyone in government built housing. We don't think outside the box about housing. And we should because the box is too expensive, run down, and not fit for purpose.

SummerInSun - it's really simple, no need to be "bemused".

Rents in some places in the UK are now so high that people living in rented accommodation cannot afford to save for a deposit if they do actually want to buy a house. And house prices also are way beyond the means of average income families - not just in London, but all over the UK.

House prices are high because of a shortage of property on the market (very basic economics). Shortage of property on the market is caused partly (someone earlier on the thread said 20%) by investors buying property to let rather than live in. So one person owns 2 properties rather than 2 people own 2 properties.

It's so obvious, I can't understand what you don't understand.

"If people didn't do this, where would the rental properties that people need to live in while they save for a deposit / live in a group house / try living together as a couple before buying together / try out an area to see whether they like it before buying / live in a different area for a shortish period of time for work"

I agree we do need some private rentals. But the position now is that there are so many that it can be very difficult while renting to save for a deposit - because btl itself has led to an increase in property prices. So even those who are ready to settle are left having to rent privately. And as other pp have said rent is often higher than the mortgage would be (though on the other hand you don't have to mend the roof!) and you have very little security of tenure. Not easy when you have dc at school, for example, and are given 2 months notice to leave.

My sister is an estate agent and when new properties come on the market they have a priority list of landlords who they contact before they put anything on Rightmove. She says they don't have to market the properties at all so easy commission! New blocks of flats are snapped up. Not saying this happens in all areas but is the norm where she is.

"This is partly caused by BTL landlords and people who own second homes they don't live in."

In a way it is odd that second home owners get so little attention in this debate. In some ways their effect on house prices is greater, because at least BTL landlords don't reduce the overall amount of housing available - they rent it out to someone. Whereas the effect of second home ownership is that the second homes are 'wasted space' all the time they are unoccupied - during the week, term time etc. However I assume there probably are far fewer of them than btls.

I think in some areas people in their 20s and 30s have been caught in a bind of high rents which prevents them ever saving for a deposit., so they have to go on renting. Meanwhile the fact that there is high rental demand means that house prices are sustained well above the old income multiples - making it even harder to save for a big enough deposit! As a pp said, btl creates and maintains its own demand.

And as another pp has said there is a straightforward solution - tax changes to push the majority of btl ers out of the market so that they sell, leading to a fall in house prices. Yes we need some private rentals but not to the extent that people who in the 1980s and 1990s would have been able to buy now have to rent. BUT the big problem with this is that in a number of areas a sharp fall in house prices would leave large numbers of house owners in negative equity. And even where prices have increased hugely, buyers in the past two or three years would be in negative equity. So there is in fact no simple solution!

"when new properties come on the market they have a priority list of landlords who they contact before they put anything on Rightmove"

That is quite eye opening! And I suppose the landlords are also desirable buyers as they have no chain, and presumably fairly reliable finance - no risk of pulling out because of mortgage problems. Not surprising that owner occupation has fallen so drastically in the 20-30 age group. Eventually as renters become the overall majority in the population they may have more influence over government policy I suppose! And tbf, there have already been some changes to taxation which may make btl less profitable. (Cue many btlers coming to explain that it is still easy money, for them, and an equal number to explain that they make hardly anything. In which case why do it, you wonder?)

I don't understand the argument that high prices are caused by an insufficient number of properties. If this were the case, many many more people would be homeless. There are plenty of properties. It's just that now instead of being bought they are being rented privately.

I want to sell to a ftb but they are only able to make low offers nowhere near the asking price
You obviously don’t want to sell to a FTB that much Snazzygoldfish or you’d accept one of those low offers! Basically what you’re saying is that FTB can’t afford your asking price. Which isn’t the fault of the BTL who can afford that price. Even if the BTL didn’t exist, the FTB still couldn’t afford the asking price.

Imo BTL is sustaining the market to a certain extent because, as the above proves, they’re buying houses at prices that FTB can’t afford. If there were no BTL then Snazzygoldfish would have to accept a lower offer or be unable to sell. I don’t think they’re sustaining the entire market though, for the simple reason that BTL mostly buy lower end properties. So they might be propping up the bottom end of the market but that’s all.

A far greater issue imo is the deposit required to get a mortgage. My mortgage costs less than my rent used to but I was completely unable to buy for years because I didn’t have a deposit. As soon as I inherited a small deposit I was able to buy and I actually pay less per month now.

NoLeopard I understand that this happens with overseas investors as well - they're given the opportunity to buy the luxury apartments before they go on general sale. Property is now built for investment purposes rather than to sell to owner occupiers.

"I don't understand the argument that high prices are caused by an insufficient number of properties. If this were the case, many many more people would be homeless. "

Yes I think there is something in that. However there may be a 'hidden' shortage of property - for instance the number of people living at home in their twenties, or in house shares, instead of having their own, say, 1 or 2 bed place, may have increased over the past 10 yrs. So there may have been a reduction in available floorspace per person!
But I agree that the other issue is that btl ers can outbid owner occupiers. Though I suspect it is area-dependent - a recent thread did suggest that outside the hotspots, it is still possible for people on average ish incomes to get on the ladder. On joint incomes though - would be more difficult on a single income, but I think that has always been the case.

@ChicCroissant the 1980s saw changes to Landlord and Tenant law, bringing in the AST and it spelled the end of lots of long term residential lettings. It was all part of the then Conservative government's policy of encouraging home ownership. My grandparents rented the same house for about 40 years before then. Hard to imagine that being the case now.

House shares, HMOs and taking in lodgers, often friends, have all increased in number in recent years. It's the only way for a lot of people to afford the rent or the mortgage and have a life.

@summerinsun I think what causes a lot of ill feeling towards private landlords is that they are lightly regulated and don't have to be very good and can charge what they like due to no rent controls. Coupled with the precarious nature of renting in England, where tenants can be evicted just because the landlord wants to, it means that there is a grossly distorted balance of power between landlord and tenant that just doesn't happen in the same way as other countries. Renting is expensive, insecure and often involves substandard properties. This is why landlords are disliked.

I think this is changing though. So many more households are now renting, and renting privately, compared to thirty/forty years ago that as a matter of policy the government is looking to regulate. It's already started happening, because of the number of people involved and crucially because these people are no longer the feckless underclass but professionals into their thirties, and the government knows that middle class voters know this and that it's a priority to sort it out.

I don't think we'll ever go back to the heyday of owner occupancy in this country - that ship has sailed unfortunately and the postwar conditions that allowed it, along with nationalisation, political consensus, a fairly equitable distribution of wealth etc, will in time come to be seen as a blip.

However as we return to being a rentier economy we will see more and more of the measures that we had before when many people also rented privately - proper tenure, rent controls and so on. All the major parties are talking in these terms now.

"However as we return to being a rentier economy we will see more and more of the measures that we had before when many people also rented privately - proper tenure, rent controls and so on. All the major parties are talking in these terms now."

Interesting Kally - it may be that as governments bring in changes to tenure, rent controls etc, being a landlord will become so much less profitable that btl ers will sell up, house prices will fall, and we will move back towards the owner occupation levels we had in the 1980s and 1990s - not that long ago after all. So the current position may be the blip!

I think the difference now (from early rentier economy days!) is that we have a combination of universal suffrage, and a generation of people who still expect to be able to buy, as their parents did, and are currently frustrated in that aim. As that group gets larger, democracy should in theory mean their demands are heard and acted on! (over simplistic I know, but ykwim)

I don't understand the argument that high prices are caused by an insufficient number of properties. If this were the case, many many more people would be homeless.

If houses are being bought by BTLers then there are less houses available for anyone else to buy, even though the number of actual houses in existence stays the same.

Most people looking to buy aren't choosing between that and homelessness; they're choosing between buying and renting, or living with their mums.

True midge - or house sharing for much longer than people used to hope to!
Though i think it is true that just promoting housebuilding won't necessarily help to increase owner occupation back to previous levels. It would have to be combined with ensuring that it doesn't all get bought by landlords instead of owner occupiers. (Not just tax changes but also addressing the point another pp made that sometimes property is offered to landlords for sale and never marketed to owner occupiers! Not sure how widespread that iis but it obviously makes it harder for o/os.)

Kally - thanks for endeavouring to give me a sensible answer, though I think that's an argument for tighter regulation, not a reason to attack people who own buy to let's who are perfectly decent landlords.

To whoever disagreed with me upthread saying it's all so simple and if there were no private landlords then all that housing stock would be owned by buyers, you haven't explained where the rental stock for those that want to rent would come from without private landlords?

@soonerthanithought hmm maybe, but I'm not convinced. The property market is geared around investment - structurally, that's how it is. Not just BTL landlords but buy to sell, buy to leave, buy and hang on in case moving in with your boyfriend doesn't work out, rent out to pay nursing care etc. The entire market is built around a different model to that of fifty years ago. Also, if private renting really were affordable, secure and the housing stock was good quality, there will be less of a need to buy, including for the middle classes. After all, prior to the 1960s the middle class rented.

@summerinsun agreed that the real fault is to do with policy failure but I can understand antipathy towards the people who are seen to exploit it.

Interesting Kally. Yes, I agree the structure of ownership has changed massively - availability of financing has made a huge difference.

Though history of home ownership in UK is interesting - even by the 1930s around a third of households owner occupied, so it was not a solely upper class prerogative . And not all owners were 'middle class' either - I have read that there were a significant number of working class,/artisan owners. (building societies!!) So I suppose what I am saying is that in the UK, there may be a strong enough will to owner occupy that political parties will eventually have to respond! Though you may well be right that we won't return to the 70% ish figure of late 1990s/early 2000s.

Anyway, history aside! even in the future a reasonable number of 'regular folk' will be able to buy - inheritance and bank of mum and dad will enable that in the next couple of decades. I think that is what will keep owner occupation as an aspiration - if you see your friends and colleagues buying, you want that for yourself. Whether that aspiration will translate into the manifestos of the political parties we will see, but they do all seem to realise the problem - hence the current government's btl tax changes, and the opposition looking into land reform/tax changes etc.

The issue isn’t BTL, it’s a simple problem of supply and demand. The population is growing significantly because of immigration and the higher birth rates of people who have come into this country and housing stock isn’t growing at the same pace. The reasons are very simple but solutions aren’t as easy to find.

The problem I have found is FTBs themselves.

I had one flat for sale.

1 bed garden flat in a very nice area of N.London.

It was up for under £130,000. (Quite a bargain price) No one went near it.

It needed new kitchen and bathroom and a redecoration.

I bought it. Spent money doing it up, rented it out for a year then decided to sell it when the tenant moved on.

First FTB spent about £1500 on a mortgage arrangement fee, then there was solicitors fees and surveyors fees etc. Probably around £2000 in total.

After 3 months and 1 week before exchange he pulled out citing that he was scared.

Started again. The next ftb after another 3 months pulled out the day before exchange.

3rd ftb pulled out after another 3 months on the morning of exchange. He said he thought if he saved a bit more then he could afford a bit better.

After 9 months of messing around I stuck £20,000 onto the price and it was snapped up by a btl landlord who exchanged and completed 5 days later.

FTBs had their chance but ultimately didn’t want to buy.

4 years later the place I notice is up for £60,000 more.

I wonder if the guy who thought he could afford better if he saved more has put away £80,000 in the last 4 years

when new properties come on the market they have a priority list of landlords who they contact before they put anything on Rightmove

I can understand that. Given how much hand holding the FTBs I have come across need, to sell straight away to a reliable buyer is huge.

House sharing and taking in lodgers and HMOs are not new things.

Most of our friends who bought in the 80s had people lodging with them to help pay the mortgage.