Rent Controls Would Spell Disaster For Thousands Of Buy-To-Let Investors

[Bear Goggles]

Apologies if already posted.

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11310826/Rent-controls-would-spell-disaster-for-thousands-of-buy-to-let-investors.html

Putting aside for a moment the rights and wrongs of rent controls in general, it's interesting how they have entered into the realm of acceptable discussion over the past few months. One might conclude that the ground is being prepared for them.

A couple of things that jump out at me about the article:

Civitas has proposed a fairly mild form of rent control. Capping rent rises to the inflation rate. How does that work in a deflationary environment? Also, this would obviously be meaningless unless it was made more difficult to evict tenants every 6-12 months, so rent controls of any sort would have to coincide with significant reform of tenancy law.

The author focusses on interest rate rises, it seems rather unlikely that rates will rise any time soon unless there is some unforeseen economic event. Also, the notion that rents will naturally rise when interest rates rise is clearly a fallacy. They didn't fall when interest rates fell, so why the assumption that they are directly correlated?

[winkie]

I don't think that would make much difference, what Landlords want is a regular stable guaranteed rent from responsible tenants.....they want capital appreciation over and above annual inflation, low interest and tax rates.....falling prices, higher interest rates or taxes is what will stop the BTL market in its tracks.....more property at lower prices will then come back onto the market for others to buy.

[Killer Bunny]

Can't wait to read of a tenant who got 000s off a LL to leave.

[justthisbloke]

The article you link to is entirely based on the false premis that landlord costs set rents.

The Civitas proposals include lifetime tenancies to match the capped rent.

As a free-marketeer, I don't warm to these ideas.

[spyguy]

No need.

Carry on reducing LHA rent limits, aligned to local wages.

[long time lurking]

Can't wait to read of a tenant who got 000s off a LL to leave.

http://www.bbc.co.uk/news/uk-england-london-24474380

Council offers tenants up to £38,000 to buy privately

Harrow Council has three types of incentive to free up council housing stock

Continue reading the main story Related Stories

• London 'needs 800,000 new homes'
• Council plan is 'social cleansing'
• London councils 'moving tenants'

Harrow Council in north-west London is offering council tenants payments of up to £38,000 to buy their own home on the private market.

[@contradevian]

http://www.bbc.co.uk/news/uk-england-london-24474380

£38k in Harrow?

Sorry but secure Council tenancy is worth far more.

Oh dear there is me writing out of 'self interest.' That is strictly not allowed for the lower orders!

Edited January 3, 2015 by aSecureTenant

[rxe]

As an "amateur" landlord, I really don't understand the economics of driving tenants out. We have tenants in who have been there for 5 years, they look after the place, and fix all the small stuff themselves - clearly we sort the big stuff. I haven't raised the rent in that time, despite the agent whimpering that we are about 15% under market at the moment. If they move, we've got to mess around the agents fees, inventory, re fitting the place, loads of expense. They know they've got a good deal, and they are in no hurry to move - win all round.

[Bear Goggles]

Here's another (poorly written) article in the Independent.

Almost nobody in the UK is opposed to rent controls for housing

There is overwhelming political support in the UK for the introduction of legal rent controls on privately rented housing, new opinion research has found.

According to the survey conducted by the pollster Populus, fewer than 10% of British people are against mandatory legal limits on housing rents.

Pretty dodgy reporting really, given that 34% of people don't have an opinion on it.

But rent controls are clearly entering into the political debate. In the absence of a massive national building programme, it is hard to see how a political party can offer a coherent alternative to those caught forever working to pay nosebleed rents without the perception of sticking up for greedy landlords. Each year homeownership falls and pressure on housing rises. It's just a matter of time...

Just to be clear, I am not in favour of rent controls. I think that we need to build enough housing to accommodate our rising population in places where people want to live (and that means the green belt). I am in favour of a LVT and against HtB and other government subsidies to buyers. But I think it's clear that none of this is going to offer a solution in the short term. Hopefully my children will benefit from a more enlightened political approach to housing in the UK, for those currently in their 20s and 30s, I think voting for government intervention is actually a logical position to take. This country needs a BTL enema, central bankers ensured the market didn't flush them out in 2008, so now it's the turn of the electorate to have a go.

Just another example of how our political class are about to reap what they have spent the past 15 years sowing.

[The Knimbies who say No]

I tweeted Dyson asking him why he felt LLs achievable rents are related to their cost bases, no reply..

And Dyson is arguing against rent rises capped at merely inflation btw, very few places have seen rent rises anything like that over the medium term. So Dyson really wants a tenants assets to be obtainable on any terms.

I'm not really in favour of rent controls per say but it seems they are a somewhat inevitable part of a reformed rental sector(greater security of tenure) as a means of preventing de facto evictions by absurd rent increases proposals.

[davidg]

Civitas has proposed a fairly mild form of rent control.

Looks to go beyond what is tolerated in Euro counties I'm familiar with. Most rent controls tie the increases to the sector inflation rate not the CPI or something. that woudl address Joan of the Tower's complaint of evictions by absurd rent increases.

Anyway address housing supply, which in turn means addressing excessive immigration and address the bailout the banking sector got in 2008 before adding a sticking plaster of rent controls that won't have the desired results.

[Si1]

I tweeted Dyson asking him why he felt LLs achievable rents are related to their cost bases, no reply..

And Dyson is arguing against rent rises capped at merely inflation btw, very few places have seen rent rises anything like that over the medium term. So Dyson really wants a tenants assets to be obtainable on any terms.

Because he's a personal finance editor? Replacement for the much despised ian cowie I presume...

[The Knimbies who say No]

Looks to go beyond what is tolerated in Euro counties I'm familiar with. Most rent controls tie the increases to the sector inflation rate not the CPI or something. that woudl address Joan of the Tower's complaint of evictions by absurd rent increases.

Anyway address housing supply, which in turn means addressing excessive immigration and address the bailout the banking sector got in 2008 before adding a sticking plaster of rent controls that won't have the desired results.

Yes, I'm sceptical of rent controls as described as they seem to set expectations of CPI/RPI rises when this is not the norm. Sector inflation rates are also imperfect via local authority benefit rates but it seems a fairer benchmark overall. I'd expect decent landlords in many areas would not enforce rises in any case.

It seems to me that there is significant change in the wind but I am not at all confident that it will be clearly for the better, having read Labour's proposals for "3 year tenancies".

[The Knimbies who say No]

Because he's a personal finance editor? Replacement for the much despised ian cowie I presume...

In fairness he doesn't seem to tweet much so his lack of response is not unexpected. I think he ought to expect to be taken to task for producing garbage like that though.

[Si1]

In fairness he doesn't seem to tweet much so his lack of response is not unexpected. I think he ought to expect to be taken to task for producing garbage like that though.

Well yes, but personal finance sections in newspapers have been wrong headed since the Napoleonic wars, I do believe

Did you ever read Ian Cowie?

Edited January 3, 2015 by Si1

[Si1]

Yes, I'm sceptical of rent controls as described as they seem to set expectations of CPI/RPI rises when this is not the norm. Sector inflation rates are also imperfect via local authority benefit rates but it seems a fairer benchmark overall. I'd expect decent landlords in many areas would not enforce rises in any case.

It seems to me that there is significant change in the wind but I am not at all confident that it will be clearly for the better, having read Labour's proposals for "3 year tenancies".

Agreed. The housing market cycle appears set for tinkering on the downside now. Mega cyclical and very destructive. They'll never just let a market be...

However since I do believe that an economic war was declared against the younger half of society then I will not resist the inevitable generational counter attack.

[The Knimbies who say No]

Well yes, but personal finance sections in newspapers have been wrong headed since the Napoleonic wars, I do believe

Did you ever read Ian Cowie?

Fair point.

[Si1]

Fair point.

It's funny, in the same edition of a newspaper, commonly the telegraph, you'll have well qualified academic economists and business leaders discussing fine points of policy using properly argued and derived fine points; agree or disagree with them, they do have constructed justified positions. They have strong economics degrees or similar, sometimes prestigious postgraduate degrees, hard experience both academically and commercially. This is the business section. They can be picked at but it requires careful thought.

And then flip a few pages to personal finance and it turns into the Teletubbies with some privileged blonde floozey named Anne stressing over which btl areas of London to invest her family nest egg with the numeracy and nuance of someone with a btec diploma in art history from Croydon further education college.

Edited January 3, 2015 by Si1

[Dorkins]

since I do believe that an economic war was declared against the younger half of society then I will not resist the inevitable generational counter attack.

Landlord pressure groups have done everything they can to prevent politicians from turning private renting into the good value for money, domestically stable form of tenure it could so easily be. This has significantly harmed the quality of life of millions of people. Those people have memories and votes. The counterattack is inevitable and will likely include increased taxation, longer tenancies and some degree of price control. Landlords need to stop whining and start factoring regulatory risk into their business plans because they don't have the numbers to win this one.

[Exiled Canadian]

Landlord pressure groups have done everything they can to prevent politicians from turning private renting into the good value for money, domestically stable form of tenure it could so easily be. This has significantly harmed the quality of life of millions of people. Those people have memories and votes. The counterattack is inevitable and will likely include increased taxation, longer tenancies and some degree of price control. Landlords need to stop whining and start factoring regulatory risk into their business plans because they don't have the numbers to win this one.

I agree.....there will be a tipping point soon when BTL tenants start to be seen as a block of voters worth courting (much as current policy is often "pensioner friendly"),

[ProleStore]

Looks to go beyond what is tolerated in Euro counties I'm familiar with. Most rent controls tie the increases to the sector inflation rate not the CPI or something. that woudl address Joan of the Tower's complaint of evictions by absurd rent increases.

Anyway address housing supply, which in turn means addressing excessive immigration and address the bailout the banking sector got in 2008 before adding a sticking plaster of rent controls that won't have the desired results.

Rent controls aren't an economically rational solution, but they are no less rational than a massive programme to build houses which, by and large, aren't needed.

The problem is not a shortage of supply, but an excess of demand. The excess demand is not (for the most part) demand for housing. It is demand from landlords for a work-free income from the state. The correct way to tackle the problem is therefore to reduce that demand.

The right solution (or at least, the best proven solution) is a land value tax, which would force people to pay the market price for their unearned income, leaving a net income of close to zero. Failing that, any measure to restrict or tax the earnings of landlords is the next best thing, although the positive effects will be smaller and the negative effects greater.

Building houses to feed the bubble will work, but only by flooding the market, and making hoarding unprofitable. However, it is ultimately malinvestment, and a waste of time and resources. It is like allocating 10% of the economy to grow tulips in order to dampen out tulipmania.

Just to be clear, I am 100% in favour of an end to planning restrictions and consequently a massive increase in private sector house building, both on moral grounds and because the housing emergency is so desperate. It is also perhaps the most politically acceptable solution. It calls the bluff of the faux-marketeers, rather than fighting against them, and allows plausible deniability when the landlords are inevitably wiped out.

In fact, it is what I would do if I was in government, along with a public sector building programme. That's just realpolitik though, and it doesn't change the basic facts.

[Si1]

Landlord pressure groups have done everything they can to prevent politicians from turning private renting into the good value for money, domestically stable form of tenure it could so easily be. This has significantly harmed the quality of life of millions of people. Those people have memories and votes. The counterattack is inevitable and will likely include increased taxation, longer tenancies and some degree of price control. Landlords need to stop whining and start factoring regulatory risk into their business plans because they don't have the numbers to win this one.

The last straw for me was that Tory landlord mp filibustering the new tenancy laws that had prior cross party agreement

The moral corruption behind that action was eye watering

[Dorkins]

The last straw for me was that Tory landlord mp filibustering the new tenancy laws that had prior cross party agreement

The moral corruption behind that action was eye watering

This Parliament has been a huge wasted opportunity. The Blair-Brown years were a hyperactive spending spree with a packed legislative schedule. By contrast, the Coalition had no money to spend and a very modest legislative programme. They should have been using this quiet period to intelligently crack on with reforms that don't cost taxpayer money like improving the laws that govern the private rented sector.

Edited January 3, 2015 by Dorkins

[The Knimbies who say No]

The last straw for me was that Tory landlord mp filibustering the new tenancy laws that had prior cross party agreement

The moral corruption behind that action was eye watering

Philip Davies (Con, Shipley)

[Dorkins]

Philip Davies (Con, Shipley)

With some help from Christopher Chope (Con, Christchurch)