Wednesday, 25 January 2012

Something Very Bad Is Going To Happen

Some time ago, I was standing on my tiny balcony which, being apparently made of chicken wire seemed to float above the world, and gazed across at a host of empty newbuilds, pondering the block I called Dovecot Towers. I thought to myself: I got it right.

Quite early on, I spotted the effect that ill-considered, mass buy-to-let property investment would have on the UK’s economy. Despite suspecting that economics is up there with voodoo and homeopathy, I predicted (well, not just me) that the property downturn was a coming in, and was vindicated.

I mention this because the list of keywords (ie the phrases people google to find rentergirl) indicates that many desperate people are seeking help by using variations on phrases like ‘I am afraid of my landlord,’ and ‘I am afraid I will have to move because of benefit cuts.’

I have never seen so many people indicating they are really scared, if not overtly terrified for their security. Those affected by housing benefit cuts have much to fear, and I can’t say anything that will make things better: this policy is stupid, spiteful and misguided. It infantilises adult claimants, placing a huge proportion of the claiming population in an impossible position.

Firstly, flatshares for older people (and that can mean anyone over 30) are often hard to find. Secondly there are not enough house-share suitable homes – and families need them. Thirdly, having claimants for tenants is forbidden under many buy-to-let mortgages – did you know that?

And then there’s the second part of this rising fear: ‘I’m afraid of my landlord.’

Add that to the above situation, where tenants are being expected to ask for cuts in rent, or to tell their hostile overloads that they lied, and are claiming, or have lost their jobs, and you can perhaps see why this might end badly. How, in times of rising unemployment, do tenants approach a landlord they already fear, who is acting like the grand-high-ruler of their destiny, and say please sir, can you lower my rent?

Many landlords have held on to the property they bought when prices were soaring, and are now bracing themselves for an interest rate rise which will mean they must either raise rents, go bankrupt or swallow the loss (and this isn’t sympathy – they shouldn’t have been so stupid, but it’s tenants who will, as ever suffer.)

I must be a genius, but here’s what to do: bring back rent officers to lower/cap rents. Don’t cut the benefit which is paid to landlords in any case. Don’t place the vulnerable ie potentially homeless on the front line of this. Don’t leave it to terrified people to sort this mess out. Housing is not like food: you can’t go freeganing/dumpster diving, the only other option to claiming Housing Benefit is rough sleeping, which will increase.

Tenants are being forced to move when nobody: not landlords, councils, shared houses, people looking for lodgers in two bed newbuilds – accepts benefit claimants for tenants. This policy will end badly: really, really badly, and I really, really hope I’m wrong this time.


Dazzla said...

"...either raise rents, go bankrupt or swallow the loss... "

Sacrificed on the altar of the 'free market'. Except it isn't, of course. Total control of blocks of housing (as happened up until the 1980s in Britain) isn't the only mode of state interference. The Bank Of England's base rate, heavily influenced by political considerations, has been on the floor since March 2009 meaning that those who have savings are effectively lending their money towards their bank's reserve fraction for free while the banks are either not lending or haven't significantly lowered their consumer loan rates despite enormous chunks of free money from the taxpayer. While no-one can say for sure who would benefit from a truly free market, even whether such a thing is possible, it's certain that we don't have such a thing now.

It seems that while landlords continue to cling precariously to their under-performing investments, and while unemployment remains relatively low, rents will not fall. It'll take foreclosures, bankruptcy and resale at a lower price, possibly to those who don't need leverage and can pay cash.

As I was walking through an empty development yesterday, it suddenly struck me that all of these empty flats and houses might be had at a bargain price by someone with fluid cash reserves who happened to be in the right place at the right time.

I think we're about to see a massive concentration of residential property ownership. When that happens, when there's an oligopoly: what then?

RenterGirl said...

Another thing to happen. And Dazzla, local authorities have already rejected buying up dovecots for use as social housing. So: will they be demolished, the sites re-used for better homes, ie for families and shared housing? And yes, an oligopoly is upon us.

Ben Reeve-Lewis said...

Totally agree with all points and to add on your comment on older tenants, I read with alam yesterday that Landlord Zone have started a facebook app for landlords to use to search for tenants using the profile info gathered in a central place from a person's page, which, as they state includes "Finding tenants in the right age group"

RenterGirl said...

And what, I wonder is the 'right' age-group? Young people=party people, older=awaiting dementia, middle-age=having families. So no tenants will win the flat? Craziness. Still, the next crash in that property bubble might make landlords re-examine their prejudices.

Dazzla said...

"...And Dazzla, local authorities have already rejected buying up dovecots for use as social housing. So: will they be demolished, the sites re-used for better homes...?"

Thats an interesting question. Property developers have been steadily building an oversupply of residential accommodation for the last 15 years. Because of the proliferation of high-density dovecots and 'executive penthouses' (read: dovecots with bigger windows) surely there mush be a massive surfeit of flats in city centres? Given that the population of Britain isn't expanding so quickly, how is it that these flats aren't dirt cheap? In Manchester, Leeds and Liverpool a small two-bedroom flat in a new-build goes for £700-£900 a month, in London for 1400+.

Could it be that the letting agencies (who already operate a virtual oligopoly *and* oligopsony) are acting as an informal cartel, fixing both Landlord fees and rents?

Why do we allow these greedy, half-educated idiots to control such an important part of our lives?

Dazzla said...

I was walking past a letting agent the other day which had a sign outside promising landlords income even when their piggy bank was empty, and I thought "How can they promise that? Surely it's not coming out of their profits?" Then it struck me. The agent is charging the landlord a very high commission and paying back a sum of it when the place is empty. This means that as the tenant, you're paying an artificially high rent part of which goes into a fund to subsidise the landlord and agency when there's no rent payer.

So effectively, you're paying for the landlord's house even after you've left. I'd never use a letting agency that promised this. They might as well post a sign saying "We rip tenants off with artificially high rents"

Emma said...

I always find it hugely ironic that the reason that a lot of this empty housing can't be used as social housing because it fails to meet the government's minimum standards for council housing - most of it is too small, and too flimsily built. There's no room in the poky kitchens for space to sit and eat, no room in the 'open-plan' living spaces for the two three-seater sofas and space for dining that the government says is needed for 'normal' life.

Seems like anything to do with housing - building it, selling it, renting it - is just complete insanity in this country.

RenterGirl said...

Dazzla: you are right about the monopoly I've written about this in previous posts. it's hard to find a landlord no using an agent now.

As for the fees of LA's - nothing surprises me. I once found a landlord on website, who asked me to get in touch with his LA. When asked why he placed ads elsewhere, he said they were doing a bad job. I said why not...etc.

Emma - I have written about this in previous posts when I lived in the newbuild I called Dovecot Towers (the nightmare haunts me still) and for the press.

Dazzla said...

the thing that really, really annoys me about all this is that without the tenant, neither the agent nor the landlord would have any of this money to play monopoly with: remember that when you're being bullied, patronised and ripped off by letting agents: You're the source of the money that makes all this possible. The letting agent's profit comes from playing the tenant agains the landlord when in reality tenant and landlord have compatible in this relationship: the tenant wants a lower rent and the landlord wants more rental income. Both of these could be satisfied instantly by cutting the agent out of the deal. The more successful the agent is (at making money: we shouldn't forget that this is their prime objective) the less successful both the tenant and landlord are.

Also, agents distort what is seen (simplistically) as the primary law of economics: the interplay of supply and demand. It's not in their interests to have supply evenly matched to demand: it's in their interests to create the impression of an undersupply of housing so they can take advantage of a scarce resource, because...where is the money coming from?

Sorry for the rants. This really pisses me off.

RenterGirl said...

Dazzla it pisses me off too. I can see a role for LA's - if and when they do a their job. Screening tenants, organising repairs, collecting rent, managing good tenant relations. Some very bad LA's encourage frequent tenant changeovers as they make more money that way, which is cynical. But then, they are not trained, or even regulated. And they should be.

Alex said...

If you tried to refuse tenants because they were black, or gay, or because you didn't like the source of their (legal) earnings, you'd be either sued or prosecuted or hounded by the papers. Either way, you'd be reduced to a greasy mark.

But discrimination on the basis of class is perfectly legal and nobody seems to care. HB/LHA paid to landlords was an astonishingly shit idea.

RenterGirl said...

Alex - that is so very true.

Ben Reeve-Lewis said...

My day job is prosecuting landlords for harassment and illegal eviction for a council in South East London. I started doing it in 1990 and left in 2001 to become a freelance housing law trainer and found my income knackered by the recession and bizarrely back in my old job after an 8 year gap.

The big difference in the intervening years that jumped out at me once I got back was the phenomonal rise in not only the amount of small independent letting agents but also the incidences of fraud amongst them.

Legal incomepetence I always expected from them, they have always focussed more on keeping landlords happy than tenants, little inconveniences like notices and legal procedures but this new crop set out with a will to make as much money as they can from whoever they can. Its a new breed. They have figured out that the council, who are forced to play by the legal book cant keep up with them if they create smoke screens by changing names of directors of companies regularly, create parent compnaies and then dissolve them and start new ones so you cant tell who is who, have fake offices on other paperwork, either those rent an office address ones or actually non-existent addresses, rent out properties that actuallly belong to housing associations, steal people's budgeting loans that they get from the DWP as a deposit, refuse to refund money when people change their minds.

I doorstepped one of our worst offenders a few weeks back when a woman with mental health problems came in to say she had paid fees up front and when she didnt like the look of the place they showed her they would give her the money back, and the completely unfazed manager smiled at me and said "In my view all tenants are scum".

Nice people

RenterGirl said...

And fun in Scotland where many pretend, or genuinely do not know that 'key money' or fees are actually illegal here.