End the War Against Landlords in the UK

 

war against landlords. rented property with a judge's gavel

Join iHowz on a gripping exploration of the ‘war against landlords‘ as we delve deep into the heart of a crisis gripping the UK’s rental market. In a landscape where landlords are fleeing in droves, leaving behind a trail of consequences that reverberate through society, we uncover the intricate web of factors driving this exodus. From the relentless barrage of legislation aimed at landlords to the emergence of offshore mega-landlords, the implications are dire. With homelessness on the rise and social housing in short supply, the stakes couldn’t be higher.

Index of Content

Introduction to the War on Landlords
Exodus of Small Private Landlords
Unveiling the Housing Crisis: Britain’s Looming Challenge
Urgent Calls for Action: Navigating the Perilous Path Ahead in Britain’s Housing Crisis
Forecasting the Future: Projections for 2030
Housing Crisis Fallout: A Closer Look at the Impact on Renters, Homeowners, and Landlords
Overlooking Shelter: The Legacy of Neglect by Housing Ministers
From Interest to Indifference: The Evolution of Housing Ministers
Legal Realities: Unbalanced Landlord Legislation vs. the Tenant Principle
Landlords Confusion Amidst Shifting Energy Standards
Fluctuating Mortgage Rates and Changes in Tax Regulations reduce Profitability
The Rise of the Mega-Landlords
Private and Offshore Equity Firms Impact on the UK Housing Market
iHowz’s Blueprint for Housing Reform: A Call to Action
Navigating the Battlefield: Addressing the War Against Landlords

Introduction to the War on Landlords

The war on landlords in the UK is not simply a catchy headline, and when we say ‘private landlords’ we refer to UK landlords in the industry and not the offshore investors or ‘mega landlords’ currently buying up a large percentage of the private rented sector (PRS). Private landlords have been scapegoated for the current UK housing crisis for way too long.

The bottom line as Leilani Farha, former UN Special Rapporteur on the Right to Housing, put it so succinctly:-

“The housing crisis is an affordability crisis.”

and this is so very true and yet social housebuilding has taken a backseat in the UK over the past decade. This shift has inadvertently thrust private landlords into the role of accommodating millions who once resided in council houses, while local authorities grapple with the staggering cost of temporary accommodation, such as hotels and B&Bs. The unfortunate outcome? A steady rise in homelessness.

However, instead of tackling the root causes of this issue, the blame is all too often pinned on private landlords. This narrative conveniently absolves politicians of responsibility for their policy decisions, while providing certain campaign groups with a convenient scapegoat. It is all too easy to highlight the small minority of unscrupulous private landlords in the press whilst ignoring the majority who provide decent housing and build good, mutual relations with their tenants.

Exodus of UK Private Landlords

Research published in 2023 by the consultancy BVA-BDRC reveals a significant trend amongst private landlords in England and Wales. According to the findings, private landlords are more than twice as likely to sell properties as they are to purchase war against landlords men running away from houses with for sale signsthem. In the second quarter of 2023, over one in ten landlords (12%) sold properties, while only 5% purchased properties during the same period.

Looking ahead, the research, commissioned by the National Residential Landlords Association (NRLA), indicates that a substantial proportion of landlords plan to reduce the number of properties they let over the next year. Specifically, over a third (37%) of landlords intend to downsize their portfolio, marking an all-time high in this trend. In contrast, only 8% of landlords plan to increase the number of properties they let in the market.

This reduction in rental properties comes despite strong demand from tenants. According to the survey, two-thirds (67%) of landlords reported an increase in tenant demand in the second quarter of 2023, reaching another all-time high.

Unveiling the Housing Crisis: Britain’s Looming Challenge

The housing crisis gripping Britain is no secret, and recent findings from a 2023 report by Watling and Breach shed light on its severity. From the bustling streets of cities in the Greater South East to the historic corners of York and Edinburgh, the crisis looms large, casting a shadow over the nation’s future and prosperity.

war against landlords property ladderThis report underscores the dire reality of the housing situation. The average house in England costs more than ten times the average salary, rendering homeownership an elusive dream for many. You will need very long legs to get on the first foot of the property ladder in this day and age! More shockingly, Britain’s lag in housing construction has led to a staggering backlog of 4.3 million homes missing from the national market. A gap that continues to widen with each passing year.

Furthermore, the report showed that statistically space per person for private renters has significantly declined. In addition, vacancy rates plummeted below 1% further exacerbating the scarcity of available homes in Britain.

Urgent Calls for Action: Navigating the Perilous Path Ahead in Britain’s Housing Crisis

In a sobering forecast, the above report by Watling and Breach lays bare the stark reality of Britain’s housing crisis. Particularly alarming is the revelation that the deficit is projected to persist for decades, even if the government manages to meet its current target of constructing 300,000 homes annually. Over the past decade, Britain’s housing efforts have consistently missed the mark, with an average of 178,228 homes built annually—leaving a significant shortfall compared to the ambitious target of 300,000.

The war against landlords, both in the media and governmental policy is not going to help in providing decent housing, especially in the social sector.

Forecasting the Future: Projections for 2030

A National Housing Federation Report by Pragmatix Advisory projects the following statistics for 2030:-

  • “An extra 1.7 million households will be living in unaffordable homes – an increase of more than a third (35%). This includes 600,000 additional households living in unaffordable private rented homes, taking the total to 2.2 million.
  • One million additional homeowners will be facing unaffordable mortgage costs, taking the total to 1.9 million – more than double current levels.
  • 1.5 million families will be on the waiting list for social housing, a rise of 350,000 or almost a third (32%).
  • 150,000 children will be homeless and living in emergency accommodations like B&Bs and hostels by 2030 – an increase of 20,000.”

Addressing the housing deficit, both current and projected isn’t merely a matter of meeting targets; it’s about confronting a crisis that threatens to endure for generations. Even if the government manages to reach its current goal of constructing 300,000 homes annually, bridging the gap would still take a staggering half a century. However, waiting isn’t an option. To truly tackle the problem head-on and provide relief sooner rather than later, an ambitious approach is necessary. According to Watling and Breach’s estimations, this would involve building 442,000 homes per year over the next 25 years, or an astonishing 654,000 annually over the next decade in England alone.

Housing Crisis Fallout: A Closer Look at the Impact on Renters, Homeowners, and Landlords

The housing crisis in the UK casts a wide net of impact, affecting renters, homeowners, and landlords alike. For renters, it translates to higher, unaffordable rents, limited housing options, and the constant fear of displacement. Homeowners face escalating property prices, making homeownership an elusive dream for many and straining household budgets. Meanwhile, landlords grapple with increasingly stringent regulations, diminishing returns on investments, and the daunting task of providing quality housing amidst mounting challenges. This multifaceted crisis underscores the urgent need for comprehensive solutions that address the needs and concerns of all stakeholders in the housing ecosystem.

Overlooking Shelter: The Legacy of Neglect by Housing Ministers

Since 1979, housing issues have been relegated to the sidelines of political priorities, evident in the fleeting tenure of housing ministers. A glance at Wikipedia’s list of Housing Ministers reveals a disconcerting trend: survival in the role for more than two years is a rarity, with most lucky to exceed a single year.

John Stanley and George Young, the longest-serving ministers in recent decades, exemplify this trend. Despite their extended tenures, their focus lay elsewhere, Stanley in defence and foreign policy, and Young infamously dismissing the homeless as:-

the people you step over when you come out of the opera

 

From Interest to Indifference: The Evolution of Housing Ministers

In the annals of iHowz’s engagement with Housing Ministers, a couple of exceptions stand out. Mark Prisk, (Sept 2012 to Oct 2013) with a background in building surveying, briefly championed housing issues during his brief stint. Similarly, Gavin Barwell, now Lord Barwell, showed promise during his tenure (July 2016 to June 2017), albeit very brief.

Yet, the true beacon of commitment to housing remains Harold Macmillan (1951 – 1954), whose tenure under Churchill saw a rare dedication to addressing the housing crisis. Tasked with an ambitious goal of constructing 300,000 houses annually, Macmillan not only met but exceeded this target—a feat achieved through genuine dedication and concerted effort.

However, since Macmillan’s era, the narrative has shifted. Housing ministers have come and gone, leaving behind a legacy of indifference that has allowed the housing crisis to fester. As successive governments fail to prioritize this fundamental need, the consequences are dire, with homelessness and unaffordable housing continuing to plague communities across the nation.

Within the intricate legal landscape of housing, private landlords find themselves navigating an ever-increasing array of legislation. iHowz has tallied the legislative burden borne by private landlords and believes there to be a staggering total of 174 statutes. Each new piece of legislation adds strain on private landlords as they struggle to conform to the increasing amount of bureaucracy. From ensuring habitable living conditions to managing tenancy agreements, landlords face a myriad of legal considerations that demand an inordinate amount of time and attention. Indeed, it was to help private landlords conform to the increasing legal requirements that iHowz was established over 50 years ago!

In contrast, tenants are guided by a principle encapsulated in the phrase “tenant-like manner,” coined by Judge Denning in the landmark Warren v Keen case of 1953/4. This pivotal ruling emphasized tenants’ duty to maintain the property in a manner consistent with its intended use, establishing a cornerstone of tenant behaviour within the legal framework.

Yet, within the legal framework, a discernible bias emerges. The Housing Act 1988, for instance, significantly reshaped the rental market by introducing assured shorthold tenancies. A change that is often perceived as tilting the scales in favour of tenants. Similarly, The Landlord and Tenant Act 1985 outlined key rights and responsibilities for both parties but is often criticized for its perceived imbalance in favour of tenants.

Landlords Confusion Amidst Shifting Energy Standards

The maze of regulations concerning the Energy Performance Certificate (EPC) and The Minimum Energy Efficiency Standards (MEES) has left numerous landlords in a state of perplexity about what lies ahead. The ever-evolving landscape of future objectives and subsequent retractions only adds to the confusion. As the echoes of COP28’s ‘Net Zero’ goal fade, they leave war against landlords. Lightbulb with a tree insidebehind a resounding global call for sustainability. However, the inconsistency in objectives and requirements leaves many landlords uncertain about the appropriate steps to take to ensure future compliance.

Over time, iHowz has consistently advocated for a clear governmental roadmap to address landlords’ concerns regarding energy efficiency. However, navigating the current and future requirements in this area remains a persistent challenge.

Despite good intentions, there’s uncertainty about whether Rishi Sunak will backtrack on the proposed changes to the Minimum Energy Efficiency rules. Such unpredictability prompts questions about the direction of government policy—is it veering off course? This uncertainty leaves UK landlords and the private rental sector in a state of concern and confusion. As mentioned earlier, rather than clear answers, more questions seem to arise. The fluctuating landscape of climate change initiatives adds to landlords’ worries and contributes to their increasing confusion. For a more detailed discussion on this topic, please see our recent article ‘Net Zero Plans: Still No Clear Guidance for UK Landlords

Fluctuating Mortgage Rates and Changes in Tax Regulations reduce Profitability

The two major issues for UK private landlords are the fluctuating mortgage rates in combination with new tax regulations. The profitability of buy-to-let properties notably diminished in recent years, largely due to a sharp increase in mortgage rates. What once stood at an average 5-year fixed-term mortgage rate of 1.72% in 2021 surged to 5.55% by the end of war against landlords couple looking sad with calculator and small model houseSeptember 2023.

Despite the recent decline in mortgage rates, the trajectory ahead remains uncertain. Presently, the average two-year fixed mortgage rate stands at 5.29%, marking a significant decrease from its peak at 6.86% in July 2023. However, this figure remains distant from the remarkably low rate of 2.17% recorded in June 2021. This fluctuation underscores the dynamic nature of the housing market and leaves room for speculation regarding future trends in mortgage rates.

Furthermore, landlords have been impacted by significant changes in tax regulations. Previously, landlords could deduct mortgage interest and other finance costs from their rental income to reduce their income tax burden. However, a pivotal rule change in 2017 gradually phased out these deductions, replacing them with a 20% tax credit on mortgage interest payments. This alteration has proved particularly challenging for landlords in recent years, especially as mortgage interest costs have risen sharply.

The unpredictable mortgage expenses are not the only challenge facing landlords; they have been grappling with various other pressures as well. Tax changes have significantly intensified the challenges for buy-to-let investors, making it increasingly difficult for them to maintain profitability. Ultimately, these challenges are likely to impact renters, as the diminishing number of available properties exacerbates the housing shortage, leading to increased competition and potentially higher rental price.

The Rise of the Mega-Landlords

Experts caution that first-time buyers are facing exclusion from home ownership as offshore and local investor “mega-war against landlords apartment blockslandlords” increasingly acquire build-to-rent homes in the UK. Knight Frank estate agents report that private equity firms have significantly contributed to the surge in investment in new-build rental properties, reaching unprecedented levels last year.

In 2023, the influx of capital into the “build-to-rent” market soared to £4.6 billion, a remarkable doubling since 2016, as revealed by recent data from Knight Frank. Notably, over a third of this investment, at 38 per cent, came from private equity firms, marking a substantial increase from the previous year’s 16 per cent.

Recently, the US-based property firm Greystar unveiled a £750 million fund aimed at tapping into the UK’s build-to-rent sector. However, Greystar is not alone in its interest in injecting capital into the build-to-let market. Other foreign investors, such as Goldman Sachs and Legal & General, have also made public their plans to invest in similar schemes. (Didn’t Rishi Sunak used to work for Goldman Sachs? Just saying!)

Private and Offshore Equity Firms Impact on the UK Housing Market

According to Leilani Farha, the former UN Special Rapporteur on the Right to Housing, the entry of private equity firms into new build projects in the UK poses significant risks. Farha has characterized this trend as “disastrous.”  She cites concerns about potential negative outcomes similar to those observed in other countries.

Large private equity firms often prioritize maximizing returns on investment, which can lead to practices detrimental to tenants and communities. For private landlords, the influx of these well-funded entities into the rental market can intensify competition and drive up property prices, making it increasingly challenging to acquire and maintain rental properties. Additionally, the focus on profit maximization may result in reduced investment in property maintenance and tenant welfare, ultimately leading to poorer living conditions and less secure tenancies for renters.

Brett Christophers, a professor of economic geography from Uppsala University in Sweden, states that:

“The evidence is fairly compelling now that you get worse outcomes for tenants with private equity-owned housing than when housing is owned by other types of professional landlord, whether that’s a public sector landlord or other types of private sector landlords. Above average rent increases are certainly part of that.”

iHowz’s Blueprint for Housing Reform: A Call to Action

Here’s iHowz’s comprehensive call for action:

  1. Continuity: We advocate for the appointment of a housing minister committed to serving the duration of their parliamentary term. Consistency in leadership is vital for implementing effective long-term housing policies.
  2. Experience: The housing minister must possess relevant expertise and experience in the housing sector. This ensures informed decision-making and effective policy implementation.
  3. war against landlords iHowz logoAuthority: Empower the housing minister with comprehensive control over all aspects of housing, including planning, building control, and the quantity of dwellings being built. Special emphasis should be placed on facilitating the construction of truly affordable housing, catering to the needs of all socio-economic groups.
  4. Legislation: Review and enact laws that comprehensively address the concerns of all landlords, both private and social. This includes regulations concerning rental properties, ensuring fair treatment and standards for all tenants.
  5. Social Housing: Hold social landlords accountable for providing an adequate supply of social housing. Private landlords should no longer bear the responsibility of housing social tenants, as they lack the necessary training and resources for this role.
  6. Housing Benefits: Implement measures to streamline housing benefit payments, ensuring efficient and equitable distribution to those in need, regardless of the method of payment.

By implementing these measures, we believe the housing sector can achieve greater stability, fairness, and affordability, ultimately improving the quality of life for all sectors of the housing market.

Navigating the Battlefield: Addressing the War Against Landlords

The battle against landlords unfolds on multiple fronts, with private landlords finding themselves vilified in the media and unfairly burdened with blame for the homelessness crisis. This hostile environment has triggered a mass exodus from the rental market, amplifying the strain on housing availability. With private landlords accommodating over 20% of the UK population, their departure only exacerbates the housing crisis.

It’s high time for the government to honour its commitment to expanding social housing, relieving the undue burden placed on private landlords. Streamlining red tape and implementing clear, comprehensive legislation for the private rental sector is essential to foster a fair and stable housing market.

Moreover, as we march towards a sustainable future, a firm commitment to environmental stewardship must be established, ensuring that upcoming legislation prioritizes sustainability considerations.

Building more social housing stands as an urgent imperative while providing financial incentives can encourage small private landlords to remain active in the market. It’s vital to recognize that the majority of landlords are decent individuals, unjustly tarnished by the actions of a few ‘rogue’ ones.

In conclusion, achieving a balanced and equitable housing landscape demands collective action. By fostering collaboration between landlords, tenants, and policymakers, we can pave the way for a housing sector that is fair, sustainable, and inclusive for all.

 

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