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9:39 AM, 26th February 2019, About 5 years ago 39
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I sent the following email to the Prime Minister et al and would welcome comments from members:
Dear Prime Minister, Leader of HM’s Opposition, Chancellor and Shadow, Housing Ministers and Shadow, Mayor and Hon MPs,
As a single HMO-property landlord in Brent, I am writing this email because you, ladies and gentlemen, potentially have influence on rules, regulations and legislation that affect the private residential sector.
I thought you may like to hear the views of someone who has been at the coalface for over 42 years.
I started letting in London in 1976, because in 1977 I went away to Germany to work (in my profession as a chemical engineer in the oil industry – now retired) and was away for nearly 10 years.
During this time, I managed my London property from Germany. On a forthcoming ending of a tenancy I would, like everyone else in those days, advertise in the Friday edition of the Evening Standard and then drive from Duesseldorf to Ostend after work, take the night ferry from Ostend to Dover and arrive at my house in West London early Saturday morning.
During the course of that weekend I would take over from the last tenants, interview new tenants, select one, sign the tenancy agreement, etc, and then be back at Victoria station on Sunday night. Ferry back from Dover to Ostend, drive to Duesseldorf and arrive just in time for office on Monday morning!
But the key point I wish to draw to your attention is that during the whole of that weekend THE TELEPHONE WOULD JUST NOT STOP RINGING! Such was the DESPERATION of tenants looking for a place to rent.
This was because we were in the dark days of the Rent Acts 1974/1977, which had driven landlords almost completely from the market and DECIMATED AVAILABILITY for tenants.
As those of us old enough will know, the Rent Act 1977 was a draconian reaction by the Wilson government to the antics of a certain Mr Peter Rachman. But the end result was that it hurt the very people it was meant to help. The law of unintended consequences.
This tyranny continued until Mrs Thatcher liberated the market with the Housing Act 1988. Gradually landlords began trickling back into the market and tenants once again started to have AVAILABILITY and CHOICE!
That trickle eventually turned into a flood. However, all the good work that Mrs Thatcher did is progressively being undone with ever more stultifying regulation, carried out no less by successive Tory governments playing to the gallery.
One cannot raise standards by legislation or council-imposed conditions, only the market can do that. One interferes with the market at one’s peril.
The only areas that Councils need to concern themselves with are fire safety, electrical safety, gas safety, conditions such as mould, and overcrowding. The rest is up to the market and the courts. Anything else brings absolutely no benefit to tenants, merely increases ineffectual, burdensome bureaucracy.
In fact, during the initial registration of my HMO, this was all that the Council concerned itself with. Unfortunately, registration was replaced by licensing as a result of the Housing Act 2004 under Mr Blair’s regime and we have seen ever more intrusive interference into the minutiae of letting by the Council.
With unlimited power granted by this Act, we are now also witnessing bizarre rules being imposed, rules not founded on facts or logic. For example, landlords across the board being told to fit window restrictors such that windows cannot open more than 100mm to prevent grown up adults falling out of windows! We appear to be well on course to turning ourselves into the laughing stock of the world.
Legislation in most cases caters to the lowest common denominator, lumping the good landlords with the bad. The end effect will be that good landlords will abandon the market leaving only the bad. The legislation is unfair on the councils too, because it is asking individual officers to exercise what are effectively subjective judgements, besides leaving room for abuse of power. In many verifiable instances it actually disadvantages tenants, and vulnerable ones at that.
It is time to clip the Councils’ wings by repealing, or at the very least severely curtailing, Section 67(1)A of the Housing Act 2004.
The main reason why Britain’s housing market is structurally defective and young people are unable to get a foot on the ladder is FISCAL. Whereas landlords are able to set off their mortgage interest payment against tax, home owners cannot. This is blatantly unfair and means that even if the supply/demand dis-equilibrium is rectified, landlords will always be able to hoover up the most affordable properties to the detriment of young buyers – and renters will remain in servitude to landlords.
When MIRAS was progressively reduced and then finally abolished, exactly the same tax regimen should have applied to landlords. No Chancellor has ever addressed this built-in structural distortion, nor any newspaper to my knowledge raised this issue.
Restoring parity in the tax treatment of mortgage interest between landlords and property owners will be a far more effective method of empowering tenants than bureaucratic means such as rent controls. Renting should only be a temporary option for people in transition, with property ownership the ultimate goal for all, even if this is by way of low-cost micro-studios as starter homes for singletons. PEOPLES’ HOMES – for the many, not just the few
Fight the tenants’ corner by fiscal means and by unleashing market forces in their favour, not by futile knee-jerk legislation and certainly not by giving Councils powers that should not be in their remit*. Nearly all post Housing Act 1988 legislation should be repealed and fed to the bonfire.
There are many examples one could give of what is going wrong in housing, and improvements that can be made, but this suffices for the time being.
I appreciate that the political establishment is currently consumed and paralysed by Brexit, but problems of state must still be addressed.
Kind regards
Frederick BSc Eng (Hons) CEng MIChemE (retired chartered chemical engineer – so hopefully endowed with a bit of analytical, logical and rational thinking)
To: mayt@parliament.uk, leader@labour.org.uk, philip.hammond.mp@ parliament.uk, mcdonnellj@parliament.uk, kit.malthouse.mp@parliament.uk, james.brokenshire. mp@parliament.uk, heather.wheeler.mp@parliament.uk, john.healey.mp@parliament.uk, vince.cable.mp@parliament.uk, gardinerb@parliament.uk, mayor@london.gov.uk
18 Jan at 21:53
Claire Smith
13:38 PM, 26th February 2019, About 5 years ago
Reply to the comment left by terry sullivan at 26/02/2019 - 13:11
And to help their friends with large rental companies.
Beaver
14:29 PM, 26th February 2019, About 5 years ago
They are interesting comments that stimulate thought. A couple of other things that distort the market and make it more difficult for a diverse market to provide choice.
1. stamp duty: you moved to Germany and rented your house out. A smart move which I assume you made because you had the choice. Most people outside the public sector don't have job security. If you are married and have kids but are having to look at a job away from where you live the total cost of your move (especially stamp duty) can easily wipe out all your after tax earnings for an entire year. Unless you are already cash rich you don't have much disposable income if you have kids so you can't mitigate against your tax losses by paying into pensions because you need the cash to support your family and you haven't got it. So either you have to rent until you know the job is going to work out....or just turn the job down because you can't afford the risk of taking it because the net gain to your family after tax is zero for such a long time; stamp duty is a tax on the jobs market which hits poorer working families and makes the jobs market less flexible.
2. Being unable to rent out more than one room in your main home [i.e. under the rent-a-room scheme] without attracting Capital Gains Tax. This means that if you do have a big home that is your principle private residence (PPR) as opposed to a HMO then you probably cannot afford to share it because of being hit by CGT. One of the rental houses I lived in when younger before the HMO legilsation was owned by a man who lived in the top floor flat but rented out all the other rooms, and was a good landlord who looked after his house (as he would because it was also his home). If the house had been burned down or burgled he'd have suffered along with everyone else so the risk in that case isn't the same as for a HMO that you live remote from...but if you had a big house and it was your PPR you would be dissuaded from renting rooms anyway, irrespective of the HMO legislation, because of the risk of being hit with the CGT stick. That's not good either for the rental market, or for the enviroment.
terry sullivan
14:36 PM, 26th February 2019, About 5 years ago
All those entities are covered by existing law
Paul Kaye
15:12 PM, 26th February 2019, About 5 years ago
Well,I read loads of rubbish !
BTL is a business for the vast majority of Landlords.
If you run a B&B, hotel, office etc you can claim for finance costs.!!! BTL is NO different.
I am not a burden on the state,claiming benefits,I am a businessman.
I worked hard,saved hard,take risk and invested in property.
I went without ,for most of my working life to save,so I could invest and make a business,not only to help myself,but to help others,only to get turned over by this government!
We need profits to keep the properties in great condition,as does any business.
You pay if you want to,this Landlord is not for turning !
Mark Alexander - Founder of Property118
18:49 PM, 26th February 2019, About 5 years ago
Dear Frederick
I think you will agree that food and heating is just as important as shelter?
However, based on your own logic, either consumers should be able to get tax relief of all of these essentials or businesses should not be able to set such costs off against their profits. Let's take Tesco as an example, they have a lot of money. They offset their rent against their profits. They also set the cost they buy food for re-sale against their profits. Likewise, they offset their costs of light and heat, fuel in company vehicles etc.
As a fellow landlord, I am amazed that you feel that our business sector should be singled out to be the only business in the UK which cannot offset finance costs against profits. This is the biggest expense in the rental property businesses for the vast majority of hard working people who have invested in property since the introduction on the Housing Act 1988, to provide for their own retirement. Without such investment, the UK will quickly find that tenant demand returns to the dark days of the 1970's you so fondly reminisce about.
Your writing style is that of an educated man, but your logic in regards to finance cost relief is sadly the polar opposite of that.
Beaver
14:23 PM, 1st March 2019, About 5 years ago
Not everybody likes the original contribution that started this thread; I still think it makes for an interesting discussion.
Frederick refers to MIRAS which first time buyers used to receive to help them get on the housing ladder; as I recall it used to be available on the first £30K of debt when you could buy a 3 bed house for ~ £60K. A lack of availability of first-time buyers means that lots of people can't get onto the ladder and buy and if they can't then lots of people can't move because the chain can't be completed, and quite likely the value of many landlords' portfolios would decline. MIRAS was removed because 'government' wished to reduce the risk of another housing bubble.
I believe the idea was to replace MIRAS with other help-to-buy schemes but whether they work better or worse than MIRAS I do not know.
Whilst I still think it's an interesting discussion, changing the tax treatment of your principle private residence is likely to be extremely unpopular for all sorts of reasons: In our society most people aspire one day to be able to own their own home, however modest that may be. Lots of people are taxed on it when they die anyway, even though the've already been taxed on the income they had to earn to buy it and pay it off. So they pay tax twice.
Moving is expensive. If you have to face (1) moving costs (2) stamp duty (3) costs associated with moving your family (4) possibly CGT if the treatment of your PPR is changed, then it's hard to move for work unless you've already got loads of cash. If you've got cash you can buy a second property to live in whilst you work away during the week; if you haven't you've got no option but to rent and live in two properties and apparently there aren't enough rental properties anyway.
If you face stamp duty, inheritance tax and possibly some other tax if the 'playing field is levelled' you may end up paying tax 3 or 4 times on the same equity. With the IHT nil-rate band being where it is today that will still catch lots of people in England; I suspect that most working people just trying to pay for a family home would object to that.
If you make mortgage interest tax deductible for your PPR then you have to assess whether that does or does not lead to a housing bubble.
I guess the debate comes down to whether MIRAS or other help-to-buy schemes for first time buyers work best to maintain the chain, without creating another bubble.
Mark Alexander - Founder of Property118
14:27 PM, 1st March 2019, About 5 years ago
Reply to the comment left by JJ at 01/03/2019 - 14:23
MIRAS or any other form of tax relief would be of more benefit to existing homeowners than to new ones. The problem that people face to become a homeowner is raising a big enough deposit and mortgage based on multiples of salary
Beaver
14:38 PM, 1st March 2019, About 5 years ago
Reply to the comment left by Mark Alexander at 01/03/2019 - 14:27
I agree that's part of the problem. But it's not the only problem. I didn't have the deposit either when I bought my first home; so I borrowed the deposit and paid the deposit back over a three year period whilst paying my mortgage. Interest rates were at 14%, it was crippling. I did receive MIRAS and receiving MIRAS helped me to pay back the deposit....so I don't really mind first-time buyers getting some help 🙂
As an existing home owner...some years ago when I had owned a house for decades and had lots of equity in it but had just become self-employed I wanted to re-mortgage my main home to raise cash to fund the growth of my business. I couldn't remortgage because I didn't have three years of accounts. I think I would have been allowed to get one if I had either two or three wage slips. Some friends who worked for a very large UK company had no equity in their house were about to be made redundant by this company (without big payouts); it struck me at the time that these people who had no equity and were about to be unemployed could get a mortgage, but I could not remortgage. I'd have found it easier to get a mortgage when I was a first-time buyer. 🙂
Fortunately my own circumstances have changed but mortgage lending policy at the moment is still totally nuts. 😉
Mark Shine
20:06 PM, 1st March 2019, About 5 years ago
Reply to the comment left by Mark Alexander at 26/02/2019 - 18:49
~“Your writing style is that of an educated man, but your logic in regards to finance cost relief is sadly the polar opposite of that.”
@MarkA... as you know I can be a little OCD about my disgust for a particularly manipulative ‘House Price Interest’ forum, who also peddle their wares literally everywhere online under various pseudonyms.
Your above comment (ie regarding people with an outstanding writing ability yet strangely having an almost incomprehensible inability to consider basic logic and look at the whole / bigger picture outside their own small world) could equally be used to describe most if not all of the infamous ‘three dozen’ manipulators?
Tim Jones
8:41 AM, 2nd March 2019, About 5 years ago
Reply to the comment left by Claire Smith at 26/02/2019 - 13:02
Landlords can reclaim finance costs if they are running it as a company eg like a shop. I have also had to restructure my model going forward and create a property company to deal with this and move properties in to this, it’s costly and annoyingly. As my trader brother in law says if personally you want to buy shares then you can’t claim finance costs. However if you do this in a company structure you can. To some degree landlord s have had a fairly easy ride for many years and those who have been doing it for a while have built up a some decent equity.