Monday, 5 May 2014

Hooray For Labour – Sort Of.

So kind lovely Labour have realised that renting is horrible. As I've been saying hereabouts, renting is often a hideous experience because of the inherent insecurity, lack of stability, aka no control at all.

But the wonderful Labour care about us! Hooray!

So what are their plans?

Well, best of all they will copy the tried and tested Scottish model of no letting agent fees whatsoever at all payable by tenants. Landlords can cough up – it’s their business, they reap the profits, they must cover the expenses. No problem there.

Next – no above inflation rent rises, the notable exception being current buy-to-let mortgages and that’s one heck of an exception. Then rents rises can match inflation – no higher. Where it applies that’s mostly brilliant news.

The downside is that tenants will need to be strong (if not downright tough) when negotiating their initial rental price, because owners will know they are, in the future, limited to no more than inflation matching rises. The unintended consequence could be rising rents, ramped up at the first stage to defeat the ceiling. Hmmm...

Three year tenancies – also better. But not perfect. It’s not enough, really is it? Families need decades, to be able to remain in their home (and please can start to say home and not 'the property'?) for schools, supportive family etc. The business of letting out property is not for those in it for short term gains (no matter how hard they want this to be the case.)

Owners will only be able to evict tenants for transgressions such as lengthy rent arrears and anti-social behaviour. But in these new plans, rentiers can also state they need the property for family use or intend to sell up. Details are scarce, but it's easy to sneak and weave your way out of. It's what rentiers do already. To be effective and protective, this coda must enforced, with actual evidence produced to confirm either is true.

What's more, mortgage providers must idelly be compelled to remove their blanket prohibition on renting to claimants. There is no justification; it's simple prejudice - nothing more.

My other gripe? It's obvious, but this gesture by is quite cynical. Do Labour care about tenants? Not really. They care for our votes, which hardly makes them unique for politicians - 'politicos in obvious vote-candy gesture.' It's what they do.

So here's the thing. Labour have woken up to and aim to cater for the needs of tenants. But we need more. Tenants are not supine, cowed poodles, begging desperately for tiny tit-bits of luke-warm good news.

We were a sleeping giant - a monster newly conscious of our power. Now we know now how important we are and have grasped that in many marginal seats our vote is crucial. We will bestow our favours to those who listen and help us (that is put right the many wrongs we endure.)

And those who do not help, break their promises or ignore us?

Let us down we will bite back - we will bite you hard.


RenterGirl said...

'I agree with many of your comments. As a landlord, I agree that certain controls are necessary to protect tenants from the less scrupulous. Ultimately, that helps the better landlord almost as much as it does the tenant.'

Cheeky SEO spammer said this. Don't do it. I always delete.

Anonymous said...

Hooray Labour will fix the problem with their wealth of knowledge and experience of business and economic success. Name something economic Labour have touched that hasn’t been a disaster…

If you artificially control a market with fiscal penalties it distorts the market usually to the detriment of the weaker party (for that read poorer). It is supply and demand. To adequately control the price we need to increase supply, ie build more houses (or for the sake of completeness you can fix the problem by reducing the population but that’s extreme socialism!). If there were a surplus of properties 500,000 say it would limit prices and drive down rents, a benefit for owners and tenants.

I have no issue with increased tenancy lengths in principle but again beware of the law of unintended consequences. There are 5m British expats around the world. Picking a number for example, if 20% of them own homes that they want to return to ie they don’t want to sell their home (see I can use home as well) that’s a million properties. By the time you add all the costs and hassle of renting out the family home, ie fees, tax, increased insurance, storage for valuables, risk of a trashed property etc its marginally profitable. If there is an imposed risk that they can’t return to that home relatively easily then a significant percentage won’t bother. Take that many homes out of the rental market and see what happens to the prices…

No above inflation rent rises, oh for crying out loud, we’ve been here before and it was a disaster. Will there be a jump in rents, oh you bet, 20% would be my opener. (except if your renting to a company because that’s not an AST is an agreed term, so the price would be lower, that seems fair…) As for being tough which made me smile, er thank you for you kind offer, next. There’s a shortage of supply, therefore the purchasers get gouged, the more the market is restricted the more they get gouged.

In short another Labour economic miracle

RenterGirl said...

No. 'market control' works. I've read the Labour plans. If ex-pat owners want their property back to live in, they can have it. Otherwise...

The recession disaster might have happened on Labour's watch, but it's hard to blame them when the Tories wanted even more lax regulation. The pitiful whining of someone who's lost the argument.

If owners/rentiers don't like the rules, then they can hold onto their empty homes (oh yeah - that's going to be penalised too hooray!) or sell up to someone who does understand the business of letting property. In the past, ie before John Major's stupid reforms, home ownership was widespread. So there were less tenants.

Anonymous said...

With all due respect its quite easy to blame Labour for running deficit in a boom, destroying the pensions system (which incidentally has been the biggest driver of amateur landlords) and a host of other incompetencies. Note you chose to attack rather than defend (a perfectly valid tactic) but can you name something economic that labour have touched that isn’t a disaster?

I guess we will have to agree to disagree market control doesn’t work. I don’t mean legal regulation (for example the requirement to have a gas safety certificate is excellent and that should be extended to electrical) that is good and required. But manipulation of the pricing by control does not produce the desired affects, look at the mess that was created in the 70s by that policy.

As for having read the Labour policy, I’m impressed as RICS hadn’t and they were a key component of it. Sadly I think Labour’s is not a genuine concern for the tenants but as you hint in your first post a political ploy.

The population is more mobile than it was in the past, you can argue that its good or bad, personally I think its good. But to facilitate that you need a supply of good rental accommodation and that will decrease under Labours proposals as there will be no incentive to own it and also to build it.

Penalising owners of empty homes. That’s always interesting when that comes up. I think I agree in principle but its almost impossible to enforce. On a single property owned it is impossible. But the target is owners of multiple properties. Ok there needs to be a timescale, empty for? 6 months, 12 etc? Who is going to check and how? Is the house on the market for rent ie are they trying. Is the house in a company, any penalty can then be offset against tax or capital gain, (unless it becomes a criminal offence to leave a property empty, better not go on a long holiday or be hospitalized then…) Is the house habitable or under refurbishment (I have and do as policy take out the bathroom as soon as I’m renovating a property as it negates the tax). So if forced the landlord can remove the bathroom as cheap solution or the roof if a more certain solution is required. If that’s not permitted then it reduces my desire to renovate a property. Like I say agree in principle but very hard to enforce. (also there are areas of the north where you can buy houses for 20-30k and why, because no one at all wants to live there… The proposed solution for the South won’t work for the north).

So here’s a solution make it an offence to rent out a property, period. That completely takes out the nasty landlords and everyone can buy a house except they can’t because the fundamental issue is there is insufficient housing stock in areas where people want to live. The solution to that is not rent control its planning control.

space cadet said...

Less landlords = more homes for people (otherwise tenants) to buy. Owner occupation is the best investment. And prices wd drop. I'm all for seeing more properties taken out of the hands of landlords.

space cadet said...

And like all things, being mobile is good if you had any choice in the matter, yes. If you're moving on because you can't afford to live in the place you're in right now then .. oh you see the irony. Landlords are not the solution, they're a large part of the problem.

Anonymous said...

Space Cadet,

Nothing either probable governing parties will do will intentionally lower house prices, the banks can’t take the negative equity hit, they are still too weak. And don’t for a minute think I’m defending the banks, capitalism is risk reward. The reverse of reward is penalty and we didn’t see any of that. The truth of the matter is Gordon looked at the options in 2008 and didn’t fry the bankers because of the greater good, the risk to the country was too high, galling as that may be.

That aside the afore discussed policy proposed will not lower house prices as there is a fundamental shortage. Sorry to be the bearer of bad news but if you can’t afford it now with base rates at 0.5% there’s no chance when rates climb above 5% which is what is going to happen over the next 3-4 years, unless there is a radical change in your circumstances. The only way to fix that is to build more houses or reduce the population and the later isn’t going to happen. There is the risky card to play on foreign ownership. The government could produce a punitive tax rate on foreign owned homes (of which there’s a lot) that’s going to have some unintended consequences but its hard to predict exactly what, (oh and we’d have to leave the EU to enforce it).

My point about mobility wasn’t about moving around the same city (and its not lost on me that your reason for moving is increased prices), its being able to take your skills and apply them where your most valued, ie other cities and countries. I have a moderately sized property company in a semi professional capacity but the apartment I live in is rented as I’ve no desire buy where I work. If there wasn’t an adequate supply of rental property I’d be stuffed, live on a boat? Don’t think I’m unsympathetic , I earn significantly above the national average and the banks won’t go near me for a mortgage even if put down 25% and another house as deposit! So I know the banks won’t play but messing with the rental market will make your and other peoples situation worse.

space cadet said...

I hope they mess with it. Less landlords = more homeowners. I wasn't talking about moving round the same city. I was alluding to the need to relocate because prices are too high. Like me. From Oxford to Glasgow. I have a flat here for the price of a room down there. Build to Rent wd take off quicker if the Govt didn't keep skewing the market with half-baked schemes like Help to Buy. But it's totally wrong to suggest, as you did, that less landlords = less incentive to build.

RenterGirl said...

The rental market isn't working. Amateur private landlords cause misery. Rents rise not because of need but profiteering. So yes, we need to build more. Fewer landlords will be for the common good. It's not as if the homes will vanish like the house at the end of Poltergeist.

Anonymous said...

Space Cadet,

Nothing would kill off build to rent faster than the rent controls Labour are suggesting, it would be buried. I did not suggest less landlords = less incentive to build houses, but less landlords would definitely reduce the desire to build rental specific accommodation. Help to buy, emm jury is out on that one. In principle they are trying to tackle exactly the problems you’re facing by enabling buyers to circumvent the banking restrictions BUT they have to be building more houses otherwise they are going to stoke one hell of a bubble and that’s not good for anyone. That said if you’re in a position to take advantage of the scheme I’d take their arm off, it won’t be around for long.

Two good but disparate points. Rents rising above inflation is greed but its enabled by a lack of supply (over supply of rental housing and landlords would be competing to retain tenants). You say the rental market isn’t working but if you had your starter house / flat and were looking to move up you’d argue the purchasing market isn’t working. The truth is the whole market is choked.

Amateur landlords, yeah ok I’ll take that with a caveat. The bloke renting his house out while he’s posted overseas etc for a couple of years is just trying to cover his costs. The ones who have miscalculated the costs and haven’t allowed for maintenance are a mischief. And then there is the out and out sharks. If you don’t do the gas checks you deserve to be provided with rent free accommodation by her majesty, no argument. Actually you missed the opportunity to name something good the Labour did, they put deposit protection in place which is a very good idea! But they didn’t write the legislation very well, typical. (I don’t know how I should name them other than the link, amend as you see fit), contacted me recently, to enquire after my health of course, and invite me to pay them 4 times the deposit one of my tenants had put down. Now I do protect my tenants deposits and I don’t let tenancies roll over I always renew them but I had to reach for my lawyer to check, (bill in the post thanks very much). I’m refusing to pay up (please note the woman had had her actual deposit back in full over a year ago!) and the lawyer reckons I’m covered because I sent her the documentation by post (only because I was out of the country) before she signed the lease. Apparently on a point of law these clowns can take the landlord to court if he didn’t redeposit the deposit when the tenancy rolled over or give at least a week for the tenant to read the documentation. Ok the sharks that still don’t protect the deposit as per the law deserve the hit but there’s an awful lot of landlords out there amateur or not who will be exposed to that. I don’t think that’s fair as they have tried to up hold the spirit of the law but Labour didn’t draft it very well…

(Picky point. Correct houses won’t vanish but it doesn’t take long for lack of maintenance to make then uninhabitable and critically unmortgagable. I prefer to buy older uninhabitable houses and strip them to the brick and refurbish them. It’s a policy as I know that everything should be new and there shouldn’t be any issues for years. Rent control produced that affect in the 70s-80s).

space cadet said...

"I did not suggest less landlords = less incentive to build houses, but less landlords would definitely reduce the desire to build rental specific accommodation."

So you're wording it differently and saying the same thing. Less amateur private landlords is a good thing to be rid of. That's exactly why the Govt is looking at Build to Rent. Maybe time to retune your violin?

mark d said...

Fair play to the female labour minister who described the private rental sector as not fit for purpose.Spot on. And she went further by saying it was stuck in the 1980's. Again kind of true, I remember in the 90's, rather than the 80's the likes of premier inn, travel inn, travel lodge offering cheap, very basic hotel accommodation with little concern for customer service, but due to competition and sites such as trip advisor having to raise their game significantly and, they did, premier inn especially, often being the top rated hotels in different cities now. And then you look at the reviews of letting agents in 2014 and who do you choose as they all seem to be pretty much as bad as each other. Throw in greed, dishonesty, ripping people off, rudeness, no customer service and the snobbery of treating tenants as third class citizens as more akin to the 1880's and 10 years of renting i've experienced all that. By all means the law needs to get tough on genuinely bad tenants but for me who is lucky enough to have a decent full time job to pay the rent on time it's still a depressing experience especially as i was kicked out the last place with exactly 2 months notice due to landlady of the dump of a flat i'd been in for 6 years selling up, and having to rely on payday loans to pay the deposit/letting agent fees plus 3 months rent upfront for the next place.(about 3 grand in total). Oh,and got ripped off checking out. Systems totally broke.