London Mayoral Candidate Calls for Rent Controls

Diane Abbott, MP for Hackney, is calling upon the government to introduce rent controls. She says the private rental market is in serious need of reform because the high cost of renting in the capital has distorted living costs and many people have to hand over up to 50% of their monthly earnings to a landlord.

“A major international city without measures to stabilise rent runs the risk of rents spiralling out of people’s reach. It is no coincidence that New York, Paris and Berlin all have some version of rent control. For too long politicians have rejected any form of rent controls but it is time to look at the issue again.”

It is a contentious viewpoint, and to date not one that has been very popular with the politicians, but tenants’ pressure group, Generation Rent, is very much in agreement.

“Rent Control is one of those strange policies that’s popular with the public but beyond the pale for much of the political establishment. This is because it devalues the price of land, and wealthy people have a lot of money tied up in land at the moment,” says Alexander from Generation Rent.

Alan Ward from the Residential Landlords Association thinks the introduction of rent controls would be extremely “short-sighted”. Chris Walker from the Head of Housing, Planning and Urban Policy at Policy Exchange, doesn’t agree either:

“Not only do rent controls reduce future returns for landlords – lower returns imply lower investment – but they send entirely the wrong signal to future investors creating more uncertainty, not less…”

Scottish Rental Market Outperforms UK

According to the latest buy to let index from Your Move, Scottish rents are increasing faster than those in England and Wales, The average rent in Scotland has increased by 2.2% in the last twelve months, compared to 1.5% in England and Wales.

Record Highs in Edinburgh
The average rent in Edinburgh is £615 per month, which is a record high, but Glasgow has fared less well – rental prices there have dropped slightly. Unfortunately the increase in rental prices has affected affordability and rent arrears are on the up. 6.5% of Scottish tenants are now in arrears, compared to 6% twelve months ago.

“Scotland may be outperforming the rest of the UK with higher employment rates and rising wages, but when the rate of inflation is taken into account, in real terms earnings aren’t helping people climb out of the red,” explains Christine Campbell from Your Move.

Rental yields in Scotland in October were 4.1%. This is a slight drop on the same period last year – in October 2013 rental yields were 4.2%. The annual return on rental property was 8.9% over the last twelve months, but this dropped off slightly before the Scottish independence referendum.

The Scottish Independence Effect
“The question of Scottish independence loomed large over the housing market this summer, and property price growth faltered as would-be buyers and investors hesitated to see how the votes rolled in. While this has left a tiny imprint on landlord returns in the past couple of months, this impact was cushioned by stable and resilient rental income – and the outlook certainly hasn’t dulled for buy-to-let,” says Christine Campbell.

Hastings Licensing Scheme will Force Rent Rises say Landlords

Hastings Borough Council is currently at the consultation stage over a new licensing plan for landlords in the town. The council say the scheme will reduce anti-social behaviour and encourage local landlords to take responsibility for their tenants. If the scheme gets the go-ahead, landlords will have to pay £415 per property for a license.

Improved Quality of Housing
The council thinks a licensing scheme is the best way to improve the quality of accommodation in the town.

“Our evidence suggests higher levels of antisocial behaviour are a feature where high density private renting exists within the town and that’s why we are considering the scheme,” says council leader, Jeremy Birch.

Unhappy Landlords
Landlords in the town are not happy about the proposed changes. Many believe that the only way they can afford the extra cost of a landlord licensing scheme is to put the rent up. The National Landlords Association agrees.

“This new scheme would be in addition to the existing licensing scheme in Hastings, so it’s another operational cost the landlords will have to foot,” says Tony Richard from the NLA.

“The council fails to understand that letting property is a business, so the unintended consequence is obvious.”

Housing charity, Generation Rent, disagrees. Clive Gross, representative from the charity believes that Hasting has become a ‘dumping ground’ for tenants. He thinks the licensing scheme is a good thing because it will help the council drive up the standard of local housing and reduce the number of rogue landlords who exploit their tenants.

Buy to Let Real Estate Investment Trusts Launched in the UK

It can be a time-consuming affair being a landlord. Dealing with tenants, sorting out problems in your properties and keeping up with the paperwork all takes time and effort, which if you work full-time is an impossible proposition. But there is an answer if you want to give property investment a go without getting your hands dirty as a full-time landlord.

The REIT Scheme
Real Estate Investment Trusts (REIT) are not a new idea – they were introduced into the UK back in 2007 – but this is the first time a mainstream UK residential property REIT has been made available to UK investors.

How it works is very simple. Investors buy shares in the REIT and any profits made as a result of rental income and capital gains are tax-free. There is a minimum investment of £1,000 in the REIT platform SyndicateRoom, but investors can drip-feed cash into the scheme and take out 90% of the rental profits as a dividend payment.

A Win-win Opportunity
The owner of the REIT says the scheme is a win-win investment opportunity for would-be buyers as it can help investors realise a tax efficient income from the buy to let market without the need for a significant investment of time and capital.

House prices in many parts of the country are putting investment properties out of reach for many small investors and with mortgage interest rates expected to rise in the next twelve months, a residential REIT is a liquid alternative to buying and managing a traditional buy to let property.

Private Rental Sector Keeps on Growing

According to a report in the Guardian newspaper, private landlords are expected to own £1tn worth of properties by spring 2015, even though property price growth is beginning to slow down.

PRS in London Booming
The private rental sector is now 3.5 times larger than it was back in 2001 and landlords now own a staggering £930.7 billion worth of property in the UK. Much of the growth in the rental market is centred in London and the South East – London currently accounts for 41% of the rental sector’s value.

Buy to let lending is also on the rise once again. Around 40% of lending last year was to landlords and with interest rates set to stay low for a while longer, this figure is likely to increase. Figures released by one mortgage lender indicate that one in five homes will be rented by 2015.

Rising Property Prices Fuels Rental Sector
Much of the boom in the rental market is as a result of rising property prices and increasing interest from investors. First time buyers can no longer afford to buy cheaper homes so landlords are snapping them up instead. Landlords in the UK currently receive nearly £4 billion per month in rental income.

“Landlords have benefited from the recovery in house prices since 2009, which has pushed their wealth to within touching distance of £1tn. But as the sector’s value marches upwards, the main impetus has come from the growth in the number of households as demand from tenants continues to climb,” says Andy Golding, CEO of OneSavings Bank.

 

Large Families Facing Eviction by Britain’s Biggest Landlord

Controversial super-landlords, Fergus and Judith Wilson, have once again hit the headlines for the way they are running their enormous property empire. The Wilsons were heavily criticised by housing charities last year when it was revealed that they had evicted more than 200 tenants claiming Housing Benefit. This was alleged to be an economic decision at the time as apparently single mothers on welfare were less likely to default on the rent than eastern European migrants.

The Wilsons have now changed tack and have begun serving eviction notices on many of the eastern European families with more than two children or those with three generations living in the same household.

“Most of our houses in Ashford go to childless couples. However, after a couple of months there are four, five, six children and I have to evict the family. The tenancy has been taken by deception,” says Fergus Wilson.

Wilson says he has no choice because if he didn’t his properties would be in breach of local authority ‘overcrowding’ rules.

“Contrary to what may be depicted by the leftwing media, I do not eat little babies alive … I do not make the rules, but I do play by them … welcome to ethnic engineering at the coal face.”

The Wilsons are also not fans of ‘zero hours’ contracts and any tenant without a regular pay check who applies to live in one of their properties may as well forget about it.

“No landlord in his right mind will accept tenants who do not have a guaranteed wage,” says Wilson. “No rent insurer will accept them, so that effectively makes the landlord’s decision for them. No pay … nowhere to live. Welcome to the real world.”

Politics and Landlords

September was party conference month in the UK. First it was the Labour Party conference and according to the Residential Landlords Association, their policies look certain to damage the private rental sector if Labour is elected back into power in the General Election next year.

Labour wants to introduce a national register for private landlords, even though such a scheme has been described as onerous and costly. Labour also wants to introduce rent controls; critics say this will almost certainly undermine investment in the private rental sector, just as it did the last time rent controls were introduced. Labour is also planning on legislating against so-called ‘revenge evictions, which would cost a fortune and is already illegal according to the Competition and Markets Authority.

RLA Comments
Alan Ward, chairman of the Residential landlords association, had this to say:

“Sadly Labour just does not get it on rented housing. Rather than supporting the sector to meet the ever growing demands being placed on it, Shadow Ministers are looking to make cheap political points by reaching for populist regulations without thinking through their consequences.”

Chancellor Announces Working Age Benefits Freeze
Then it was the turn of the Conservative Party to hold their conference and George Osborne announced that the Tories will freeze benefits to those of work age if they are re-elected. Since this tactic will put an even tighter squeeze on low-income families, many of whom are living in private rental housing, one of the unwanted side effects is that landlords are likely to be affected, too.

Number of Tenant Evictions Falling

The popular press would have us believe that landlords all over the country are ruthlessly evicting tenants left, right and centre. In fact this is not true at all. Figures released by the English Housing Survey have show that tenant evictions have fallen from 9 per cent to just 7 per cent since 2011/12, which makes a mockery of repeated claims by housing charity, Shelter, that evil landlords are engaging in so-called ‘revenge evictions’ on a regular basis.

Most Evictions are Legitimate says RLA
According to research carried out by the Residential Landlords Association, most evictions happen because a landlord needs to sell the property or move back in, the property needs extensive repairs, or because the tenant has not paid the rent, all of which are perfectly legitimate reasons.

RLA Accuses Shelter of Scaremongering
Richard Jones, Policy Director at the Residential Landlords Association, has called Shelter’s recent campaign to highlight revenge evictions as ‘scaremongering’.

“The official figures show quite clearly a fall in the number of tenants having their tenancies terminated and by far most of these are for perfectly good reasons,” he says.

“Shelter’s campaign on so called revenge evictions is totally inaccurate and irresponsible. To severely restrict landlords’ right to regain possession as Shelter advocates would severely damage confidence in the sector. This would reduce supply at a time of high demand causing more people to be homeless and we thought Shelter is all about reducing the number of homeless. In the past, Shelter have put out highly questionable statistics, which bare little resemblance to reality which we again see today.”

Are You a Landlord or Letting Agent?

New rules have been introduced by the DCLG inviting letting agents to join a redress scheme, the idea being that tenants and landlords are then protected from shoddy business practices. Unfortunately the rules underpinning the scheme are a bit unclear and already the DCLG has been forced to publish new guidance – and it’s only been a few days since the scheme was launched!

According to the guidance notes, landlords are classed as property managers or letting agents if they undertake particular activities as part of their business. These include:

• If a landlord helps another landlord find a tenant or a tenant find a home in the private rental sector (not including relatives), they are classed as a letting agent

• Arranging services, maintenance, repairs, improvements or insurance (or dealing with any other aspect of managing a residential property) on behalf of someone else makes a landlord a property manager

The scheme is a bit confusing, but further guidance is available.

What is the Point of the Redress Scheme?
The DCLG is keen to drive up standards and filter out bad letting agents from the private rental sector:

“While the majority of lettings agents and property managers provide a good service there are a minority who offer a poor service and engage in unacceptable practices. This requirement will mean that tenants and landlords with agents in the private rented sector and leaseholders and freeholders dealing with property managers in the residential sector will be able to complain to an independent person about the service they have received.”

Asylum Seekers Make a Fortune Sub-Letting Luxury Flats

The Mail on Sunday has revealed that a group of Iraqi Asylum seekers have been raking in a fortune by illegally sub-letting luxury London flats. After claiming asylum in the UK, the individuals were given Housing Benefit to pay for flats in some of London’s most exclusive areas. Unfortunately for the UK tax payer, their hard-earned cash was soon invested in a money making exercise of gigantic proportions.

Instead of living in their luxury flats with concierges, 24 hour security, and manicured lawns, the Iraqis decided to sub-let the flats to wealthy tourists for as much as £3,000 per week.

Local estate agents are not surprised to learn of the property letting scam.

“They come into my office asking which blocks are best to rent,” one Marylebone agent told the Daily Mail. “Some of them will come to the UK with a piece of paper with instructions on how to do things. First you have to be pregnant, then go to the housing department – they give you a flat.

“After you get the flat, you move into another place, give the [first set of] keys to an agent, he will find you a tenant and you’ll be making double whammy – money from the Government and making money from the flat the Government gave you.”

The refugees apparently find their luxury accommodation through a middle-man, who splits the profits with the benefits claimants when the money starts rolling in from wealthy Arabs holidaying in London. The owners of the properties have no idea what’s going on because the rent is paid on time.

Unfortunately, despite the fact the fraudsters have all been caught and their Housing Benefit cut off, Westminster Council says it will be extremely difficult to recover the money via a criminal prosecution because of the high burden of proof needed in court.