Tuesday, Sep 07, 2010
Another nail in the BTL coffin
Citywire: Landlords brace themselves for benefit caps
... and once the final nail goes in, this BTL coffin wants to be filled with cement and dropped into the Mariana Trench.
Posted by doomwatch @ 10:07 AM (1331 views) Add Comment
29 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Crunchy said...
What?
Government cut backs, and now BTL cuts. lol
Gordon Bennett!
2. sibley's b'stard child said...
I'm sure the BTL brigade would have already factored-in such an eventuality into their business model. Heaven forfend that they'd solely rely on LHA. Why, they'll simply find tenants that can afford the rent...
3. doomwatch said...
sibley's b'stard child @1.
Following your logic to conclusion, that mean the ConDems will have to build social housing double quick, or reap
the whirlwind of social unrest & increased crime levels [in the context of police cuts, oh dear[.
It's interesting that UK social housing went into massive over-drive in the 30s during the last major depression.
So if it could happen then, why not now ?
4. techieman said...
sbc - thats a million people per the article! are you telling me that there are a million people that are currently looking to rent from the private sector?
This is why i think the LLs will have to lower rents because there just wont be enough people out there to take up the slack. ok assuming you are right though, then LLs will have to attract private tenants currently occupying other properties. Not only that but social housing stock is different to private housing stock.
I know someone who does a fair chunk of this. he has to take a video before the tenant arrives and then one after he leaves. i dont want to sound right wing here - but its not unusual (in fact quite usual) for the place to be stripped bare including light switches etc. i have not spoken to him about this for a while but whatever damage was caused the council would make good. i dont know the details but i understand for this reason he couldnt use great fittings and fixtures.
5. ontheotherhand said...
The realities of the guaranteed money making machine that the Experts said could not fail. From the comments,
"I have LHA tenants in north wales and the rent is in no way guaranteed by the goverment, it gets paid direct to the claiment, not the landlord so if they dont want to pay the rent and claim as much in benefits as possible this is what they will do.
Having been a forced landlord with a home in negative equity for three years running i have yet to make a profit, the rent received is not enough to cover the mortgage and the last tenants knocked up arrears and damages of 10K before the courts got them out.
The current tenants are not in arrears but always pay late and in pieces etc but when they move out there is no way i would take on LHA tenants again."
6. sibley's b'stard child said...
Techie, I should really avoid using sarcasm, it doen't translate very well does it?
I'm obviously in agreement with you that this will drive down private rents (of which I will be a beneficiary). Although the article would like us to think otherwise...it seems their argument is that this skewed rental market is simply a London problem. Which is patently boll*cks as LHA is scaled for a reason. Just because the LHA is lower for, say, the NE or Wales it doesn't mean that their local rental market isn't as equally skewed.
@ 4 OTOH, I know, it's 'great' isn't it. I couldn't believe it when I found out that LHA is payed directly to the tenant. Does anyone know the rationale behind this - is it to prevent dodgy LLs or is it some cack-handed method of 'empowering' the doley?
7. techieman said...
otoh
no it couldnt fail.... if you got in early enough.
Any bubble is a problem when the jcls are sucked in - and when the yields don't compensate for the cost of capital. there becomes a tipping point where the number of jcls exceed the numbers who got in at the bottom (with much lower loans and therefore much lower cost of capital) by a certain amount. That "certain amount" depends on a few variables - eg where they got in, and what current IRs they are paying.
still HPS will continue to go up so that the yeilds go down further and the gap between cost of capital and income produced becomes even more negative.... yeah right!!
8. techieman said...
sorry sbc for missing the p1ss take. As for paying tenants this was a relativity recent change. the rationale was that the tennats should get used to being responsible and budgeting themselves. if the tenants get into so many months arrears then the LL can apply to the council to get the money paid direct.
yes it really is daft, new labour at its most stupid.
9. sibley's b'stard child said...
@ 7
Ah, the Law of Unintended Consequences strikes again.
10. uncle tom said...
The thing about this is that the government has only just begun.
Labour totally failed when it came to the construction of new social housing, and allowed housing benefit expenditure to soar to outrageous levels.
The coalition has to tackle balooning HB spending while at the same time finding more social housing; yet has no reserves of cash to throw at the issue.
On the HB front, I think the government will need to kill the sacred cow that dictates that people applying for HB have to be provided with housing in the same district. If you go begging to the state for housing assistance, it is not unreasonable for the state to ask you to move to a cheaper district, or even a different region.
That might sound a bit draconian, but it is far from fair that taxpayers in cheaper parts of the country are having to subsidise housing in London.
For the supply side of social housing, the solution has to be to build more.
There are various options for funding construction without having to hit the exchequer; and building houses makes jobs, cuts unemployment, increases tax receipts, and cuts benefit payments - so everything to gain.
The easiest delivery method is an 'open season' approach - make ANY piece of previously developed land available for residential development, provided that for every two houses built for sale, a house of identical size and specification must be gifted to the local authority to rent - and then follow this with auctions of surplus MoD land to be developed on that basis.
The key issue though is to get on with it, and recognise the need to fast track the planning process.
11. jack c said...
Picking up on UT's last point "The key issue though is to get on with it, and recognise the need to fast track the planning process" - there is a new article by John Redwood which has yet to appear in the FT etc.. titled How solid are bricks and mortar? and interestingly one of the lines reads "Tight planning controls created artificial scarcity. Investors benefitted as a result"
The full article is available @ www.pan-asset.co.uk/2010/09/how-solid-are-bricks-and-mortar/
12. mark wadsworth said...
Inevitably rents will drop, and house prices will adjust to a lower level at which it is still profitable to buy a house and let it out.
PS, the government does not need any money to finance social housing - they can easily fund the 'deposit' out of the money saved from HB and then borrow the rest to be repaid out of future rental income.
Or put it this way, if you were a council and it were your own money you were spending, would you rather knock up some flats @ £40,000 a pop (using largely borrowed money) or pay a private landlord £5,000-plus a year in rent (via HB?). What's cheaper in the long run is cheaper in the short run as well.
13. Mba Analyst said...
LHA rents are upto 30% higher than private rentals in some areas for private landlords this new "gap" will only lead to expansion of the homeless lists for which we dont have enough council houses for!!! It also means that housing associations which charge less than the private market for their tenants will be able to charge more because of the "small print" maybe they will then be able to afford to build more social housing?! either way it will not save the tax payer money and is another pointless political exercise
14. sibley's b'stard child said...
@ 9
Absolutely UT, and the flip-side of the coin is these people living in subsidised - and subsequenty overinflated properties - would seldom be able to command a salary necessary to pay the said inflated rents. So on one hand we have a system that milks the poor suckers (me included) that have to rent privately but on the other, one which disincentivises those on HB from finding employment.
How did it come to this? I really do despair.
15. uncle tom said...
Jack C,
I've never liked John Redwood - someone whose self esteem has always far exceeded his ability..
Buy into REITS now? - I don't think so..
16. jack c said...
uncle tom - agreed on both fronts - I just happened to be reading the article and one thing that does ring true is the bit about planning/artificial scarcity which (IMO) ties in with your comment.
I was speaking with a couple of Buy 2 Let dabblers at the weekend who are adamant all is well ie rents easily covering the mortgages (due to low interest rates) and if house prices fall then it provides further buying opportunity ! - I politely nodded and moved the conversation on as they were buying the food and drink.
17. pelethar said...
Agree with previous comments, and the impact on the lower/mid end of the housing market in London will in my opinion be material. Anyone know when this is likely to kick in?
18. sibley's b'stard child said...
@ 15
If I recall, the new LHA rates will come into effect as of April 2011. As to a suggested timeline; i'll leave that to the experts to hazard a guess.
19. uncle tom said...
Pelethar,
I agree, this could be a very big dampener on that sector of the London market.
There's a white paper on housing expected next month, which should clarify the strategies that the coalition has in mind.
Besides that, listen out for any mention of HB as the govt's spending review rolls out.
It's worth noting that London is a very marginal area politically, and that chasing HB claimants out of the capital would probably play to the Tories' advantage. On the other hand, it would probably play against the LibDems; so an area of potential disagreement in the coalition.
20. braindeed said...
ontheotherhand @4said...
'Having been a forced landlord with a home in negative equity for three years running i have yet to make a profit, the rent received is not enough to cover the mortgage and the last tenants knocked up arrears and damages of 10K before the courts got them out.'
Who forced you?
'Profit'? - why would you ever deserve a profit.....stealing away a FTB's home-ownership opportunity?
Arrears and damages of 10K? Guffaw – I love stories like this, every time an ‘amateur’ or ‘forced’ landlord gets fried, it’s another nail in the BTL scam coffin.
Sorry, I can’t shed any tears for you, and I even hope the heat is turned up on the blowlamp currently toasting your economically illiterate ass, you deserve it.
21. techieman said...
braindeed - as much as its tempting to be rude to you based on you slagging off various people at various times, i will merely point out that you have got the wrong end of the stick. I will do this without even calling you braindead.
re-read his point - he is actually quoting one of the comments to the article - take a look at the link and you will see.
regards
tetchie
22. jack c said...
As we are on the BTL topic can anyone confirm whether selective licensing is operating elsewhere in the country - This from Newcastle City Council
A new scheme which requires private landlords to register their properties with Newcastle City Council will be launched at a community event next week. The Selective Licensing scheme will be unveiled at the Carnegie Building (old Benwell Library) on Monday, 6 September at 12 noon and will provide the council with the power to license private landlords for up to five years. This means they will be more responsible for looking after their properties and tenants which will enhance the area. The city council has introduced selective licensing in the Greater High Cross area to tackle some of the properties which have been poorly managed. It has also been implemented to address the high levels of poor property maintenance and the high levels of complaints about environmental issues. Following its launch selective licensing will make sure privately rented properties are well managed and tackle unprofessional landlords while supporting good landlords.
SOURCE (full release) www.newcastle.gov.uk/press.nsf/latestbyid/1EC4852CF8F96EC58025779300318E06?opendocument
23. sibley's b'stard child said...
@ 20 Jack C,
Can't say i've heard of such a beast. Back in the day, there was a term for housing run and managed by the council; it escapes me now, however.
Still, I imagine this'll create a team of, ooh, ten council administrative staff to run this.
24. the number cruncher said...
JC at 20
I used to go out with a girl who lived in Benwell in the early nineties, lovely girl, absolute pit of an area. We learned from some locals that organised criminals would chase people out of the area so they could buy up properties on the cheap. Whole crime families would own different streets. They would then rent them out to HB claimants at vast profit. Still going on I should imagine, so this sounds like the council trying to stop HB payments to organised criminal gangs operating in the area.
I cannot believe I used to walk through those streets, it was straight out of a Dickensian novel, feral kids running wild. Some streets where all boarded up, there where some stories in the press of houses being sold for £500. I had someone pull a knife on me once at her cousins 18th birthday party, I was so socked I just froze, The knife man was a little chap in his late teens who had gate crashed and was acting very strange. The chap I was talking went for him and he got stabbed in the leg, blood went everywhere. The chaps two brothers chased the knife man and give him a kicking the like of which I have never seen, I would be surprised if he survived without permanent injuries. I can still remember his terrified screams as they dragged him from a taxi he tried to climb in to escape them.
25. Crunchy said...
21. techieman said...I will do this without even calling you braindead.
'You just can't help yourself.'
No harm was done tetchie. I hope this helps.
However, I am sure you could do better than that to snap brain tweed out from his obvious boredom.
It's what you are good at.
26. jack c said...
sibley's b'stard child - yep no doubt the 10 jobs to be cut in XYZ dept will re-surface in the selective licensing dept
the number cruncher - thanks for your input, reminded me of Get Carter original version with Michael Caine - little has changed over the years except it's worse now than in the 90's and several years ago the houses were trading at £1.00 each (I've posted links on this before). Lets hope this scheme actually works and the area genuinely improves.
27. braindeed said...
21. tetchie said...
braindeed - as much as its tempting to be rude to you based on you slagging off various people at various times, i will merely point out that you have got the wrong end of the stick. I will do this without even calling you braindead.
Okay, fair point - although it could still be directed at the author.
'I will do this without even calling you braindead.'
are you going soft?..
28. techieman said...
soft? - clearly yes!
"although it could still be directed at the author". - Agreed.
29. Crunchy said...
I rest my case.