Straight talking from the Editor’s laptop:
The last twenty years or so has seen an explosion in property prices, and the buy-to-let rentals market. Quite a few people have got very rich indeed, like infamous landlords Fergus and Judith Wilson, who built up a property empire of over 300 homes, before deciding to sell up earlier this year. More typical perhaps would be a landlord with say three or four properties, who doesn’t make much profit from them, but can see that the way houses keep pace – or beat – inflation, means bricks and mortar is a better pension plan than anything a local financial advisor can offer.
But I think that opportunity to provide a substantial nest agg for yourself and your partner to live on in your latter years is going to end soon, and the reason is clear; the government wants to take control of the private rental market, without actually owning the buildings.
In essence, it wants to grow the taxation revenue streams from property, but only on condition that HM Govt gets a bigger slice of the pie than the actual landlord, despite the owner taking all the risk as regards maintenance, bad paying tenants and any problems arising from the social engineering experiments that local councils like to play by using tenants as guinea pigs for their pet University theories.
REGULATION NOW IS PRO-TENANT, ANTI-LANDLORD
Before you start, I’m a tenant, not a landlord, just so you know this isn’t a rant from some Rachman-like character upset at profits being dented. My feeling is that the tide has turned in government circles, and regulations will now dripfeed into the prvate rental sector until small-time landlords give up, and sell out to bigger players.
Consider the evidence;
In March 2019 new legislation came into force giving tenants the right to sue landlords over things like bed bug infestations, or problems which `materially affect the comfort’ of the tenant. That could be something like a draught excluder tape coming adrift from the back door. The landlord has three days to rectify such problems – not easy if you only own a few properties, work full-time and are away on holiday that week when the tenant complains.
As from June, tenants don’t pay fees to letting agencies to apply for a tenancy, or a fee to hold the deal while credit checks are carried out, plus bonds are capped at one month’s rent. It’s easy to say landlords can jack up rents to cover the extra costs they face to use lettings agents, but the reality across most of the UK is that rents are capped by the affordability rules which underpin credit checking – just like a mortgage applicant, a tenants must have no CCJs, high income vs monthly rent, low outgoings etc.
So, if a landlord sticks another £50-£75 a month on the rent in say Bolton, Hereford or Leicester, they may find that tenants simply keep failing the affordability tests. Result; empty properties, bank forecloses on buy-to-let portfolio, landlord exits the game and big company buys the housing stock. You get the picture yet?
After Grenfell, the government is also seeking to give tenants in apartment blocks a `stronger voice’ when it comes to fire safety and building regulations. Understandable given the politics surrounding the tragedy, but what extra insights can tenants with no qualifications or experience offer compared to fire service staff, building inspectors, insurance claims assessors or construction specialists? We may be in a position in the future where tenants are suing apartment owners for failing to test fire alarms, or having electrical appliances tested, even though the tenants have denied the landlord – or their agents – access to the flat.
My advice to anyone with buy-to-let properties is to sell immediately and look for other ways to build up a nest egg. The government plan is to make your asset into a 24/7 business, so that you have to outsource more work to third party contractors to meet new regulations. You’ll also spend more time managing people problems in the future too, as tenants feel the chance of a Corbyn victory is close at hand, and that will embolden those who wish to see private landlords `shamed’ somehow via social media.
It’s going to be a bumpy ride for landlords as the BBC and other media outlets band together to paint property entrepreneurs as `leeches,’ or people who are essentially throttling the UK economy. Yes, it is going to come to that level of name-calling, that type of class hatred. Sad times ideed.