The consequence of Section 24 – bankrupt councils and countless homeless

The consequence of Section 24 – bankrupt councils and countless homeless

9:45 AM, 26th January 2024, About 4 months ago 15

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News this week that councils around the country are flagging up the prospect of going bankrupt because of the ever-growing homelessness bill they have to meet. Oh please, cry me a river. Not once will councils and the government accept that their short-sighted policies hurting landlords are to blame. It’s always the landlord’s fault.

Council leaders held an emergency meeting in Westminster to highlight the cost of having to house homeless people and families. These costs are pushing them towards bankruptcy – they claim.

Eastbourne council claims – perhaps overstating the case – that they are spending 49p in every £1 of taxpayers’ money on temporary accommodation. If true, that is astonishing and unsustainable.

Crawley Borough Council says we are seeing ‘the end of local government’ unless the government coughs up more money. That council has an annual temporary accommodation bill that rose by £2 million in 2023 – and it will increase again this year.

Even Gloucester City Council spent £364,000 last year on temporary accommodation.

Everyone in the private rented sector predicted would happen

So, let’s take a closer look at this terrible situation which everyone in the private rented sector predicted would happen and what has happened.

The slippery slope for the PRS began with the clueless George Osbourne and his removal of section 24. The opportunity to claim mortgage interest as a business cost was hugely helpful. Not so much when the rule was removed, and landlord costs went up.

Then Mr Osbourne reduced the Local Housing Allowance so tenants struggled to find cheap places to rent because they couldn’t get the extra money needed to pay for it.

It also meant that landlords couldn’t afford to lower rents to accommodate them.

As a result, tenants faced the prospect of temporary accommodation – that is usually long-term – and a government hoping to slash its benefits bill (it didn’t work, natch).

No money saved during the so-called ‘austerity years’

What is interesting is that after the LHA cuts were brought in, there was no money saved during the so-called ‘austerity years’ (so-called because government spending didn’t decline as critics like to portray). That meant the buffoon Boris Johnson and his sidekick Rishi did poor tenants another disservice.

However, it did prove to be beneficial for temporary accommodation providers who cashed in – with councils picking up the bill. I say councils, I mean taxpayers.

But the rising homelessness situation is down to the landlords, right?

The issue of selling off council houses

Then there’s the issue of selling off council houses – which should never have been introduced – and not enough new social homes being built.

That means that the temporary accommodation bill for homeless families with children goes up.

Private landlords stepped into the breach to provide homes for those who lived in areas with a diminishing supply of council houses.

Two things happened here – councils still had to pay housing benefit to landlords and there still weren’t enough homes.

Another rising bill for councils. I mean taxpayers, obvs.

Double whammy of paying more taxpayers’ cash for housing

So, we were delivered a double whammy of paying more taxpayers’ cash for housing but having fewer homes for people to live in.

And we voted these clowns into power to come up with barmy ideas like this!

Remember, the housing crisis is only just beginning, and families are still being placed in pricey temporary accommodation.

Then Rishi froze the LHA in 2020 which led to more families being made homeless because that didn’t stop private rents from going up.

Poor tenants really were caught in the crossfire because more landlords are selling up and leaving the PRS.

They can’t make the numbers work what with rising mortgage rates, selective licensing bills and the prospect of what damage the Renters (Reform) Bill will do.

That means there are even fewer cheap homes to rent. And still, no council houses to rent either.

And all the while, the benefits and temporary accommodation bill goes up. Hooray!

Why we had to build council houses in the first place

Along the way we have lost sight of why we had to build council houses in the first place, and we are back at square one.

Adding to the situation are a huge number of legal and illegal migrants wanting a home. And they can jump the queue because the system of allocation under Labour turned into one of need.

The bottom line is that we have had third-rate politicians coming up with policies to serve an economy they thought we had – not the one we really did have.

So why not rescind section 24 so that landlords can make the numbers work again?

Alongside this, build more homes – make planning easier and let’s forego some of the green belt (NIMBYS are happy with homes being built anywhere but where they live, apparently).

Scrap selective licensing for the expensive nonsense that it is – it puts up rents and HMO rules are seeing larger room regulations being introduced so fewer people are being homed.

Private landlords have done amazingly well

There needs to be an honest conversation (that won’t happen) which highlights that private landlords have done amazingly well under the circumstances.

Councils – which needlessly harass landlords and make renting difficult and expensive – will need to accept their role in this debacle.

We also need to appreciate that the government’s scrapping of Section 24 and then freezing LHA effectively lit a fire under the homelessness numbers.

Landlords and landlord organisations told everyone this would happen when Section 24 was binned.

Nobody listened.

So, here we are.

Until next time,

The Landlord Crusader

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John Socha

14:32 PM, 27th January 2024, About 4 months ago

Reply to the comment left by Jason at 26/01/2024 - 20:17
Just look at Persommon Homes PLC a FT 100 company.
Net profiting 2022 was 30% of sales.
Why sell cheap (small) properties when you can sell 3, 4 & 5 bed houses at a fat margin?
Oh, make them all leasehold doubling every 10 years. Sell the freeholds to Russian & Chinese investors.
The Government changed the law at the end of June 2022.
Taylor Wimpey were claiming in their advertising that they did not do this.
It was their actions from 2011 to 2017 which forced them to buy back all the freeholds.
The Government changed the rules on new leasehold properties.
Big house builders buy building land and trade amongst themselves.
Restrict the rate of construction to keep prices up.
Nothing to see here, just a modern oligopoly in action.

Old Mrs Landlord

16:17 PM, 27th January 2024, About 4 months ago

Reply to the comment left by Old Mrs Landlord at 27/01/2024 - 08:34
Thank you Neil. (Feel free to delete this and previous post.)

Ian Narbeth

10:13 AM, 29th January 2024, About 4 months ago

Reply to the comment left by John Socha at 27/01/2024 - 14:32Thankfully the doubling ground rents have been abolished for new builds but not, unfortunately, for older leases.

Ian Narbeth

10:20 AM, 29th January 2024, About 4 months ago

Regarding selling off council houses, landlords should be alert to the specious argument that it was the horrible Tories that sold off Council houses, and that if they had not done so, Councils could house the homeless.
Anyone who reflects on this for a few seconds will realise that those ex-Council houses are not sitting empty. They are occupied. The problem was not the sale but the double problem of a failure to build enough houses and an increasing population. I suspect also that with the increase in divorce and family breakdown, more properties are needed as mother and father are not living in one property with their children.

Alison Walker

12:13 PM, 29th January 2024, About 4 months ago

Reply to the comment left by Jo Westlake at 26/01/2024 - 11:01
Great Point Jo. We have a development near us where the labourers have all been laid off as they've not managed to sell enough of the phase 1 properties so 3/4's of the site is just mud. Added to the fact that they are probably not in the least 'affordable' the site is also under the flight path of a provincial airport, the site is probably 1 mile away from the end of the runway as the crow flies plus part of the site is potentially a flood plain. Why would anyone want to buy one of these rabbit hutches, sorry houses.

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