Friday, September 10, 2010

Property lobby organisation thinks it’s good people are priced out

Government needs to support private rental sector

The government has missed an opportunity to support the fledging professional private rented sector the British Property Federation (BPF) has warned. The property lobby organisation said it was disappointed the Treasury would not help boost the UK’s supply of rental homes homes. The Treasury's decision follows a consultation initiated by the previous government, which was looking at ways of boosting investment in the private rented sector. The BPF claimed cost-effective measures of encouraging investment included encouraging institutions such as pension funds to invest in homes for rent and the disaggregation of stamp duty land tax (SDLT) on the bulk purchase of homes.

Posted by jack c @ 11:17 AM (1261 views)
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12 thoughts on “Property lobby organisation thinks it’s good people are priced out

  • I’ve just posted another article in the same vein. Isn’t it strange how the people who are assumed to be “wealthy” i.e. landowners, are at the front of the queue with the begging bowl?

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  • Big corporate money angling to get an unfair advantage..

    ..hopefully they’ll be ignored.

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  • Er, oops. What an idiot. Posted on the wrong thread! Sorry, sorry. 🙂

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  • “disaggregation of stamp duty land tax (SDLT) on the bulk purchase of homes”

    That would actually be a very good idea. One of the constant frustrations about the UK’s private rental sector is that it’s made up almost exclusively of small-scale “mom and pop” landlords (as the Americans might say). No doubt some people think that’s a good thing – the same people who think Sainsburys Local is evil because it killed off their local corner shop – but I disagree. Large companies renting out whole streets or whole tower blocks would provide a more consistent quality of service. Customer complaints would be treated more fairly because large companies would have a reputation to uphold. As a side benefit, it would also allow people who aren’t on the ladder to get on the ladder in small steps by buying shares in those companies.

    Large rental companies are common in the rest of the world (especially in the USA). Britain should fix this once and for all.

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  • There might be something good about facilitating institutional investors into the private rented sector, although there would have to be a social aspect to it. I’m thinking along the lines of the Dutch Private Rented Sector which is dominated by institutional money. Of the (circa) 15% of the total housing stock in the PRS in Holland about 2/3 is owned by pension funds and insurance companies. These units were purpose built for the PRS: whole streets of row houses and whole blocks of appartments, dozens at a time, part of the mix on large scale newbuild sites. The units are rented out for open ended periods (i.e. tenants can stay for as long as they like and cant be booted out arbitrarily) at capped rents (i.e. cheaper than true open market rents, but more expensive than social rents). This means they are a stable tenure, proffessionally managed with a much lower turnover rate than in the UK. There are commonly waiting lists to get such a house. The benefit is that it creates a responsible and respectable PRS, thus marginalising rogue landlords.

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  • greenmind – thanks for the info about the Netherlands. One thing I don’t understand – why do these private companies offer “cheaper than true open market rents”, and why is there a waiting list? Surely the price would just rise to prevent waiting lists from forming?

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  • Drewster, my understanding (which may not be 100% perfect) is that there is a sort of contract from the outset that goes something like this:
    – 1 newbuild site: 30 hectares = 1,000 new homes, needed by town x to meet satisfy 10 year housing requirements;
    – Council, developers, housing associations and institutional investors gather around the table and divy it up (all is dependant on planning permission so private sector players have to accept design standards, infra costs and cross subsidisation from market sector to affordable sector;
    – Institutional investors have bags of cash they want to park in a safe place for 15 years, willing to accept a modest rate of return as the money will be safe as houses (counter balances more risky investments in portfolio);
    – 10% of the homes earmarked for the PRS (i.e. institutional investors): Council considers it a useful tenure to include in the mix (balanced communitities, some people want to rent even though they may be able to afford to buy), plus a useful source of finance to tap into;
    – PRS (i.e. institutional investors) get slightly cheaper deal on their land in return for restrictions: i.e. capped rents;
    – Units may be sold off on the open market eventually, but not during the first 10 years.

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  • There is a waiting list due to the capped rent and the fact that there is still a housing shortage in NL. The other 1/3 of the PRS is made up of “huisjesmelkers” (“house milkers”) i.e. small time landlords like in the UK (sometimes with baseball bats) who take advantage of the housing shortage and push rents up as high as they will go, thus putting their tenants under financial pressure.

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  • mark wadsworth says:

    Drewster is quite right about blocks of flats being sub-divided amongs Moms and Pop BTLs (and he has been right every time he suggests it).

    It’d be far better for all concerned* if one business owned the whole block and everybody rented from the same landlord – and as D says, if you want to invest in the building, then just buy shares in the company.

    * For example, you might rent Flat 3 quite happily from Mr A, but what do you do it the neighbour in Flat 4 is a complete idiot who rents from Mr B? Neither you nor Mr A have any leverage over Mr B or his tenant. If one company owned the whole block and enough people complained about the ar5ehole in Flat 4, then no doubt he would get chucked out. And so on.

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  • Another advantage of a company owning the block would be a professional approach to management, repairs, etc; and remove the prospect of mendacious and incompetent individual landlords. Mind you, my individual landlord is very good.

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  • mark wadsworth says:

    Drewster, LTF, warming to the theme, it’s a question of transaction costs.

    If tenant rents from property company which owns the whole block, then either he’s reasonably happy and pays the rent (and vice versa) or he moves out/is chucked out. The company does one set of accounts and declares the profits for tax. Job done.

    If the tenant rents from an individual landlord there is hassle in both directions (possibly with a letting agent interposed), and there is then another layer of hassle between the sub-landlord and the manager of the block, the freeholder and between separate sub-landlords; and hassle between each individual landlord with his own mortgage lender and doing his own tax returns. There is just no end of bickering.

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  • tenyearstogetmymoneyback says:

    I agree completely with Drewsters comments and those that follow them.
    To me REITS were a huge disappointment as when they were first announced I thought it would be a way to
    invest in property without becoming a small time landlord (which I could have done by renting out the house I sold in 1999).
    It would be great to be able to invest without buying a whole house, or if you did to get enough income to rent a different one.

    I thought Drewsters “Mom and Pop” analogy was great. Why does Europe lead in Telecomms ? Because having had Mom and Pop
    TV cable networks the USA applied the same model to their Mobile Phone networks. At one time you could enter a
    raffle to win the Mobile Phone Licence for your local village !

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