Rent Controls

[dimstitute]

When tenants had security of tenure and controlled rents the attraction of a lifetime mortgage was far less. Times are hard for many now and even this (property owners) government must be tempted to revert to the old system to please most of the electorate and to save public finances huge sums, as the costs of housing allowances paid to the rising numbers of unemployed would come down. This would shift this burden from the back of the taxpayers onto that of the buy-to-let landlords ( who have done very well for 10 years or so ) and be popular with many. As always, there are real choices to be made and this one is political.

Demand would shift from purchase to renting, landlords would dump property to get out, once Assured Short term Tenancies were abolished and their Capital Gains Tax advantages were removed, and both would force prices down. People would once more debate the arguments for and against buying or renting. The houses are still there so what could the landlords do? Harass the tenants so they can sell to owner occupiers? (Illegal.) Stop building? (It wouldn't do much in the short run and council houses could be built again.) Why not?

[plummet expert]

When tenants had security of tenure and controlled rents the attraction of a lifetime mortgage was far less. Times are hard for many now and even this (property owners) government must be tempted to revert to the old system to please most of the electorate and to save public finances huge sums, as the costs of housing allowances paid to the rising numbers of unemployed would come down. This would shift this burden from the back of the taxpayers onto that of the buy-to-let landlords ( who have done very well for 10 years or so ) and be popular with many. As always, there are real choices to be made and this one is political.

Demand would shift from purchase to renting, landlords would dump property to get out, once Assured Short term Tenancies were abolished and their Capital Gains Tax advantages were removed, and both would force prices down. People would once more debate the arguments for and against buying or renting. The houses are still there so what could the landlords do? Harass the tenants so they can sell to owner occupiers? (Illegal.) Stop building? (It wouldn't do much in the short run and council houses could be built again.) Why not?

If you just did this you would need to build many more council and housing Assocn estates. Better to enforce sensible lending criteria, put CGT back as it was pre 2007 and have a HPC. Letting property was impossible before the AST and unfair to the LL.

[the flying pig]

i'd absolutely like to see housing benefit capped at something like [as an arbitrary starter for ten - i'm not close enough to such things to arrive at sensible figures], on a weekly basis, oh, about £75 for the first adult in a housedhole plus, uh, say £30 per additional adult and then £30 for the first child in the household, £15 for the second, and a maximum further few quid regardless of how many more children were in the household. lots more council housing if the private sector wouldn't accept these terms.

i shan't be holding my breath.

Edited May 30, 2010 by the flying pig

[cartimandua51]

When tenants had security of tenure and controlled rents the attraction of a lifetime mortgage was far less. Times are hard for many now and even this (property owners) government must be tempted to revert to the old system to please most of the electorate and to save public finances huge sums, as the costs of housing allowances paid to the rising numbers of unemployed would come down. This would shift this burden from the back of the taxpayers onto that of the buy-to-let landlords ( who have done very well for 10 years or so ) and be popular with many. As always, there are real choices to be made and this one is political.

Demand would shift from purchase to renting, landlords would dump property to get out, once Assured Short term Tenancies were abolished and their Capital Gains Tax advantages were removed, and both would force prices down. People would once more debate the arguments for and against buying or renting. The houses are still there so what could the landlords do? Harass the tenants so they can sell to owner occupiers? (Illegal.) Stop building? (It wouldn't do much in the short run and council houses could be built again.) Why not?

Are you old enough to remember what private renting was like back in the 70s & early 80s? I am, and a lot of it wasn't pretty. One thing the introduction of ASTs did was to cause a massive expansion in supply of reasonable quality rented housing. Some people would benefit; just as some people who have been in their properties since before 1988 benefit from having regulated tenancies, but the longer- term effect would be a considerable reduction in supply for the young and/or vulnerable. BTLs would tend to divide into the big corporations who cherry-pick company-guaranteed lets and the bottom-feeders who are the inheritors of the Rachmans and he-of-Dutch-extraction who had better not be named. The Law, whatever the theoretical criminal sanctions, is about as much use as a chocolate frying pan if you are beaten up on your street when your Landlord can produce a dozen impeccable witnesses to prove he was 200 miles away.

At least most of the small-scale BTL LLs today are largely inept rather than actively vicious.

Of course there should be more social housing for families; but sticking controls on the private sector before these exist will cause more problems than it solves.

[Stars]

Are you old enough to remember what private renting was like back in the 70s & early 80s? I am, and a lot of it wasn't pretty. One thing the introduction of ASTs did was to cause a massive expansion in supply of reasonable quality rented housing. Some people would benefit; just as some people who have been in their properties since before 1988 benefit from having regulated tenancies, but the longer- term effect would be a considerable reduction in supply for the young and/or vulnerable. BTLs would tend to divide into the big corporations who cherry-pick company-guaranteed lets and the bottom-feeders who are the inheritors of the Rachmans and he-of-Dutch-extraction who had better not be named. The Law, whatever the theoretical criminal sanctions, is about as much use as a chocolate frying pan if you are beaten up on your street when your Landlord can produce a dozen impeccable witnesses to prove he was 200 miles away.

At least most of the small-scale BTL LLs today are largely inept rather than actively vicious.

Of course there should be more social housing for families; but sticking controls on the private sector before these exist will cause more problems than it solves.

I agree

[ingermany]

i'd absolutely like to see housing benefit capped at something like [as an arbitrary starter for ten - i'm not close enough to such things to arrive at sensible figures], on a weekly basis, oh, about £75 for the first adult in a housedhole plus, uh, say £30 per additional adult and then £30 for the first child in the household, £15 for the second, and a maximum further few quid regardless of how many more children were in the household. lots more council housing if the private sector wouldn't accept these terms.

i shan't be holding my breath.

I agree. The actual figures aren't that important. But just setting a limit that is arbitrary is the answer. The current system of relating it to average rents creates a positive feedback loop. It's not rent controls you need. The market will take care of that. What is needed is benefit controls...........limit the extent to which the State will subsidize excessive and unaffordable rents.

[Tiger Woods?]

When tenants had security of tenure and controlled rents the attraction of a lifetime mortgage was far less. Times are hard for many now and even this (property owners) government must be tempted to revert to the old system to please most of the electorate and to save public finances huge sums, as the costs of housing allowances paid to the rising numbers of unemployed would come down. This would shift this burden from the back of the taxpayers onto that of the buy-to-let landlords ( who have done very well for 10 years or so ) and be popular with many. As always, there are real choices to be made and this one is political.

Demand would shift from purchase to renting, landlords would dump property to get out, once Assured Short term Tenancies were abolished and their Capital Gains Tax advantages were removed, and both would force prices down. People would once more debate the arguments for and against buying or renting. The houses are still there so what could the landlords do? Harass the tenants so they can sell to owner occupiers? (Illegal.) Stop building? (It wouldn't do much in the short run and council houses could be built again.) Why not?

But, but, but...without ASTs how could property entrenpenuers boot out tenants at short notice to actualise the capital gains on their investments?!

Oh, I forgot, they are all in it providing rental accomodation for the long term.

Edited May 31, 2010 by D'oh

[thod]

Europe offers extensive tenants rights and they have much larger rental sectors than the UK. All this talk of disappearing rentals is nonsense. Lots of landlords do not want serial tenants. I rented a place for 10 years and the landlord loved me, he had no voids, I kept the place clean and secure. I rarely bothered him performing minor repairs myself. Free money for him.

Yet if he sold, I could be evicted by the new landlord without reason. What the UK system fails to recognise is the tenants interests. After living there for so long it is my home, not just a house but my home. The landlord has a financial interest but I have a personal interest. This was always recognised prior to the Thatcher reforms. If the landlord wanted you out, he could pay you some money to go. In evicting the tenant, the landlord is imposing all sorts of costs and hardships on the tenant through no fault of the tenant. The same sort of thing is recognised with redundancy payments.

It is the UK which is different from the rest of the world. We have the lowest level of tenant protection in the world. The rent councils were not set up to dictate market rents. They were set up to stop landlords raising rents to a million pounds a week thus bypassing tenant protections.

[tim123]

But, but, but...without ASTs how could property entrenpenuers boot out tenants at short notice to actualise the capital gains on their investments?!

without an exit strategy most people wont invest in the first place.

tim

[DeepLurker]

without an exit strategy most people wont invest in the first place.

tim

Sell to another landlord who keeps the same tenant? Sounds like a logical exit strategy to me.

[dissident junk]

There's a number of problems with rent controls and private landlords. Rental controls only really works with public landlords in the UK, and then you face issues with housing cost disparity between featherbedded state clients and everyone else who can't get social housing despite low incomes.

One of the major issues with rent controls and private landlords in the 60s and 70s was that there was no financial incentive for landlords to renovate or upkeep rented housing. They simply rented out slums at the maximum amount. People ended up paying for absolute hovels (there's BBC footage of the kinds of properties people rented in Rachman's day somewhere), and they have to be seen to be believed.

It is worth saying, though probably very unfashionable on HPC, that the housing BTL phenomenon in the last 15 years has meant a higher quality of housing to rent. The difference between available housing to rent in my area back in the late 80s and early 90s and today is very stark -- for example, you can now rent somewhere and be pretty sure it will have some sort of central heating and a decent kitchen. You couldn't guarantee that before the BTL boom; rentals were utter dumps.

The other aspect of permanent renting is that there is an argument for people getting to the point where they no longer need to pay monthly housing costs. Rent is a monthly liability that eats into income, and to put yourself in that situation for your entire life is awkward, particularly if people do not earn enough to save.

The solution, to my mind, is just to allow house prices to collapse and then legislate to prevent another HPI scenario.

Some academic (who I cannot remember now) says the average house prices in the UK should be about £60K: he believes this would be conducive to the British economy as a whole, as people could move easily.

The thing to consider is that if UK house prices were an average of £60K, there would be a significant number of them that would cost less than this. We then enter the territory where almost any working person would be able to afford to buy some sort of property. If you were on minimum wage, a two-up-two-down in my area would be about £20K -- less than twice your annual income.

I know a number of immigrant families who took advantage of cheap property back in the early 90s (when everything crashed). They have now paid off all their mortgage and despite still earning minimum wages, they no longer pay for housing costs, a situation which has meant their disposable income has increased dramatically. Cheap housing purchase prices do lift people from one socio-economic band into another.

I don't like the idea that people should be pushed into paying housing costs their entire life -- either though inflated house prices that require 25 to 30 years of mortgage liability or long term rental costs. It stinks of draining people of their benefits of their labour, and a state of fiscal servitude.

[tim123]

Sell to another landlord who keeps the same tenant? Sounds like a logical exit strategy to me.

Have you looked at this market?

Buyers are virtually non-existant.

As an investment exit strategy it is a non starter

tim

[abharrisson]

When tenants had security of tenure and controlled rents the attraction of a lifetime mortgage was far less. Times are hard for many now and even this (property owners) government must be tempted to revert to the old system to please most of the electorate and to save public finances huge sums, as the costs of housing allowances paid to the rising numbers of unemployed would come down. This would shift this burden from the back of the taxpayers onto that of the buy-to-let landlords ( who have done very well for 10 years or so ) and be popular with many. As always, there are real choices to be made and this one is political.

Demand would shift from purchase to renting, landlords would dump property to get out, once Assured Short term Tenancies were abolished and their Capital Gains Tax advantages were removed, and both would force prices down. People would once more debate the arguments for and against buying or renting. The houses are still there so what could the landlords do? Harass the tenants so they can sell to owner occupiers? (Illegal.) Stop building? (It wouldn't do much in the short run and council houses could be built again.) Why not?

I am sure you are correct. The advice the govt will get however is that with 10% of mortgages on BTL etc etc, the effect of introducing it would be that the banks would withdraw all mortgage financing ( as property couldn't be let on an ast which is a fundemental condition of the loan) they would do this in one big go when the announcemetnof the change forbidding AST's was made and the net result would be effectively 10% of the properties in the UK would come onto the market in one go, tenats would get their marching orders, renewals wouldn't be possible etc.

The basics are without AST's banks will not lend in the way they have ( they would still lend commercially but thats a whole different deal) the carnage in house prices/ repossessions/pressure on bank bad debts etc etc would never be sanctioned nor would it be sanctioned for the desperate fallout that would hit tenants.

So whilst I'd agree it would be a game changer and no bad thing in many ways I just can't see them turning the clock back from here as it would deliver to much carnage.

[TheEmperorHasNoClothes]

Have you looked at this market?

Buyers are virtually non-existant.

As an investment exit strategy it is a non starter

tim

What you mean to say that no-one is interested in BTL if there is a sitting tennant (i.e guaranteed customer). I think I would prefer to buy a BTL in that case rather than turn a previous OO house into BTL.

(Unless you are saying BTL interest is itself becoming non-existing. Well that I can believe with just a 4-5% yield before any costs.)

[babesagainstmachines]

Letting property was impossible before the AST and unfair to the LL.

You are right. There is no rental market in countries with protection for tenants.

[cartimandua51]

I am sure you are correct. The advice the govt will get however is that with 10% of mortgages on BTL etc etc, the effect of introducing it would be that the banks would withdraw all mortgage financing ( as property couldn't be let on an ast which is a fundemental condition of the loan) they would do this in one big go when the announcemetnof the change forbidding AST's was made and the net result would be effectively 10% of the properties in the UK would come onto the market in one go, tenants would get their marching orders, renewals wouldn't be possible etc.

So whilst I'd agree it would be a game changer and no bad thing in many ways I just can't see them turning the clock back from here as it would deliver to much carnage.

Looking back to the practices of the 1970s / early eighties, the people who would suffer most would be families, and youngish couples.

The major fear of LLs back before ASTs was the fact that it took well over a year to evict a tenant, even if they weren't paying any rent. This was especially the case where there were children, so LLs discriminated heavily against anyone who already had, or looked of an age to have children. For students & young singles it wasn't so bad - the accommodation might be substandard, but you could get it; if you were employed, your employer might sign a "company let" which gave the LL security, but otherwise...

The other thing which would immediately reappear would be the "Resident Landlord" phenomenon - no (peacetime) legislation has ever forced a LL to share his main home with anyone they didn't want to. Watch out for couples suddenly deciding to "separate" and reserving a bedroom in their BTL for themselves. You might argue that tenants wouldn't take the property under those conditions, but if even, say, 5% of BTL properties were taken off the market that would lead to massive shortfalls in some areas. I remember lots of family-to-a-room situations in some places I or my friends lived in in the 70s.

Any change of this variety needs pre-planning! You cant rely on it triggering a HPC - many BTL LLs have been doing this since the early 90s and not all of them have MEWed the equity, so they might prefer to leave properties empty (happened a LOT in the 60s & 70s) until the market eventually recovers - or the Law changes back again.

[tim123]

Looking back to the practices of the 1970s / early eighties, the people who would suffer most would be families, and youngish couples.

The major fear of LLs back before ASTs was the fact that it took well over a year to evict a tenant, even if they weren't paying any rent. This was especially the case where there were children, so LLs discriminated heavily against anyone who already had, or looked of an age to have children. For students & young singles it wasn't so bad - the accommodation might be substandard, but you could get it; if you were employed, your employer might sign a "company let" which gave the LL security, but otherwise...

The other thing which would immediately reappear would be the "Resident Landlord" phenomenon - no (peacetime) legislation has ever forced a LL to share his main home with anyone they didn't want to. Watch out for couples suddenly deciding to "separate" and reserving a bedroom in their BTL for themselves. You might argue that tenants wouldn't take the property under those conditions, but if even, say, 5% of BTL properties were taken off the market that would lead to massive shortfalls in some areas. I remember lots of family-to-a-room situations in some places I or my friends lived in in the 70s.

Any change of this variety needs pre-planning! You cant rely on it triggering a HPC - many BTL LLs have been doing this since the early 90s and not all of them have MEWed the equity, so they might prefer to leave properties empty (happened a LOT in the 60s & 70s) until the market eventually recovers - or the Law changes back again.

One Landlord that my colleagues dealt with offered "B&B" because that was exempt from letting rules.

The breakfast consisted of the LL leaving a packet of Cornflakes each week and paying for the milkman to leave a bottle of milk each day (for a household of 4)

(and I will repeat) Anyone who thinks the abolition of ASTs and a return to secure tenancies will be bettr for tenants, really has absolutely no conception of what it will do to the supply.

tim

[Stars]

Any change of this variety needs pre-planning! You cant rely on it triggering a HPC - many BTL LLs have been doing this since the early 90s and not all of them have MEWed the equity, so they might prefer to leave properties empty (happened a LOT in the 60s & 70s) until the market eventually recovers - or the Law changes back again.

The practical way to improve the lot of tenants is not to control rents or restrict conditions, it is to tax real estate so that anyone who is holding it has some productive reason to do so or is paying a penalty for doing so.

[cartimandua51]

One Landlord that my colleagues dealt with offered "B&B" because that was exempt from letting rules.

The breakfast consisted of the LL leaving a packet of Cornflakes each week and paying for the milkman to leave a bottle of milk each day (for a household of 4)

(and I will repeat) Anyone who thinks the abolition of ASTs and a return to secure tenancies will be bettr for tenants, really has absolutely no conception of what it will do to the supply.

tim

Ooh, I remember that, too! and the rather dubious "Holiday Lets" for three months at a time when the LL refused to rent to you unless you signed a declaration that your main home was elsewhere.....

where there's a regulation, there's a loophole....

[Injin]

The practical way to improve the lot of tenants is not to control rents or restrict conditions, it is to control rents and restrict conditions so that anyone who is holding it has some productive reason to do so or is paying a penalty for doing so.

fixed and