'i Lost Seven Properties' Cut-Price Repossession Sales 'are Cheating The Taxpayer'

[(Blizzard)]

The problem with this, or any other analysis, is that one gets to which came first the chicken or the egg? In this case one could describe the chicken as cheap finance and the egg as the semi-amateur landlord. BTL ran at low levels into the 1990s; often people who had surplus day-to-day cash and bought an extra house with savings as a deposit. At this level of BTL there were few problems as the numbers were not that great and banks and building societies were not rushing to support this class of borrower.

As house prices recovered from the slump of the early 1990s BTL started to be mentioned, but there was hardly a rush of funding. There was demand and a few products, but decent deposits were required (I know as we looked into it then but wouldn't touch it now). The globally low interest rates that followed Greenspan's attempts to stave off a post 9/11 recession overwhelmed the demand for credit that then existed so bankers looked for new areas into which to lend. Lo and behold, we have a rise in demand from BTL landlords convinced it was their route to getting rich whilst having rental income to pay the interest. Once they had started and prices began their unsustainable rise then they leveraged to the hilt using the then readily-available credit and the scope afforded by each new rise in prices

They're wrong and will shortly find out quite how wrong they were and remain.

I would argue that it was these low rates and the bankers' belief in a new paradigm that drove BTL demand and house prices.

I don't disagree, but I think this is missing the point somewhat.

It is difficult to calculate exactly how much of the current economic crisis was caused by the greed of landlords, and how much was caused by cheap money malinvested by bad banks.

In the UK, I would guess that landlords and banks were equally to blame. I think that's a justifiable position, but not one that is relevant to this thread.

This thread is about the actions of one landlord, who has lost money and now wants sympathy.

Landlordism is unquestionably immoral, and those who engage in landlordism can expect no sympathy when their plans fail.

[disenfranchised]

Impressive rant, I can see you having to clean the spittle from your screen after that. In one post you had a dig at him having a pension, having the cheek to try and create a second income and insinuating that he is in some way robbing the people living in his over leveraged flats.

No I did not have a dig at him for having a pension, my point was he will hardly be destitute without his BTL as he will have a good one! I undestand police pensions, my brother is a serving officer and has explained it at length over a beer!

The governments job is to legislate for the good of the majority of the population. I have no issue with somebody taking their own capital and becoming a landlord. I have every issue with greedy idiots like him being allowed to take bank capital underwritten by me as a taxpayer, and drive up house prices into a speculative bubble in a get-rich-quick commodity grab, thus disenfranchising a generation.

So yeah, ****** him, I hope the whole lot gets repo'd!

As for my spittle, nope... Not raging angry, just sad and disappointed. I think its a ridiculous situation, but it won't be my problem. I can see where things are going in this country. I don't like it, but I accept it is like an oil tanker with a jammed rudder - very unlikely to turn around!

This guy gets to retire in his 50s with a final salary pension. My generation gets to work to 68 for a crappy defined contribution pension beholden to the stock market, whilst paying for the healthcare and nursing of the very people who have awarded themselves everything and priced us out of owning a house.

No thanks. Self employment as a contractor beckons, with a healthy dollop of tax avoidance too, and also looking at overseas work and even emigration. I would be happy to carry on paying into a fairer system as I have for the last 16 years, but not a completely rigged one.

[Bland Unsight]

Impressive rant, I can see you having to clean the spittle from your screen after that. In one post you had a dig at him having a pension, having the cheek to try and create a second income and insinuating that he is in some way robbing the people living in his over leveraged flats.

The only thing I can see wrong with this guy is that he over extended himself and his leverage probably killed what could have been a reasonable little business, until he was really retired. I wonder what will happen to his tenants now.......Those who criticize loudest are usually those with the most to hide.

This post characterises succinctly the extent to which we as a people are completely besotted with debt, property and rent. How can we possibly make our way in the world by using debt to bid up the price of our residential properties and then renting out said properties to other participants in the auction, especially if a significant proportion of these rents are paid with housing benefits that were paid from taxes that resulted from a GDP growth that arose from mortgage equity withdrawal only made possible by the self same auction? How is any of this a "reasonable little business" unless you propose radical redefinitions of "reasonable", "little" and "business"?

I would be happy to carry on paying into a fairer system as I have for the last 16 years, but not a completely rigged one.

+1

[mfs1959]

This post characterises succinctly the extent to which we as a people are completely besotted with debt, property and rent. How can we possibly make our way in the world by using debt to bid up the price of our residential properties and then renting out said properties to other participants in the auction, especially if a significant proportion of these rents are paid with housing benefits that were paid from taxes that resulted from a GDP growth that arose from mortgage equity withdrawal only made possible by the self same auction? How is any of this a "reasonable little business" unless you propose radical redefinitions of "reasonable", "little" and "business"?

If I may add:

+1 many times over

[justthisbloke]

Anyone renting has lot to thank BTL mortgages, AST contracts and landlords for.

Back before these things existed, renting was a major PIA. There was little property to chose from, standards were very poor and costs were high. These days renting is a comparative dream and, as bigger companies and professionals come to dominate the market it can only get better.

It's ludicrous to suggest that landlords somehow restrict housing. True, the banks' lending policies re BTL do increase prices for some types of OO property but I suspect that had they not invented BTL, they'd have chucked the same credit at OO mortgages and you'd have seen the same price increases.

[mfs1959]

Anyone renting has lot to thank BTL mortgages, AST contracts and landlords for.

Back before these things existed, renting was a major PIA. There was little property to chose from, standards were very poor and costs were high. These days renting is a comparative dream and, as bigger companies and professionals come to dominate the market it can only get better.

It's ludicrous to suggest that landlords somehow restrict housing. True, the banks' lending policies re BTL do increase prices for some types of OO property but I suspect that had they not invented BTL, they'd have chucked the same credit at OO mortgages and you'd have seen the same price increases.

Possibly there is something in this but you forget the effect of leveraging. BTL landlords used each accrual of 'profit' to extend their 'empire' thus ratcheting up prices; owner occupiers don't as a whole do that.

[Bland Unsight]

Anyone renting has lot to thank BTL mortgages, AST contracts and landlords for.

Back before these things existed, renting was a major PIA. There was little property to chose from, standards were very poor and costs were high. These days renting is a comparative dream and, as bigger companies and professionals come to dominate the market it can only get better.

It's ludicrous to suggest that landlords somehow restrict housing. True, the banks' lending policies re BTL do increase prices for some types of OO property but I suspect that had they not invented BTL, they'd have chucked the same credit at OO mortgages and you'd have seen the same price increases.

This is a very weak argument, which is based on the selective use of counterfactuals. There is no reason why we could not have had pervasive planning reform and sufficient building of high quality family friendly housing at low cost adequate to meet our needs. There is no reason why the financial capture of our polity could not have been avoided. There is no reason why the Bank of England and the FSA could not have been given the powers they needed to prevent the worst excesses that arose in the bubble lending environment, (yes, Eric, liar loans!).

Your argument is entirely specious. Its essential structure is "things could have been worse". It's not really an argument - it's a statement of the bleeding obvious. The point is that all the things that you need to take for granted in order to construe BTL as a good thing were not inevitable. What you are foundering on is referred to in the trade as the "ontological fallacy".

[mfs1959]

This is a very weak argument, which is based on the selective use of counterfactuals. There is no reason why we could not have had pervasive planning reform and sufficient building of high quality family friendly housing at low cost adequate to meet our needs. There is no reason why the financial capture of our polity could not have been avoided. There is no reason why the Bank of England and the FSA could not have been given the powers they needed to prevent the worst excesses that arose in the bubble lending environment, (yes, Eric, liar loans!).

Your argument is entirely specious. Its essential structure is "things could have been worse". It's not really an argument - it's a statement of the bleeding obvious. The point is that all the things that you need to take for granted in order to construe BTL as a good thing were not inevitable. What you are foundering on is referred to in the trade as the "ontological fallacy".

Do you suspect, as I do, that Justhisbloke may have a secret identity as a landlord?

[sleepwello'nights]

What you are foundering on is referred to in the trade as the "ontological fallacy".

What on earth has the existence of God got to do with BTL?

[mfs1959]

What on earth has the existence of God got to do with BTL?

Nice point, but:

Anselm's Ontological Argument for the existence of God posits God's existence based upon the fact that nothing can be conceived of that is greater or more perfect than God and that, as existence makes something more perfect than non-existence, God must therefore exist as conceived.

The 'ontological fallacy' is a construct in social philosophy denoting the mistaken belief that because you can name something it must exist.

I suppose one could link the two, but that is not an argument that I wish to disprove at this hour.

[bewildered_renter]

Do you suspect, as I do, that Justhisbloke may have a secret identity as a landlord?

And his description doesn't match my nigh on 30 years of renting.

We used to have security of tenure and fair rents, for one.

And the quality of rental properties has only improved in some cases. The big new build flat developments being an example, but those have all sorts of problems that I've mentioned in a few posts by now.

And the people we ave to deal with are the same shady, incompetent money-grabbers they always were.

[justthisbloke]

This is a very weak argument, which is based on the selective use of counterfactuals. There is no reason why we could not have had pervasive planning reform and sufficient building of high quality family friendly housing at low cost adequate to meet our needs. There is no reason why the financial capture of our polity could not have been avoided. There is no reason why the Bank of England and the FSA could not have been given the powers they needed to prevent the worst excesses that arose in the bubble lending environment, (yes, Eric, liar loans!).

Sure, if the world of the past twenty years had been different then, yes, things would be different. If planning laws were different, FSA regulation better, and BOE interest rate policy were different then, sure, the world would be different.

All I was saying was that, ceteris paribus, ASTs, BTL mortgages and willing landlords have made things better for renters.

[justthisbloke]

Do you suspect, as I do, that Justhisbloke may have a secret identity as a landlord?

Happy to confirm that you are adrift with that suspicion! I have never bought or sold a house, flat or other property. My only dealings with estate agents have been with lettings agents.

Edited August 31, 2012 by justthisbloke

[porca misèria]

Your argument is entirely specious. Its essential structure is "things could have been worse".

Not could have been. Things were much, much worse, in the 1980s before the introduction of the AST.

A few privileged folks got a very good deal, while the open market for the rest of us not on that bandwagon was a nightmare with no protection for anyone.

[mfs1959]

Happy to confirm that you are adrift with that suspicion! I have never bought or sold a house, flat or other property. My only dealings with estate agents have been with lettings agents.

In that case. my apologies.

[(Blizzard)]

Anyone renting has lot to thank BTL mortgages, AST contracts and landlords for.

Back before these things existed, renting was a major PIA. There was little property to chose from, standards were very poor and costs were high. These days renting is a comparative dream and, as bigger companies and professionals come to dominate the market it can only get better.

Yes, and were it not for the cholera virus, it would be much harder to get cholera.

Without the proliferation of landlords, renting would be unnecessary for many people.

Landlords provide the solution to a problem they create, not something they should be thanked for.

It's ludicrous to suggest that landlords somehow restrict housing.

Landlords increase the demand for the same fixed supply of land. That pushes up the price.

Which price, where and by how much, is more difficult to say, but you cannot escape this basic fact.

On aggregate:

More people want houses -> houses more difficult to get.

True, the banks' lending policies re BTL do increase prices for some types of OO property

but I suspect that had they not invented BTL, they'd have chucked the same credit at OO mortgages and you'd have seen the same price increases.

If housing wasn't available as an investment you really think the same amount of money would have been poured in?

(and yes my argument about landlords applies equally to flippers, it's the same basic business model)

Sure, if the world of the past twenty years had been different then, yes, things would be different. If planning laws were different, FSA regulation better, and BOE interest rate policy were different then, sure, the world would be different.<br style="line-height: 17px; "><br style="line-height: 17px; ">All I was saying was that, ceteris paribus, ASTs, BTL mortgages and willing landlords have made things better for renters.

And where did all these new renters come from?

Every home occupied by a landlord is unavailable to an owner occupier. That means, (roughly speaking and on aggregate), a landlord has turned an owner occupier into a tenant.

What marvellous philanthropy.

As a result, it isn't even clear that landlords reduce the cost of renting relative to buying.

What is absolutely clear is that their net effect on the market is to push up the cost of housing.

Edited August 31, 2012 by (Blizzard)

[Bland Unsight]

Sure, if the world of the past twenty years had been different then, yes, things would be different. If planning laws were different, FSA regulation better, and BOE interest rate policy were different then, sure, the world would be different.

All I was saying was that, ceteris paribus, ASTs, BTL mortgages and willing landlords have made things better for renters.

If your argument is that all other things being equal ASTs are a good thing, then I still think that it is more complicated than that. Whilst the rights for the renter are better than the pre-AST rights, it is far from ideal if there exists little if any mechanism for a renter to acquire one way or another some security of tenure.

Secondly, BTL is a massive contributory factor to this mess and in no way a good thing. If wannabe landlords had not been able to buy these houses they would not have stood empty. Someone else would have bought them, and seeing as we have had a net transition from owner occupiers to private rental sector it seems reasonable to argue that the BTLers bid up prices higher than owner occupiers alone would have as clearly the BTLers won the auction.

At a deeper level than this my concern is the extent to which we have so happily gone along with a trebling of house prices based on a willingness to take on far higher levels of debt for much longer. Why did we do that? Was it a good idea in any sense?

IMO it was a bloody stupid idea. One of the reasons that it happened was the introduction of four new classes of borrowers; very-high LTV, liar loans, interest only without repayment vehicle and buy-to-let.

The banks own the mortgaged houses and it benefits the banks if the mortgages are larger because then more interest is paid. BTLers are just a proxy for the banks in the banks' successful campaign to claim a larger share of our earned income. The advent of widespread bank-backed ownership of UK housing at these prices is not a good thing, it's a nightmare.

[mfs1959]

If your argument is that all other things being equal ASTs are a good thing, then I still think that it is more complicated than that. Whilst the rights for the renter are better than the pre-AST rights, it is far from ideal if there exists little if any mechanism for a renter to acquire one way or another some security of tenure.

Secondly, BTL is a massive contributory factor to this mess and in no way a good thing. If wannabe landlords had not been able to buy these houses they would not have stood empty. Someone else would have bought them, and seeing as we have had a net transition from owner occupiers to private rental sector it seems reasonable to argue that the BTLers bid up prices higher than owner occupiers alone would have as clearly the BTLers won the auction.

At a deeper level than this my concern is the extent to which we have so happily gone along with a trebling of house prices based on a willingness to take on far higher levels of debt for much longer. Why did we do that? Was it a good idea in any sense?

IMO it was a bloody stupid idea. One of the reasons that it happened was the introduction of four new classes of borrowers; very-high LTV, liar loans, interest only without repayment vehicle and buy-to-let.

The banks own the mortgaged houses and it benefits the banks if the mortgages are larger because then more interest is paid. BTLers are just a proxy for the banks in the banks' successful campaign to claim a larger share of our earned income. The advent of widespread bank-backed ownership of UK housing at these prices is not a good thing, it's a nightmare.

This is actually a very fair summary of the problem.

I might take slight exception to the way that the banks are painted as the source of the problem as all banks do is lend money. One might more accurately look at those companies that lured people into BTL with the promise of getting rich quickly. That said, I do like the way that you depict BTL landlords as the tools of the banks.

[tim123]

If your argument is that all other things being equal ASTs are a good thing,

No that isn't the arguement.

The point is that without ASTs there was almost no market, so there is no possibility of things being equal.

The choice is:

Little security of tenure and a supply of houses to rent

or

Security of tenure and little choice of houses to rent

tim

[Bloo Loo]

No that isn't the arguement.

The point is that without ASTs there was almost no market, so there is no possibility of things being equal.

The choice is:

Little security of tenure and a supply of houses to rent

or

Security of tenure and little choice of houses to rent

tim

so BTL is a poor investment, unless the tenants have few rights for the cash?

[Lepista]

No that isn't the arguement.

The point is that without ASTs there was almost no market, so there is no possibility of things being equal.

The choice is:

Little security of tenure and a supply of houses to rent

or

Security of tenure and little choice of houses to rent

tim

I wonder what would happen now, if the AST laws were revoked...

lots of choice of properties to rent, and security of tenure....

Perhaps then we would get the HPC, and people would not need to rent.

[Bland Unsight]

No that isn't the arguement.

The point is that without ASTs there was almost no market, so there is no possibility of things being equal.

The choice is:

Little security of tenure and a supply of houses to rent

or

Security of tenure and little choice of houses to rent

tim

That's a totally arbitrary analysis. You've assumed that AST law has to be as it is and cannot be reformed. You've further assumed that of all the possible arrangements that are in theory possible only two "choices" can actually exist, (neglecting most obviously a mixture of those two choices).

Clearly AST did correlate to an increase in the amount of PRS housing. At the same time it has correlated with an improvement in the quality of much of that PRS housing. However, that does not preclude the possibility that ASTs have struck the balance between tenants and landlords interest too far in landlords' favour.

However, the ungodly alliance of ASTs and buy-to-let lending had led to a situation which presumably nobody intended, which is rather than create investment in the PRS, ASTs have facilitated speculation on house prices, and worse still highly leveraged speculation.

In light of the damage that was the end result of all this speculation (we trashed the economy) the size and make up of the PRS is pretty small beer. ASTs matter because they were just one small part of a larger f***-up.

[tim123]

so BTL is a poor investment, unless the tenants have few rights for the cash?

You need to try that again.

I have no idea what point you are trying to make

tim

[tim123]

That's a totally arbitrary analysis. You've assumed that AST law has to be as it is and cannot be reformed. You've further assumed that of all the possible arrangements that are in theory possible only two "choices" can actually exist, (neglecting most obviously a mixture of those two choices).

Clearly AST did correlate to an increase in the amount of PRS housing. At the same time it has correlated with an improvement in the quality of much of that PRS housing. However, that does not preclude the possibility that ASTs have struck the balance between tenants and landlords interest too far in landlords' favour.

That may be true, but IMHO the one thing that ASTs did that opened up the market was the removal of security of tenure.

LLs do not want to rent to tenants that they cannot get rid of as it buggers up their exit strategy. Having a sitting tenant devalues the property that they reside in, so you don't want to sell on with one.

And ISTM that it's imposssible to have security of tenure without rent controls, as otherwise a LL could circumvent the security problem by jacking up the rent until the tenant can't pay. And investing LLs aren't prepared to let with rent controls.

So what part of the AST terms could be modified in tenant's favour without affecting market availability?

tim

[Bland Unsight]

That may be true, but IMHO the one thing that ASTs did that opened up the market was the removal of security of tenure.

LLs do not want to rent to tenants that they cannot get rid of as it buggers up their exit strategy. Having a sitting tenant devalues the property that they reside in, so you don't want to sell on with one.

I think you just made my point. Further, these are exactly the kind of amateurish speculators that we do not want in control of the private rental sector. Your advocacy of the status quo is more damning than anything I would have posted.

And ISTM that it's imposssible to have security of tenure without rent controls, as otherwise a LL could circumvent the security problem by jacking up the rent until the tenant can't pay. And investing LLs aren't prepared to let with rent controls.

So what part of the AST terms could be modified in tenant's favour without affecting market availability?

tim

Are you joking? "Investing landlords"? House prices have tripled. Wages have barely got out of bed. Do you seriously think that the correct frame of reference is how we can make sure that we keep the existing number of over-leveraged speculators in the market? The only game in town is getting prices back down. Who the hell wants to go on like this?

You can't see the wood for the trees. If the banks had proposed to borrow billions from the wholesale funding markets, buy up so much residential property that they inflated the biggest asset bubble in history, pricing owner occupiers out of the market in the process and then started gouging everyone for larger rents because of the high house prices, hopefully we would be up in arms.

In fact that's exactly what happened except that when private investors decided that the banks' model was daft and refused to continue to extend funding the Bank of England stepped in to keep the game going, and it has carried on for three years further and counting.

How would I change ASTs? I'd make sure that the landlord could only be a large, well regulated commercial concern, preferably backed by a UK pension fund or similar that was looking for a low yielding asset paid out like an inflation proof perpetuity and paid out in sterling. The kind of chancers that we presently have (sorry "investing landlords") would have to put up with security of tenure and rent controls or take their financial acumen and turn a buck somewhere else. (More difficult to do without a 9:1 gearing ratio care of BM Solutions or some other state owned BTL lender). What would that do to market availability? It would probably improve it.

Either you're a landlord who doesn't see that they are just a small part in a big war, or you're a slave too happy in your own servitude to consider that Dr Pangloss was part of a satire and Voltaire didn't really think the everything must be for the best given that this is the best of all possible worlds.