9:40 AM, 4th December 2017, About 5 years ago 7
Patrick Collinson has again misunderstood a report with big numbers in it, like he did in the summer: Patrick Collinson “Guardian of Housing Ignorance”
This time it was a report from Scottish Widows which claimed that tenants who retire in the next 15 years need to increase their pension contributions on average by over £6,300 a year until they retire so that they will be able to afford the increases in rent that the researchers assumed would occur during their retirement. These extra contributions, over 15 years, would amount to £43bn.
The £43bn was calculated by Development Economics. They assumed that the proportion of pensioner income spent on rental payments would increase from 32% in 2017 to 42% in 2032 as a UK average. For London they assumed an increase from 66% to 80%.
Patrick Collinson has written an article about this report: Pensions aren’t the ticking timebomb – rents are
He wrote “It says there is a £43bn gap between the income and savings people have now and what the rent bill will be in retirement. That’s more than one-third of the entire NHS budget for a year – to be squandered on rent.” As opposed to being squandered on other essentials like food and clothing, presumably.
In this paragraph Collinson revealed that he did not understand the figure of £43bn. The Scottish Widows press release compared the figure to the cost of the Olympics, but Collinson has made a different comparison. By comparing it to the NHS budget for a year he is implying that it is an annual cost.
And the gap is nothing like his description. It is not the difference between one year’s current income plus accumulated savings on the one hand and future rental payments during retirement on the other. It is the total amount that renters who will retire between 2018 and 2032 would have to put into pension funds so that the resulting estimated increases in their pension payouts would cover the estimated increases in their rent.
It should have been obvious that there would be no point in doing the comparison that he described, because people will not be getting as much in pension as their income now.
However, it is a big impressive number and the report is about rents, so that is a good excuse for him to produce yet another article criticising BTL.
But first he accuses Scottish Widows of skirting round the issue “by suggesting that non-homeowners currently in their 50s should start saving an extra £6,000 a year now to be able to afford their rent in retirement. As if people on low incomes are going to find that sort of money. The reason they are renting is that they were never able to find the savings for a deposit on a house in the first place, or didn’t earn enough to qualify for a mortgage.”
Helpfully he ends the article with “The solution? Build more houses, of course. But even 300,000 a year won’t solve this problem if they are snapped up by landlords. That only leaves us with rent control and much higher taxes on buy to let.”
His “solutions” of course are nothing of the sort.
Building 300,000 houses a year is not the solution for “non-homeowning workers aged above 50 who have no money left after basic costs to put aside extra money for a pension”, because they will never able to find the savings for a deposit on a house in the first place, or won’t earn enough to qualify for a mortgage, to paraphrase his own second paragraph.
And preventing landlords from buying new homes would have two negative effects. Firstly, it would prevent them increasing the size of the rental sector and therefore the availability of accommodation for people who will never be able to buy. If supply is restricted and demand continues to increase, so will rents. The DCLG estimated that 227,000 new households will be created each year.
Secondly, a ban on landlords financing the building of some of these 300,000 new homes a year would make it less likely that the target will be reached. And any such deterrent to the building of private homes for sale or rent will also reduce the number of affordable homes that developers have to build as the price for planning permission.
He quotes the press release’s figure “one in eight retirees will be renting by 2032 – treble today’s figure”. He does not wonder what or where the extra 723,000 retirees will rent if landlords cannot buy any of the new properties. One of its tables, “based on data published by the House of Commons Research Library, June 2017” shows that the number of people renting will go up from 4.8m this year to 9.1m in 2032. What will the extra 4.3m people rent if landlords can’t buy? He does not say.
“That only leaves us with rent control and much higher taxes on buy to let.”
Higher taxes have already been applied and they are being passed on to the end-user, as in any other business, in the form of rent increases. The taxes are also forcing some landlords to exit the market, reducing the supply, consequently increasing rents. Thousands of people who cannot afford the rent increases are being made homeless because of these higher taxes. This also happened in Ireland when higher taxes were introduced twice, and had to be repealed twice.
But Collinson seems to be as ignorant of the history of renting as he is of its economics. Rent control was introduced in 1915 and was in force for most of the last century. It resulted in a reduction in the number of rented properties and a reduction in their quality because landlords could not afford to maintain them. It would have the same effect again.
Collinson’s “solutions” – excluding landlords from financing new-builds off-plan or buying them when finished, imposing rent controls and higher taxes – will all have the same result: higher rents. His solution to the problem of high rents is to propose things that would increase rents!
And the tone of some of the article is puerile. “the whole lot [rent] will be gobbled up by the landlord” is nonsense. The rental income is used to pay mortgage interest, agents’ fees and maintenance costs – and income tax on the profit.
“All so that the buy-to-let landlord with multiple properties can enjoy a lavish retirement themselves”. Here he reveals his envy, but also his ignorance: only a minority of landlords (1 in 5) own more than two properties. The majority own properties to ensure they can afford a modest retirement and be independent of State financial support.
“A landlord who has the power to evict without reason and at short notice” is more nonsense. The vast majority of tenancies are ended by the tenant; no landlord evicts without a reason; the minimum notice period is two months, but if the tenant follows Shelter’s advice to wait for the bailiffs, the process takes several months more. Collinson must be aware of this by now, but continues to publish propaganda.
It is an appalling article.
But the report from Scottish Widows is not what it seems. It is not a sales pitch – that would be futile given the fact that it states that “68% of those who plan to rent in retirement say they could only increase contributions if they sacrificed elsewhere”. This is not a very appealing idea – make sacrifices now to increase pension contributions in order to avoid having to claim housing benefit in retirement.
It is a lobbying document, advocating among other things the extension of their new Scottish tenancy agreement to the rest of the UK. Thus Scottish Widows has decided to put its oar into the politics of the PRS. One of the recommendations in the report is:
“3. REFINE THE HOUSING MARKET TO BETTER SUIT OLDER RENTERS. As the number of retired renters is set to treble in the next 15 years, consideration should be given to allow tenants more flexibility over the terms of their tenancy. The Government announced in the Budget that it will consult on the barriers to landlords offering longer, more secure tenancies to those tenants who want them. We welcome this, as an open ended tenancy with predictable rents and protection against excessive rent increases, would play a valuable part in making planning for renting in retirement more effective. A template for this already exists through the Scottish Government’s reforms coming into place in December 2017.”.
The report and the press release can be downloaded here: Retirement Report 2017: Renters in Retirement
The press release includes the following:
“Robert Cochran, Retirement Expert at Scottish Widows, said: “Generation Rent is a term often applied to younger generations, but our research shows that the problem extends right to the other end of the generational scale. The number of people renting in retirement is set to treble over the next fifteen years, but alarmingly few people are thinking about how they would cover the growing cost of a property lease when they stop working.
“Whilst some people may choose to rent later in life, we also need to ensure it’s a more sustainable, secure option for an ageing population – many of whom will have no choice. We’re therefore urging the government to consider ways to refine the housing market to better suit older renters – through options such as open ended tenancy, with predictable rents and protection.”
All three articles that I have found on Google about this report include a quote from Dan Wilson Craw. This is because Scottish Power included it in its press release:
Dan Wilson Craw, Director, Generation Rent, said: “The common perception is that retirees either own their home outright or have a council tenancy, so the government will be in for a nasty shock as more of us retire and continue to rent from a private landlord. Many renters relying on pensions will qualify for housing benefit which will put greater strain on the public finances. The government can prepare for this by ensuring it delivers on its plans for 300,000 homes a year in order to bring rents down. More people facing a lifetime of renting also makes it essential that we make tenancies more secure to give tenants more stability in their lives.”
The Guardian publishes garbage from Wilson Craw as well as from Collinson, see the last section of https://www.property118.com/poverty-evictions-forced-moves/
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