Here we go again – PRS Right to Buy!

by Readers Question

9:36 AM, 4th March 2019
About 3 months ago

Here we go again – PRS Right to Buy!

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Here we go again – PRS Right to Buy!

I came across this posting on another forum and wanted to share it with P118.

“Sian Berry, The Green Party’s London Mayor candidate plans to introduce a right to buy for tenants. Sian Berry has been influential to Sadiq Khan, The London Mayor who has adopted Green policies and also Jeremy Corbyn so there is a risk this could become Labour policy.
I would encourage you to challenge them publicly on social media about it. They are responsive to adverse publicly and this needs to be nipped in the bud. Search on twitter @sianberry @sajeraj and @tom_chance

A Right to Buy and to Co-op for private renters

Dear All, this is based on the work Tom Chance and I did with Sian to produce this report: We’ll be consulting a number of housing organisations and other relevant parties on this as well.

Motion title – a private renter Right to Buy and Right to form a Housing Cooperative

Synopsis: Private renters are often left without control over their housing situations. This motion seeks to establish a Right to Buy for private renters and Right to form a Housing Cooperative in order to improve the control, conditions and finances of private renters.
Motion text:
Private renters in a house of multiple occupancy (HMO) will have the right to form a cooperative in order to exercise a right to buy from a private landlord. They would receive a discount on the cost of the home that would be paid out of the landlord’s capital gain. Renters would also have the option of contracting with an existing housing co-operative to manage their home. Tenants that chose the co-op option would still be protected by the same tenancy provisions, including secure tenancies and rent controls.

Cooperatives will be provided 5-year loans to help co-ops buy properties. After those 5 years the co-op would have gained sufficient equity in the property, and have a financial track record, to be able to secure better deals from ethical and other lenders. Loan and grant funding will be provided for property improvements and extensions. A Green government would also work with existing housing co-operatives in London to leverage their asset base and their cash holdings to support new co-operatives.

Private renters will have a Right to Buy their home from their private landlord. They would receive a discount on the cost of the home that would be paid out of the landlord’s capital gain. The price the renters buy at should not be less than the original price the landlord paid plus expenditure on subsequent improvements and inflation (CPI), so that no landlord can make a loss. Landlords with between one and three properties should also be entitled to financial advice including an assessment of their options to achieve income or capital growth in more socially productive investments. The Right to Buy would be limited to homes that are at least 25 years old, to avoid deterring investment in new build properties. Homes bought through this mechanism will have a covenant applied restricting the resale price to the original price paid plus inflation (CPI) to preserve future affordability.”

My initial thoughts are (after “OMG, FFS!”)

– “left without control over their housing situations” – except for minimum 2 month’s notice, no retaliatory evictions, able to reclaim rent & deposit and sue LL if they cock up, free legal advice at court, HHRS, compliance with licensing regs etc etc

– HMOs tend to have more transient tenants by nature – why would they buy? What happens if one “owner” wishes to move on? Will other tenants be obliged to buy them out? If so, who’s going to fund that? What happens in a falling market?

– What would happen in a HMO with say 6 tenants, 5 of whom want to buy but the 6th doesn’t? Will they evict the 6th tenant or buy as a group of 5, thus making the 6th tenant a lodger? Will lodger’s have a right to buy?

– Why should LLs take the risks, finance the properties/maintenance/refurbs, save for the initial investment with the aim of making a living, only to hand over the profit to people who have taken no risks or made the sacrifices to save for the investment?

– How will they balance the loss of revenue to HMRC for reduced CGT and Income Tax on rental profits?

– Para 2 infers that they will bring in secure tenancies and rent controls which will mean more LLs leaving the market and higher rents.

– Who will fund these 5 year loans? Taxpayers? How will the Treasury do this out of reduced receipts? Who’s paying the legal & SDLT or will that be covered by taxpayers too?

– Their assumption that the property would gain sufficient equity in 5 years shows their total lack of understanding of property. After 10 years, some areas in the UK have not got back to pre-crash levels. What happens if the tenants default on their mortgage – how will the lenders feel about pursuing 4,5,6+ mortgagees? Who do they expect will pay for loan & grant funding for property improvements and extensions? Will every home owner in the country be eligible for these loans, or only those in a HMO Co-Op?

– The 5 yr initial mortgage for this RTB would have horrendously high repayments – especially in London/SE – where many HMO Tenants may well be claiming LHA – hence any repayments would need to derive from net earned income – whilst also satisfying the strict MMR lending criteria.

– They state we would get PP + improvements + inflation so we don’t make a loss – but why would anyone become a LL to just break even?

– Fab! We can get financial advice on how to achieve income or capital growth in more socially productive investments. But they don’t say this will be free financial advice (nor what they consider profit-making socially productive investments).

– The majority of homes in this country are over 25 years old. It will deter investment in new builds as no LL will invest. And what about all the hundreds of Rent to Buy apartments that are springing up all over the country?

– Does the R2B means that tenants can force the sale of a property without the LLs consent? Can the LL evict tenants to prevent the forced sale? Or evict them so he can sell on the open market (perhaps giving tenants first refusal)?

– Compulsory R2B would mean the mortgage market drying up as lenders won’t want to take the risk of a LL having their property effectively confiscated. This would cause a market crash and another recession.

– As someone else has pointed out: There will be a form of securitisation from collectives’ loans. So as Lehman Brothers proved so successfully lending millions of loans to uncreditworthy people does not give you a credit worthy product. What it does do is allow you to slice and dice the risk better. But who takes the last tranche? Would tax payers?

– This is an asset-grab for political gain and nationalisation by the back door.

Heather



Comments

Rob Crawford

16:25 PM, 4th March 2019
About 3 months ago

Can someone point me in the direction of the source document for this - thanks.

Annie Landlord

16:32 PM, 4th March 2019
About 3 months ago

I'm afraid the Green Party is more left of Corbyn. How b..... dare this woman suggest that providing decent, safe homes for people is not a socially productive investment. Its a business. Are all businesses socially unproductive? What about all the owner occupiers? Are they going to have to gift their money to someone else too? This isn't a new idea idea. Its been floating around for several months. I would HOPE there is legislation that precludes a business owner from being forced to give their assets away. To my mind this idea would just be theft

Sue Twyford

16:42 PM, 4th March 2019
About 3 months ago

Just what are the "more socially productive investments" mentioned in the posting? The proposer doesn't say. Providing safe homes to rent in the PRS is surely "socially productive" since the local authorities don't have sufficient means? Furthermore, the tax we pay on our rental income, VAT on our expenditure/maintenance/advisors etc, inflated SDLT, is that not socially productive? Not to mention keeping judges and bailiffs in gainful employment? So the proposition is to grant discounted R2B, disenfranchising LLs with older properties, whilst ring-fencing the corporate developers with their new-builds!

Alan bus

17:32 PM, 4th March 2019
About 3 months ago

My first property was purchased under the right to buy and I received a large discount. My first property cost me 17k it is now worth £220k so therefore I am entitled to 17k plus a bit extra??

Freda Blogs

17:36 PM, 4th March 2019
About 3 months ago

Leaving aside the injustice of this proposal on private sector landlords, have we not learned anything from the past?

The irony of this proposal is that as a direct result of the Right to Buy legislation, the country has been deliberately deprived of homes to rent in the social sector, which has been a significant contribution towards the current housing crisis. Many Local Authorities (and now Housing Associations) have had to ‘give away’ housing assets and forego full value (i.e. lose money) for the benefit of the (few) tenants who are able to benefit from it - it lined the pockets of tenants (isn’t that what would be said if it were landlords?!) who qualified at the time.

If this proposal were to be enacted, we will be depriving the country again of homes to rent - in the private sector. Then what? Where would other tenants go – i.e. the ones who are not currently renting, or those who won’t quality or wish to buy?

At what point will it will be appreciated that such short term thinking for eye catching vote headlines has disastrous long term consequences?

Laura Delow

18:07 PM, 4th March 2019
About 3 months ago

Reply to the comment left by Alan bus at 04/03/2019 - 17:32
Yup. So it seems. I should never have sacrificed having children so I could have a career, nor work 15 hour days with next to no social life in order to do as I was taught by my parents; save, save, save (funding the maximum in to my pension & use the rest to buy properties & pay premiums into savings plans and pay down mortgage debt asap), whilst in the early years running at a loss whilst I grappled with the world of property. Nor should I have sacrificed (and continue to do), the inordinate amount of time invested in trying to be a good landlord whilst being bashed around the head by the current government (let alone what any new party in power wants to do to me) for having been a hard working citizen who has never taken a penny from the state. Instead I should have had 10 kids, spent all my earnings on whatever took my fancy, lived off benefits (funded by the tax payer) & then be offered the G_d given right to buy my rented property from under my landlord's nose at a massively discounted price, after which I'd no doubt balk as suddenly I'd find I couldn't call my landlord to fix things.

Rob Crawford

18:14 PM, 4th March 2019
About 3 months ago

I suggest that everyone contacts her and voice your opinion! Contact details on her website contacts page: "If you want to make a media request, ask me about my policies or tell me what you think about my ideas for London, please email me directly at:
action@sianberry.london or 020 7983 4391 "

Website: http://www.sianberry.london/

Alison King

18:23 PM, 4th March 2019
About 3 months ago

It's a stupid idea on so many levels. As has been said, HMO tenants are transitory by nature and usually live there as the rent is cheaper, allowing them to save up for their own place in the future. Who would want to buy within a partnership of housemates? What happens when someone wants to leave? How do they get their equity out and how will the remaining residents fill the gap?
The main motive for buying in this situation would be for the group to deliberately acquire a discounted property to do up and sell for a big profit. They could even rinse and repeat. This daft idea does not help the housing crisis one little bit.

Darlington Landlord

18:45 PM, 4th March 2019
About 3 months ago

Reply to the comment left by Rob Crawford at 04/03/2019 - 16:25This is the article including citations for the various statistics used.
http://www.sianberry.london/news/housing/2018_11_01_right_to_co-op/
The latest citation seems to be 2017 and suprise suprise no RLA reasearch is referenced, mainly CIVITAS and also Shelter. The whole thing is very London focused.

JB

21:41 PM, 4th March 2019
About 3 months ago

My grandparents lost everything in the Russian Revolution and returned to the UK destitute. History may repeat itself but this time in my own country.

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