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Should I sell or risk tenants buying at undervalue price?
9:08 AM, 25th September 2019About 3 weeks ago 48
Landlord email to Scottish MP
Make Text Bigger Landlord email to Scottish MP
This week a landlord based in Scotland very kindly bcc’d me into an email he sent to his MP. I felt it was well worth sharing on the basis that it may inspire YOU to educate YOUR MP by writing a similar letter to him/her. Naturally, I have redacted personal details for the purposes of confidentiality.
To find contact details of your own MP simply CLICK HERE
The email …..
Dear ….
Further to my email to you on 25 July 2016 regarding the issue of property taxes, I thought it might be useful to let you know the action that I will take to mitigate the impact of the Government’s tax changes.
Firstly, I will pass on the additional costs to my customers (ie. my tenants). As previously stated, I have three properties in your constituency. The current rents are £360 (one bedroom flat in *******), £495 (2 bedroom flat in *******) and £875 (four bedroom house in *******). I have calculated that I will need to increase rents by at least 3% per annum over the next four years in order to pass on my additional costs to my customers. By 2021/22, when the full impact of the Government’s restriction on finance cost relief is fully implemented, my rents will have increased to £405, £557 and £957 respectively. This action is not because I am a greedy landlord. It is a necessary response to Government policy. Such action will have a detrimental impact on tenants’ finances. For those who may aspire to become first time buyers, having to pay increased rent will make it more difficult for them to save for a deposit.
Five of the properties in my portfolio were purchased as new build properties directly from house builders. Such action by me as a landlord increased the overall housing supply. As a direct consequence of the Government’s tax policies, I will not be buying new build properties again. The overall supply of housing will not grow as quickly as it could because of the Government’s tax policies as other landlords will also stop buying new builds. This is a shame when it is widely acknowledged that there is a shortfall in housing supply and a growing demand for rented accommodation.
Five of my properties are let to tenants in receipt of housing benefit. As you will be aware, providing homes for tenants in receipt of housing benefit comes with some added risk to a landlord because some of the tenants are not very good at managing their finances. My experience is that people in receipt of housing benefits are more likely to be in rent arrears than non-benefit tenants. Regrettably, I have decided that I will no longer rent to tenants in receipt of housing benefit as they will not be able to afford the rent increases that I will need to make. I will also need to reduce my exposure to the risk of tenants not paying their rent because of the much higher tax bills I will face in the future.
Other landlords I know are also planning to stop renting to tenants on housing benefit. The supply of rented accommodation for tenants on housing benefit is likely to decline as a result of the Government’s tax changes. This will in turn increase homelessness in your constituency and put financial pressure on Fife Council who have a statutory duty to deal with people who present as homeless. I have previously written to Fife Council to let them know of the consequences for them of the Government’s tax changes but did not receive a reply. It would be really good if you could contact the Head of Housing at Fife Council to raise awareness of the likely implications for the council.
Several of the houses I have purchased to rent out have been empty and / or in very poor condition. I have invested substantial sums of money to bring these houses up to an acceptable condition, suitable for letting.
The house in ******* is a good example of a property I have improved. This was a two bedroom semi-detached house that was very dated. It was marketed for sale when the previous owner passed away. I obtained a building warrant to convert the attic to provide two additional bedrooms and a new bathroom. The condition of the property was generally upgraded, including a new kitchen and new central heating. The total cost of the work was £60,000. This investment not only improved the condition of the property, it created work for local tradesmen. As a result of the Government’s tax changes, I do not plan to purchase any more properties like this to let out. The type of houses I typically buy are not those sought by first time buyers who usually do not have sufficient funds to refurbish properties that are in a serious state of disrepair.
I recently wrote to all of my tenants who are not in receipt of housing benefit to find out if they would be interested in purchasing the property they currently rent from me. Not one said they were in a position to do so. Some are EU migrants and do not qualify for a mortgage as they have not lived in the country for 3 years; several said they did not have enough funds for a deposit; some said they did not want the responsibility of home ownership; one said that his job was not secure so he did not want to commit to home ownership. Where will people like this live if many landlords are forced to sell up as a result of the Government’s tax changes?
I hope these comments help you understand the problems that are likely to be caused by the Government’s absurd approach to property taxation.
Would it be possible to meet with you to discuss my concerns?
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Appalled Landlord
11:38 AM, 12th August 2016
About 3 years ago
That is an excellent email. It covers all the ground, showing how the tax changes will be bad for tenants, bad for the housing stock, bad for those who will be made homeless, and as a result of all three, bad for the economy. They will not make it easier for FTB’s to qualify for mortgages. The tax changes are good for nothing, like their author Osborne.
Cyril Moseley
11:45 AM, 12th August 2016
About 3 years ago
I have not been a landlord very long and am only just refurbishing my second property at a cost of £50,000 to £60,000. This is a three storey end of terrace house, which had been on the market for many months. One offer had been made below the asking price, but that was eventually withdrawn when they really investigated what needed to be done. No first time buyers had shown any interest an I doubt whether they could have financed it anyway. Being new to the profession I have quickly come to realise that the impression Government Ministers and their advisers have of Landlords is that of unscrupulous, grasping, Scrooges who take advantage of tenants by charging high rents for poor quality accommodation. They appear to think the odds are stacked in the landlord's favour and attempt to equalise the balance by imposing extra or higher tax burdens upon us.
In fact, whilst there is a small number of rogue landlords, it seems to me that most of us are trying to provide clean, comfortable, well maintained accommodation at reasonable rents. Little account appears to be taken of rogue tenants, who probably outnumber rogue landlords anyway. Whilst I had intended to purchase and renovate other properties for rent in the future, George Osborne's 3% stamp duty and the future changes to the tax regime, are making me have second thoughts. George Osborne was prone to "shoot from the hip" in terms of his policy making (which is why he did so many "U" turns) and I am hoping that the new regime will think things through a little more carefully and not let their own tax-grabbing greed guide their policies in respect of the rental market.
However, a change in attitude can only be brought about by letters like the one from our Scottish colleague being sent to MPs. There is a need for a comprehensive case to be made to government ministers outlining why they should be supporting good landlords not trying to cripple them. This includes issues far wider than tax and finance, it includes the onerous eviction processes and red tape generally. As I said I am new to the Landlord profession and have much to learn if I am to stay in it, and it may be that a comprehensive case has been made out in the past and if that is the case is there a need to update it to take account of more recent tax and legislative changes. I do not intend to teach "granny to suck eggs" here and apologise if my comments come across in that way
Cyril Moseley
terry sullivan
12:23 PM, 12th August 2016
About 3 years ago
send a copy to robb at shelter? rub his nose in it
Cyril Moseley
13:14 PM, 12th August 2016
About 3 years ago
Reply to the comment left by "terry sullivan" at "12/08/2016 - 12:23":
Hi Terry, I will happily send my response to Shelter, but it may carry more weight if it was sent by someone else as an example of the way the government's (and to some extent shelter's) attitude could lead to a dearth of rental properties and create more homeless people. I would be quite happy for someone else to use it in this way and identify me in the process.
Cyril
David Main
14:29 PM, 13th August 2016
About 3 years ago
I'm afraid I don't share the optimism shown by other commentators to the potential for this post to influence government thinking. Most Scottish MPs are SNP, which is unremittingly hostile to the PRS. Remember, the Scottish Government very quickly replicated Osborne's 3℅ tax surcharge and recently consulted on changes to letting law that includes removal of 'no fault' repossession and paves the way for rent controls.
As a fellow Fife landlord I will be interested to be updated with the outcome of the meeting with the MP - if it even happens. If my experience of SNP MSPs is anything to go by I suspect the MP's reaction will less one of intellectual persuasion or rebuttal and more one of smug satisfaction that a private landlord has been well and truly kicked in the financial goolies.
Mark Alexander
14:47 PM, 13th August 2016
About 3 years ago
It's not all bad North of the border Andrew.
You guys can avoid the 3% LBTT levy if you decide to incorporate a rental business with six or more properties.
In England and Wales the 3% SDLT surcharge is payable on all transactions.
Also, whilst far from perfect, I do actually rather like your new rental contracts in Scotland. They will pretty much kill off the the market for accidental landlords and leave only professionals in the market. I just hope, for your sake, they improve the eviction processes for when you need to evict bad tenants.
James Fraser
21:39 PM, 13th August 2016
About 3 years ago
David Main makes a good point about SNP MPs - they're far more likely to be rubbing their hands with glee than be sympathetic to our situation (poor misguided fools though this makes them!).
The thing is this though. If we DON'T all keep writing and bringing this to their attention, over and over again, they definitely won't ever see it as an issue of importance. Also, I once wrote to Mullin myself, proudly and clearly explaining from the off that I am 400 miles from his constituency and a Tory, so I wasn't particularly hopeful of any support, but in fact I quickly got back a response that was far more reasoned and sympathetic than I was expecting.
The simple fact is that not trying in the first place is the biggest sin, but we also don't know which of our contacts will be the straw that breaks the camel's back in terms of changing their mind(s). Keep writing.
Janet Carnochan
22:32 PM, 13th August 2016
About 3 years ago
I too have wrote to my MSP over the last few weeks outlining the above points. However I more than likely will sell some of my properties. Mine are all rented to working families who are not able or looking to buy at present or eligible for a housing association property. I am based in Dumfries and Galloway. My MSP has passed my letter to the Secretary of State for Scotland as he too is interested in his response. I am currently awaiting a reply. Like the above I also use local tradesmen far more than the average homeowner, due to the current spec now required for letting being so high. Also my husband and I invested in this business to provide a pension for ourselves as due to being with private employers have no pension provision. We now would have been better enjoying the money and asking the state to look after us in our old age.