How do landlords selling up impact the rental market?

[Rispa42]

Genuinely curious because it’s been said that one of the reasons the rental market is heating up is because BTL landlords are selling up, and therefore leading to an imbalance between supply and demand. However, if they sell, they’d either sell to another landlord (therefore not impacting supply) or to a FTB who was previously renting (therefore reducing ‘demand’). What am I missing?

I live in rural Scotland. There is a massive shortage currently in let housing. I assume as a result of landlords selling up for various reasons, hardly any new private lets and a massive shortage in social housing.

In our area, a property for sale would most likely become either a second home or a holiday let. £200-£300k would buy you a lovely cottage. If we’re lucky someone would buy it to occupy it, but most likely they’d be a retired couple from a more affluent area. Local first time buyers can’t compete. Yes the new residents contribute to the economy and community etc and are usually very nice people, but essentially it’s a local family put out of their rental home and the property hasn’t then gone to another local family who were able to buy it.

Some HAs are shit especially with older, less efficient housing stock. A lot of people say nice things about ha/ social housing on new build estates though. I’d assume the majority will be new blocks/ estates as easier to maintain/ less unknown costs.

If the buyer plans to AirBnB it then they'll renovate it accordingly. A quick look in my own city finds an AirBnB that's obviously in a council tower block in an inner-city "rough area", going for 70 quid a night in summer, and more in the same area in low-rise blocks.

Are you saying Lloyds Bank, (or Lloyds of London) and JL are buying residential property? Why is that?

@ConstitutionHill there have been muttering for some time at least a few years that JL and Lloyds bank I think were making a bid to be the biggest owners of property in the UK I thought it was unfounded but no it is true if you Google it you will see for yourself and read the yahoo report. They are doing it to make solid returns on their investment

www.johnlewispartnership.co.uk/media/press/y2022/jlp-announces-first-proposed-locations-for-rental-homes.html

Sounds like it could work!

Is that a tax driven decision? I would have thought airbnbs would be a lot more work?

As others have already said, partly it's not about a long term net loss of rental housing its about the time it take for that to happen. For example:

1-landlord gives notice to tenants so can advertise the property empty
2-property is purchased by downsizing retirees
3-retirees family sized home is purchased by a second-stepper
4 -second-steppers home is purchased by an FTB that was previously renting
5-FTBs previous rental home goes back on market as a rental.

Step 1-5 could easily take 18months during which there's no empty rental property to replace the one that was lost in step 1.

The long-term problem though is concealed households - first time buyers are much more likely to be a new household - in other words a household that didn't exist on its own previously. They might have been living in a houseshare, or with parents, or borrowing a friend's sofa or whatever.

They get to buy the home the landlord has sold, but they don't free up a rental home in the process.

Not to mention family breakdown. So many familys split up and then require two properties rather than the one they would occupy as a single family

That’s a really helpful way of looking at it, hadn’t thought of it in that way. I guess the more disruption that will be caused to private landlords, the more of this we’ll see, at least in the short term.

You assume all BTL that will come to the market will be stock that is for the FTB segment. One of the houses we rent is, one isn't. Even the one that technically is, is in London. So it's FTBs with deep pockets. Even if we sell it will have no impact on making affordable homes avaliable. The only way we have thought we could have an impact, is splitting one of the houses into 2 flats which would then be more accessible to more renters/ buyers.

The one house we have that isn't for FTB, is beautiful, we'll probably Airbnb it, literally out of needing to from a financial perspective. Otherwise, we'll probably sell it and invest in Europe so we can get a Golden Visa and be one step closer to leaving this shit show behind. I've even run the numbers on just leaving it empty to stop the ridiculous tax bills as a bit of a FU to HMRC. Most of the possible solutions don't support keeping great homes in the rental market.

Both our rentals are lovely. I am actually jealous. Am desperate for the washing machine I brought for one of the houses. It is better than ours! We are very responsive landlords, who take it seriously. We are not making much any money after maintenance and our crippling tax bills. Any profit is ploughed into the repayment so when the rates go up, it'll soften the blow and we might not have our hands forced to sell and our lovely tenants and their families can stay put. The thought of having to shake up their lives by selling would drive us to keep a grip with the edge of of financial fingernails.

Unless the government take the thumb screws off landlords and stop treating the vast majority like 'slumlords' the better. There is no relief on mortgage interest which is a killer. HMRC see your 'income' as total rent minus expenses, but this doesn't include mortgage interest payments anymore. In very simple terms. The way things are looking my interest repayment will increase 4 fold but I'll still be taxed based on the same rental income, which will definitely leave me with a big question about whether it is worth it. The Government are driving decision-making which doesn't support the need for longer term high quality rentals.

We have always lived hugely under our means. We are both from families that had nothing. So we have a real social conscious about the impact of the decisions we make with these houses. We are not swanning about pocketing oodles of cash. We talk about what the hell we are going to do constantly like most families up and down the country right now.

@Dogstar78 section 24 was first published in 2015, eight years ago.
Why didn’t you incorporate?

EPC C is quietly being scrapped for 2025 and moved to 2028 apparently, no surprise there then.

"Otherwise, we'll probably sell it and invest in Europe so we can get a Golden Visa and be one step closer to leaving this shit show behind."

I have thought of doing the same - but if your seriously considering it you need to move quickly. The EU has decided they don't want it happening and most EU countries have already announced its stopping. The few that are left at the moment are being pressured to follow suit.

I have friends who are landlords who tell me the rental market is crazy with nowhere near enough properties. So they market a house and are inundated with viewings, people write a little biography about who they are, etc and she looks through them deciding who to pick. She’ll cap the viewings at about the first 15 and they all want it. They write sob stories of how this is the 20th property they’ve applied for.

I can only imagine less rental properties available is going to cause serious issues at least in the short term. Prices will go up further and more people will have nowhere to live. 🤷‍♀️

whether long term it means prices come down and more people can buy so less rental properties are needed I don’t know.

The new corporate landlords are building new high density towers so how that pans out is to be seen.

Yes that seems to be fair doesn't it ?

The real reason behind it though isn't to give landlords with low performing EPC time to make the investments. It's to give the corporate "build to rent" machine time to gain more momentum I think. Huge investment is now being gathered to in the city to fund a massive amount of new builds that will be rental only. The government has deliberately engineered the demand for it through policy over recent years. Thats because they don't want the costs and complexity of going back to the old system of building council estates - but they do realise someone has to do it.
This is hopefully going to give the UK the new build numbers we need. Councils and government have consistently failed to get anywhere near targets that were set and then recently scrapped. So it's over to corporate and private equity to build large swathes of new homes exclusively for rent. I think it's a good idea and should re balance supply.

Yes though equally you have family/relationship formation on the other side of the scales - people who were previously living apart move in together.

I guess the trend is toward family breakdown having a bigger role to play. Later marriage too means there’s more demand on housing. Though none of these things specifically answers the question of why landlords selling up creates pressure on private rent - they’re issues of long term housing demand.

Thanks for explaining, I didn't know any details but had seen about the change recently, I was wondering what would happen to the band D, 1930s private rental opposite where I live and if it would just be sold, it's more of a second time buyer house rather than ftb.

I think DS lives in a Manchester flat owned by a corporate landlord and he seems quite happy with it but he has got a well paying job and is single which is completely different situation to a lot of families that have to rent who would want a home rather than a base.

Big corporate Landlords won’t be evicting people because they complain about damp, they can afford to fix the boiler, and won’t be selling peoples homes because they decided being a landlord is just too onerous to bother with anymore, or can’t afford the mortgage payments anymore.
They will be in it for the very long term.

Yes exactly.

You assume all BTL that will come to the market will be stock that is for the FTB segment. One of the houses we rent is, one isn't. Even the one that technically is, is in London. So it's FTBs with deep pockets. Even if we sell it will have no impact on making affordable homes avaliable.

If you thinking about the housing market like a board game with playing pieces (households) moving round the board (homes) and other playing pieces jumping into the empty space, it doesn't matter if you're selling a home suitable for a FTB or not, eventually there'll be enough moves that a home for an FTB comes available. By that logic even a luxury 5 bed coming on the market eventually helps an FTB as everyone in the market moves up a step releasing a smaller home for an FTB.

In practice it's not always so simple. The luxury penthouse in London gets bought by a foreign investor and lays empty most of the time. The cottage in Cornwall gets snapped up as a holiday let or second home.

I can see big corporate landlords operating in London & major cities - but outside of that, no.

I'm from Scotland & the situation is worse here - LL cannot increase rent due to government legislation & cannot serve notice. There's no fixed term tenancies either - the tenant can move in, then give 4 weeks notice at any point.

There's legislation to effectively outlaw airbnb in flats (you will require planning permission & the vast majority are rejected).

So LL are leaving in droves & you cannot get a rental property for love nor money.

I rent out my old flat & have done for 20 years, but will likely sell it when the current tenants move out.

The rental market is a nightmare here; no-one will lease to those on benefits, students & families looking for temporary accommodation whilst renovating.

There's no winners here.

@ProseccoOnTap that souvds like a complete nightmare I saw the picture of hundreds of people wishing to view a property in Glasgow there is no joined up thinking none ! Plus do you honestly think the corporate landlords with house UC claimants ? No I don’t think so it’s an enormous mess