Benefit tenants set to lose by Government attack on Landlords

I was talking about 'reliable tenants' as per the article and as I've said twice. I don't know why you're trying to argue that I'm talking about total number of renters/properties or supplying properties at below price. If you want to argue please choose someone else.

The large majority of those half a million people would make 'reliable tenants'.

But even if they didn't, the large increase in demand at the bottom end would still result in less voids and higher rents for existing 'reliable tenants'.

Basic supply and demand.

But if it is simple supply and demand, and, as you say, demand is increasing while supply is tight, then why are rental yields falling like a stone over most of the country? Doesn't quite add up?

If rents could be increased as you say, surely they would already be doing so at a much greater rate? I mean, looking at London, typical yields of around 4%, that's awful value given the work involved?! A major repair or one month void and you're under water..

Reply to the comment left by "mark andrews" at "30/05/2016 - 17:22":

It depends how you calculate rental yields. If it is against capital value yes that yield will fall as prices rise but only if you are buying and/ or rents are static. If you calculate yield against your mortgage payments or your original purchase price they look better. So yields are maybe low at the outset but increase over time as rents go up but your loan amount stays the same. Then you just have to factor in interest rate fluctuations which you can mitigate to a certain extent by fixing for 5 years

You should not become a landlord if one major repair or a months void will put you under. You should always hold a contingency fund to cover these known variables which will of course happen at some point.. Each portfolio should be stress tested against these known variables within a range which is acceptable to ones own risk profile.

Some people invest primarily for rental yields some primarily for capital growth. Some for both. Some corporate workers with a job will think nothing of contributing £250 pcm to a traditional pension fund and wait for the pay back 30 years down the line.

So a cash flow neutral property or even one losing £250 pcm is not necessarily a bad investment. Keep it for 15 years it may double in price so a 300K property becomes a 600K one. You have gained 300k but lost 45K in that time if it is £250 pcm cash flow negative.

Gross gain before tax/ fees / cgt etc is still a whopping 255K in 15 years and you get your 75K stake back if you bought at 75% LTV . Beats any pension fund I know. 45K in and 255K out in 15 years is not a bad return and that`s before you bought at a discount maybe and added value to your investment to enhance its value.
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Reply to the comment left by "mark andrews" at "30/05/2016 - 17:22":

"Why are rental yields falling like a stone over most of the country?"*

Because house prices are increasing faster than rents.

"If rents could be increased as you say, surely they would already be doing so at a much greater rate?"

Rents are increasing and will continue to do so as this kicks in. Many landlords are still blissfully unaware or simply don't care, not to mention the number of new landlords who will be deterred once they run through the figures.

You have to bear in mind not everyone is as obsessive about this as we are.

"A major repair or one month void and you’re under water."

Then as Johnathan says, you shouldn't become a landlord in that position.

*Are they 'falling like a stone'? Over 'most of the country'? That has not been my experience (once out of London and the South East). Do you have anything to back up your statement?

Reply to the comment left by "Jonathan Clarke" at "28/05/2016 - 05:13":

Jonathan, as usual a very articulate comment which sets out the issues for landlords operating in the HB sector, however can you appreciate that the majority of tax payers are unlikely to agree that you "are doing them a favour housing HB" when you also comment that "sometimes you can get a 2 bed rate for a studio flat".

It may be that the HB tenant with the two bed rate has accepted the studio flat in the hope / expectation that the local authority will treat them as a priority in re-housing them but to many it will look like overcrowding by a landlord to maximise rental income. I fully acknowledge that it is the tenant's choice to move into the property and it may be better than staying in a second rate B&B but it cannot be a satisfactory situation.

As the article says many landlords may move out of the HB sector, that may be true, but I expect many will need to upgrade their properties to do so and will not achieve the same rental returns as those in the HB sector.

Reply to the comment left by "S.E. Landlord" at "01/06/2016 - 08:58":

Jonathan is just stating the unpalatable reality.
These are the inevitable consequences.

Reply to the comment left by "S.E. Landlord" at "01/06/2016 - 08:58":

Sorry in advance for the length of this post but I have a quiet day so I feel like going off on one! .....

Yes I quite agree at first glance from the taxpayers viewpoint it may not appear to be a satisfactory state of affairs. But I also believe when one digs down beneath the surface into the whole welfare taxpayer funded system we the private landlords are very much part of the solution as opposed to part of the problem. We save the taxpayer millions they would otherwise have to pay to support the homeless in other much more expensive social accommodation

But there is no doubt also that i benefit financially from the system as it is set up and yes it can look to be too self serving even though morally I feel I can fully justify it . The two economic and social aspects can happily work well in tandem together for the benefit of me and the taxpayer without their necessarily being a conflict of interest . The mother and baby takes the studio flat because its the best on offer and better than what they are currently in but not necessarily because they are after a council house. She does so as its the best option for the foreseeable future because the council has failed her month after month and increasingly year after year

Broadly if we as a society believe people should be entitled to a roof over their head then that has a cost to the taxpayer at varying point in any persons life cycle. So we have the full range of roofs where the population may spend their nights. These include in no particular order ... Council housing, sheltered housing . housing associations, private rented housing, hostels , B&B`s , hotels, hospitals, police cells, prisons, children homes, care home, mental institutions, camps , mates home , mobile homes , privately owned homes, etc etc .... The final roof is our coffin!

I would argue that the PRS costs much less for the taxpayer than many of the taxpayer funded alternatives. I believe there are ill thought out historic prejudices against us . We offer in fact a very cost effective sustainable option

I do not know the figures intimately but instinctively I am sure I am cheaper to the taxpayer than many of the alternatives. I am happy to be proved otherwise. But there is a paradox here which the taxpayer perhaps naturally sometimes has difficulty in grappling with . I make lots of money ( legitimately ) out of others perhaps misfortune but at the same time I provide a much needed service to society on behalf of the taxpayer

Another comparable paradox would be maybe a life jacket producer who supplies his product to the ever increasing number of migrants getting into boats to cross the dangerous waters . His business booms because he sells more jackets precisely because of a war torn country`s tragedy but he also has the satisfaction that he saves lives by the business he happens to be in. A funeral director likewise offers a vital service to the community but makes more money when more people die .

When I offer people a studio flat they sometimes physically cry with relief and gratitude to finally getting a secure roof over their head. They have jumped through rings of fire to get to me. For everyone though that cries with relief and gratitude there are another 10 at least who cry with pain as they are unsuccessful . I take maybe £1000 from the government up front but that is peanuts compared with potential alternatives for them . I had a guy the other day who split from his wife after 20 years. Him and his 15 yr old son were now living in the unheated conservatory of his daughters small 2 bed house. She had her own 2 children. It was cramped and totally unsatisfactory and unhealthy for all . He begged me to find him a safe space. The studio i could offer him was a palace in comparison. If he stays where he is then tempers will flare the police may be called, drink would be involved and the police and hospital could be called into play one night at great cost to the taxpayer. And thats just one night. That pattern of behaviour would be repeated maybe a dozen times . It makes me very cost effective for the taxpayer

Overcrowding is a very subjective term I feel and social services criteria is in some cases I have been involved in is less strict than housing benefit criteria. Sometimes its more strict. The rules differ from department to department and from council to council. It can be a postcode lottery. They seem happy to class the living room in a 2 bed as also a sleeping space and therefore their report to the council on living conditions often denies a growing family perhaps access to a council house. Some of my large two beds have comparable square footage to my smaller 3 beds so that provides a dilemma as to what exactly do we / should we mean by overcrowding.

I have some living rooms 10 x 9 foot. Some are though 22 foot by 12 foot . Does a mother and her 1 week old baby girl need the same space as another mother and her strapping 16 year old son. A 1 week old baby can sleep in the same bed as her mother but that is clearly inappropriate for the 16yr old boy . They both get the same LHA rate though . A studio is for some reason the same LHA rate as a 1 bed. As an investor with a proportion of LHA tenants a studio is potentially gives me a better return than a 1 bed. Next week the rules may change though. I have to manage that risk

I take people out of cramped stifling living conditions which the council sometimes place them into and give them room to breathe. I take people from prison, hostels , cars , tents , sofas etc . Not a day goes by when I dont get a distressing request. And the government says thank you for that, you done us a favour so to show our gratitude we will happily give you taxpayers money in the form of rent in advance and a deposit to help you on your way.... BUT Mr Clarke don't get to pleased with yourself as we will sneakily now also freeze that LHA rent we pay you now for 4 whole years. But we kind of hope you don't notice or if you do just hey let them off the rent when you raise it annually for your private tenants.

But of course we know deep down you need to cover your mortgage so you wont wear that and you naturally will have to evict them fairly soon when you realise you are losing out year on year. But we haven't really thought through that one yet and don't really care because that's tomorrow and we only can be bothered to deal with todays problems. Councils are in an impossible position. They are at their wits end as more and more homeless flock to their doors because of the LHA freeze and Clause 24 and benefit caps. They bail them out as a short term measure to me as a last of a dying breed but also knowing they haven't fixed the long term problem. This is why they don't act on sec 21`s they wait till bailiff stage because the B& B`s and low grade hotels are full to the brim

So the vulnerable tenants who already have often dysfunctional lives deteriorate further and one night in the cells after eviction as they drown their sorrows in drink costs the taxpayer £418 per night which is a massive 2,500% more than a night in one of my studio flats which costs the taxpayer only around £17 per night . One night in the cells would give you 24 nights in my studio flat. One night in hospital apparently gives you around 15 nights in one of my places. The math is there to support the PRS as being a great benefit to the taxpayer AND for solving the chronic homelessness problem.
So yes I often take the `vulture` criticism from the general populace but its misplaced in my view . I give good value to the taxpayer I reckon and yes I do them a favour.

A shift in public attitude does take a massive energy and sustained effort though to win the argument. The government relies in many respects on the people rebelling a bit but just not too much to be heard

What surprises me than even with the massive punch now that social media can deliver its still hard to make progress. Imagine before social media was a force how the disadvantaged suffered largely in silence

This is of course why wars are started . People turn violent in desperation Survival of the fittest and all that ..... But I`m starting to digress.......

http://www.mirror.co.uk/news/uk-news/night-prison-cell-costs-more-5555031

https://www.york.ac.uk/media/chp/documents/2015/CostsofHomelessness.pdf

http://www.mirror.co.uk/news/uk-news/hospital-bed-blocking-hits-record-2840400

Its a Crazy world
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Reply to the comment left by "Jonathan Clarke" at "03/06/2016 - 09:51":

Fantastic summary Jonathan, people really don't seem to realise the cost of the alternatives, the cost of homelessness, both in financial and social terms. Private landlords, whether Housing Benefit or otherwise, save the government a fortune compared to the alternative options. Those who house people who are dysfunctional, or lead chaotic lives (perhaps due to poor mental health or addiction), save the taxpayer even more, because these are the people who without a roof over their heads would end up in police cells, hospital, prison, etc, at a much greater cost to society (and the taxpayer).

If any landlord, or other person, says that landlords who let to HB tenants are exploiting the system, then let that person take in and house the homeless and types of tenants that you (and I) house. If they've not housed these types of tenants and dealt with the consequences of doing so, then they are in no position to judge or criticise.

All the points highlighted regarding HB tenants with personal problems and the HB rent being more cost effective than the cost of alternative accommodation may be valid, but are more reflective of social services not providing proper support where it is needed than the rent reflecting the property being provided.

I don’t think anybody has said letting to HB tenants is in itself exploiting the system. My original comment was questioning if most tax payers would think a landlord was doing them (the taxpayer) a favour in accepting HB tenants and placing them in a smaller property than the HB rate being paid provided for - particularly if that tax payer (who funds the HB) was having difficulty in finding reasonably priced accommodation because the system allowed HB tenants to pay a higher rent (two bed allowance for a studio) than the working tenant could afford.

Yes I believe everybody is entitled to a roof over their head. I also believe that overcrowding in any form is unsatisfactory; sadly I cannot see either being resolved in the short term.