Email to Prime Minister et al

Email to Prime Minister et al

9:39 AM, 26th February 2019, About 3 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



Comments

by Heather G.

18:32 PM, 22nd March 2019, About 3 years ago

"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."
Home owners do not take a risk on the property purchase, spend thousands in refurbishment, take the risk on the tenants, pay for a licence to have these tenants, have to comply with hundreds of pieces of legislation (and keep up to date with all the new rules being introduced), risk fines of thousands of pounds for not having EPCs, gas certs, Right to Rent checks, or issuing paperwork in the wrong order. Owner occupiers are not at risk of loosing their properties if there is ASB or over crowding taking place (which mostly happens without the landlord's knowledge). Owner occupiers can choose what and when they upgrade or maintain their property, and control who enters and what they do there.
The home owner gets PPR relief when they sell ie a tax break which (risk-taking) investors do not.
I would also like to understand why you think LLs "hoover up the most affordable properties"? A large percentage of BTL properties are 3 or more bedrooms (or commercial to residential conversions), not first time buyer/starter homes. And if they're "affordable" it's usually because they require extensive work to bring them up to standard.
And I take strong offence at your comment that "renters will remain in servitude to landlords." We have a great relationships with our tenants. One set of tenants are European and plan to remain here for 3-5 more years, they all work and pay taxes but don't want to buy a property. On the last two visits they gave me bouquets of flowers, cakes and wine to thank us for giving them a lovely home. Our other property has an English couple with children, moving in together for the first time, one of them owns a property already but it's not big enough for them, but they don't want to commit to buying a joint property for 2-3 years. These people are not "in servitude" but making flexible life choices, enabled by the Private Rented Sector. If LLs are forced out of the market due to increased financial burdens and regulations, what will happen to these and the thousands/millions of other tenants? There are no social homes for them to move to.
Finally, Mortgage Interest Relief will be phased out by 2020/21 so your call for it to be scrapped is rather behind the times!

by Heather G.

18:49 PM, 22nd March 2019, About 3 years ago

Oh and...
"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."
This makes no sense to me! How would the removal of MIR ("restoring parity between LL & OO") "empower tenants"? OO don't provide accommodation therefore, "parity" with the PRS in this regard is irrelevant. How does the taxation of a LL or OO affect a FTBs ability to raise a deposit and all the other costs of purchase? However, reducing profitability in the PRS will do the opposite, especially for the low paid or vulnerable. More LLs will leave, squeezing supply further, when demand is growing. More LL will be more stringent in their referencing to minimise the risk of taking on rogue tenants who take more than 6 months to evict costing the LL more time, money and lost rent. LLs will have less available income to undertake refurbishments and upgrades.
The problem with the housing market is because not enough properties were built over many decades and there are no real incentives to bring disused properties back into use. And an overly regulated PRS is already starting to shrink as LLs are selling up, but I'm sure we'll be blamed for that too?

by Frederick Morrow-Ahmed

22:09 PM, 22nd March 2019, About 3 years ago

Reply to the comment left by Heather G. at 22/03/2019 - 18:49
Your comments are very valid and I read them with great respect.

If I may address some of them in no particular order.

First to my statement “renters will remain in servitude to landlords". I wrote this allegorically, not literally. I didn’t mean that renters are kept with a chain around their neck by their landlords! I have young professional tenants, who have been with me for ten odd years and my worry is that they are dependent on me providing them with a roof over their heads. It shouldn’t be that way. There must be some way for them to get on the property ladder and to escape my clutches. I am 74 and do wish to retire!

I have no doubt that you look after your tenants extremely well and have an excellent relationship with them. I am sure the majority of landlords do.

As to your comment about how much regulatory burden landlords are forced to carry, that was precisely my point. Even during the dark days of the Rent Acts 1974/1977 letting a property, for the few who still remained in the market, was incredibly simple. Just a tenancy agreement, an inventory, a standing order, utility meter readings. And the few who remained in the market could do so because there was an allowance in the above Rent Acts. If one lived in a property as an owner-occupier and then went abroad to work, the Rent Act allowed you to recover possession once you returned, and many of the other punitive measures in those Acts didn’t apply. There was some wording, which I cannot remember, that had to be inserted in the tenancy agreement for this to apply.

My argument is that almost all regulations post Mrs Thatcher’s Housing Act 1998 should be abolished, save with a few notable exceptions, such as deposit protection. They serve absolutely no purpose whatsoever and have been dreamt up by politicians eager to make a name for themselves in the media. Even in supposedly bureaucratic Germany I cannot recall anything like this. But this was in the 1970s/1980s. I cannot vouch for what is happening there today.

As for abolishing MIR, I am of the firm opinion that no legislation should have retroactive effect. People were lured into this get-rich-quick-scheme of property investment and they should not be penalised for it retrospectively. The fact that I too didn’t succumb to this craze was only due to my experience of the 1970s/80s, when landlords were ruined and virtually lost their properties. It was a salutary lesson that property is very susceptible to the vagaries of politics.

Abolishing MIR would not stop investment in property. People would just go in with a much reduced gearing, no bad thing. And MIR could still apply to build-to-rent. This brings new property into the market and serves a useful purpose. It can’t be right that some sharp boys with very little capital of their own can fill in an application form, with goodness knows what half-truths, get a mortgage and be on the road to becoming a property millionaire.

Letting property is not a business. It creates no wealth for the nation. It requires no inventiveness. It spawns a whole unproductive industry policed by an army of parasitic council bureaucrats with dictatorial powers bestowed on them by Mr Blair’s Housing Act 2004.

If you think abolishing MIR is a threat to anyone’s rentals, think again. Any petty council bureaucrat has the power, simply on whim, to do far more damage to a landlord and leave him bankrupt.

This is what we should be fighting against. It is this that should be abolished as a quid pro quo for abolishing MIR. Any landlord still in the field should think carefully about staying in or, at the very least, reducing his portfolio with the aim of reducing his gearing.

I am sorry that time does not permit me to answer all the points that you raised. I trust this has addressed at least some of them.

by Frederick Morrow-Ahmed

22:15 PM, 22nd March 2019, About 3 years ago

Reply to the comment left by Frederick Morrow-Ahmed at 22/03/2019 - 22:09
The only legislation that is valid is that related to safety. But it should be based on objective, verifiable measures, not on matters of opinion.

by Frederick Morrow-Ahmed

16:32 PM, 23rd March 2019, About 3 years ago

I was only alerted to comments due to @Victoria's contributions, so was absent for a while.

I am extremely grateful to everyone who has commented. This was the whole purpose of the exercise. To act as the devil's advocate and see what people's reactions are. After all, there's no point in holding certain views if those views are not tested in the court of public opinion. Especially, if some of those views may be considered to be bordering on the extreme.

I also apologise if I have not been able to reply to everyone's comments individually.

But elaborating further on @Victoria's comments, since this is what alerted me and drew my response, may I make the following points:

Yes, many people are now renting due to various reasons. But is this always a matter of choice? If we accept that human nature and aspirations lead us to conclude that the ultimate goal of most will be to own their own roof, then we have to ask why so many more people are renting now.

Many commentators have put forward many valid reasons why this is so, but could one of those be that they find it difficult to afford their potential mortgage repayments?

And here's the rub. While these renters in seeking to put a roof over their own heads would not be eligible for MIR, landlords borrowing to put a roof over someone else's head are so eligible!!!

So, one group becomes “subservient” to the other, to explain my tongue-in-cheek comment, that @Victoria picked up on.

And as many have acknowledged, this was not always so. At one time BOTH owner-occupiers and landlords were eligible for MIR (or MIRAS for owner-occupiers).

When this level playing field was disturbed it created a structural distortion of the market favouring one group over the other.

As for the risk a landlord takes in buying up a property and doing it up, it is no different from the risk a renter takes in buying his first property and doing it up. Both are subject to the vagaries of the market, which could go down into negative equity. As anyone who was around in the periods 1972-1975, 1989-1995, and shortly after the credit crunch will know all too well.

As for letting being a business because of its ‘complexity’, it only becomes so if legislation makes it complex. As I wrote earlier, at one time it was fairly simple. Let us go back to that period, that golden age!

My apologies once more if I have not responded to everyone’s comments, merely to the last one.

by David Price

16:47 PM, 23rd March 2019, About 3 years ago

Reply to the comment left by Frederick Morrow-Ahmed at 23/03/2019 - 16:32
Frederick you omit two important taxes;-
The lack of tax on imputed rent for owner occupiers and Capital gains tax for landlords, both of which favour the owner occupier. Being a landlord is and always has been a business, it occupies me and my team full time and I have no intention of retiring despite being somewhat older then you. Landlording should be taxed in the same manner and to the same extent as any other business.

by Mark Alexander

8:36 AM, 25th March 2019, About 3 years ago

Reply to the comment left by Frederick Morrow-Ahmed at 23/03/2019 - 16:32
if you want to “level the playing field” then do you agree that landlords should be able to claim the ‘rent a Room’ allowance on each of their properties, pay the same level of Stamp Duty, have the same rules on fire and gas safety as owner occupiers, pay no licensing fees and the same insurance premiums and the same rates for mortgages and not have to pay CGT on Capital appreciation?

On the flip side, if they are running businesses then, is it so unreasonable to tax landlords on the same basis as all other businesses?

by Mick Roberts

11:03 AM, 25th March 2019, About 3 years ago

Reply to the comment left by Mark Alexander at 25/03/2019 - 08:36
Brilliant words Mark, u sum it all up, the attacks from all the angles.

by Frederick Morrow-Ahmed

12:54 PM, 25th March 2019, About 3 years ago

Reply to the comment left by David Price at 23/03/2019 - 16:47
David, I am not sure what you meant by ‘imputed rent’. When a tenant becomes a FTB and buys his first property he ceases to pay his landlord’s mortgage (aka rent) and starts paying his own mortgage. Perhaps I have missed the plot. If there is something else involved I would welcome being enlightened.

As for CGT, I would assume that all UK landlords are themselves owner-occupiers so benefit from this relief. Are you saying that you would be happy to lose this for your own residential property? This may be a classical case of cutting off one’s nose to spite one’s face.

Landlords can already claim many expenses such as for repairs which an oo cannot. In my view these are perfectly legitimate expenses for carrying out the RUNNING of letting. But MIR relates to the ACQUISITION of the property, a finite resource, in competition with FTBs.

If you are older than me then you will have been around for the Rent ACT 1974, which put furnished letting on the same footing as unfurnished. You would have witnessed the activities of friend Peter Rachman and the backlash that produced in the form of the Rent Act 1977 with lifelong secure tenancies and paltry “fair rents” imposed by rent officers. Effectively, landlords ‘businesses’ were ruined.

Landlording can never be the same as any other business. It is a highly emotive subject that has always been subject to political machinations.

The thrust of my argument is that there are far greater dangers to a landlord in the form of unnecessary and ever more draconian regulation than MIR and it is this we should be fighting against. We shoot ourselves in the foot if we try to defend the indefensible.

The biggest peril is the complete carte blanche given to councils by Mr Blair’s Housing Act 2004, which puts landlords at the whim of any two-bit council apparatchik, all very selectively applied.

by Mark Alexander

13:20 PM, 25th March 2019, About 3 years ago

Reply to the comment left by Frederick Morrow-Ahmed at 25/03/2019 - 12:54
I will assume you’re choosing not to answer my questions on the basis that you have no logical response


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