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The war on landlords: are these “bogeymen” to blame for the housing crisis?

Tom Entwistle explores some of the reasons why UK landlords are taking flak in the current cost of living crisis.  

“People are being priced out of housing markets, they’re having trouble finding places to rent, they’re leaving the cities where they grew up, or where their opportunities for employment are.”

“The housing affordability crisis deepens as inflation, cost of living and housing prices rise at a faster rate than wages.”

"Some students are able to rent a place using a financial guarantee from their parents, but it's especially difficult for international students because they often aren't able to provide such a guarantee."

“The housing crisis… is complicated – whether you’re a tenant, a prospective house buyer, a landlord or a homeowner considering selling.”

“Why are landlords being blamed for the tenant bidding wars?”

The house crisis in the UK is shocking, but you’d be forgiven for thinking we’re alone in this. 

These quotes sum up our home grown housing crisis, they certainly do, but they just go to show we’re far from alone in this: these quotes are recent Canadian, Australian, German and Irish Republican and finally English newspaper headlines respectively.

Who are the “bogeyman” in all of this

So, the UK housing crisis, as bad as it is, is far from as unique as the homegrown news cycle would have us believe. Ours is a continuing news echo chamber of stories bouncing off the walls, a vortex of misery describing damp infested housing and tenants thrown out on the streets. The “nation’s animosity towards the ‘bogeymen of modern times’ has reached a breaking point”, the Daily Telegraph proclaims.

Is this crisis really the landlord’s fault? Or are these ‘bogeymen’ themselves the victims of an ongoing housing shortage, and a media smear campaign looking for somewhere to pin blame? 

Why have landlords forever been pilloried in society?

The landlord-tenant relationship is complex. Landlords are perceived as having significant power over their tenants, which to a large extent is true. It creates an imbalance in the relationship. This power dynamic can lead to concerns about exploitation, unfair treatment, a lack of accountability on the part of some landlords, and a good deal of envy and resentment on the part of some renters.

The regulations governing the private rented sector are designed to redress this landlord-tenant imbalance, but it’s an impossible ideal to achieve: either the legislation is too tame, in which case there’s the suffering and resentment of tenants, or it’s too tough, in which case landlords can’t make a reasonable return on their investment. Then they become so disillusioned, they simply sell up.

The philosophical dimension

There’s also that underlying political and philosophical dimension: on the one hand socialist philosophy abhors property ownership and rentiers; landlords are the pinnacle of this, they were taken out and shot in the cultural revolutions in China and Russia. At the other extreme the capitalists venerate property, they see housing tenants as a purely business operation, where profits must always be maximised. 

Can the two extremes ever truly coexist in peace and harmony? Can any amount of regulation respond to the needs of both when the PRS houses such a broad spectrum; from the increasing numbers of social tenants on benefits, families, singles and couples, working and professionals, to the high flying executive?

Rent increases and affordability, maintenance and poor housing standards, evictions and lack of security, these are the issues that divide. Couple this with the stereotyping of landlords as the “bogeymen '', perpetuated by the never ending negative news cycle, and you have a toxic mix for the responsible landlord to deal with. Most landlords are simply trying to make a reasonable profit from renting property while at the same time providing a much needed community service. 

To weed-out the rogues amongst us

There's undoubtedly a  minority of landlords who engage in unethical practices, fail to maintain their properties or mistreat their tenants. This perpetuates this negative perception of the entire landlord community and it tars every landlord with this detestable brush .

At the same time it has to be acknowledged there are some downright awful tenants. And given the disparity in numbers there are likely in reality to be more bad tenants than there are bad landlords  -  there are said to be around 2.5 million landlords currently housing 19 percent of all the households in England.  

The media simply  ignores the vast majority of responsible landlords who are providing excellent accommodation at a reasonable price. There’s no story in this. The fact that many thousands of tenants are very happy with their lot in the private rented sector, and that surveys show that there are less complaints from these tenants than from those in the social rented sector - housing associations and councils housing.

Most responsible landlords welcome the removal of the rogues and the irresponsible from their midst. Successive governments have introduced countless extra layers of tough new legislation to achieve this. But it continually comes up against a seemingly insurmountable obstacle: enforcement, the inability of local authorities to properly enforce the laws they already have at their disposal, and often the timidity of the courts to impose meaningful penalties. 

An acute housing shortage

The UK housing crisis is one of the biggest issues facing the country and is likely to be a major issue in the coming general election. The property market in the UK, as in most of the Western World, is currently characterised by soaring property prices, limited affordability and a shortage of homes. 

The homeowners with mortgages - which includes buy-to-let landlords -  are being hit with higher interest rates, excluding first time buyers. And demand for rental accommodation has skyrocketed at the same time as landlords are packing up, leaving the sector, resulting in rents reaching record heights.

Years of continuous house price increases means that the average home now costs around 9 times the average annual earnings, a massive change since the 3.5 times ratio recorded in 1997. It explains the increase in demand for rental housing as most young people simply cannot raise the funds needed for a deposit, let alone pay off a mortgage, at the new higher rates.

The pandemic effect

In desirable locations house prices rose considerably during the pandemic as many buyers competed for the same properties, those offering more space and country living. But since interest rates rose and an inflation induced cost of living crisis hit, house prices began to stabilise and even declined a little.

A persistent shortage of new housing and slowing construction activity, particularly in high-demand areas like London, in part due to planning restrictions, led to lengthy development lead times. These factors have combined to continue to support the high prices, even though sales have slowed.

Furthermore, the support for house prices and rental demand comes from the UK’s steadily growing population. Driven by migration, rising birth rates and longer life expectancy, demand for housing should remain strong for the foreseeable future. The UK is struggling to keep up with its population growth and now in particular, high rent prices.

Historically, low bank base rates, approaching zero for years, stimulated borrowing against property by homeowners, as well as buy-to-let landlords, leading to much higher asset prices. Now a major change in the direction of the economy has resulted in higher interest rates slowing the economy  down, as well as house sales. It’s resulted in a tough operating environment for those landlords with mortgages. Many have been forced to increase their rents in order to survive.

Some landlords, in order to improve their returns and escape the ever tightening renting regulations, turned to Airbnb style short-term and holiday lets. This is in preference to longer-term buy-to-let rentals. These short-term lets are leading to problems in some locations where long-term renters with key jobs in the area are unable to find somewhere to live. Other landlords are turning to multi-occupied properties (HMOs) in order to improve productivity.

There are wide variations in the accessibility to housing across the whole country, and the rental yields buy-to-let landlords can achieve. Some areas, particularly in the North of England, offer much more affordable housing and consequently better returns, for example than those in London and the South-east. 

This is leading to shifts in the population as people seek more affordable housing. This started off during the pandemic and is continuing, with a steady south-north migration to cities like Leeds, Manchester and Liverpool.

The International dimension

According to one policy study, around 90% of the world’s largest cities around the world were considered to be unaffordable for the average wage earner given the average house price.  During the pandemic these house prices across the globe saw dramatic increases, leaving buyers and renters facing huge housing problems. 

The United States has seen prices rise by around 40 percent since the 2000 with an 11 percent rise in 2021-22 alone. Median house prices in 200 of the US’s largest cities are now around £1mn. 

Similarly, Toronto and Vancouver Canada have experienced similar price rises with New Zealand house prices up by around 22 percent during the same period - 2021-2022. In Hong Kong, Singapore, Japan, the Netherlands and France it’s a similar picture. There’s a similar story here in the UK.

So the backlash is felt by landlords

“It is landlords who have borne the brunt of the country’s angst in the face of a housing crisis. This is despite new homes in England being built at an annual rate of 234,400 – well below the Government’s 300,000 target – and the country’s rental supply having not budged in over a decade,” says the Daily Telegraph.

There’s a fear that new legislation will make the business of letting property more risky. The threat of the Government removing the Section 21 “no-fault” eviction process, a convenient way for landlords to remove bad tenants, even though it can take nine months to do so, is resulting in record numbers being evicted before the new laws come in.

It’s also the case that many landlords can no longer make the buy-to-let business work for them: increased taxation and interest rates on top of the increasing regulations and costs of everything and they are scrambling to increase rents or else sell up. 

The result: not only are private landlords being castigated for their actions, cash strapped and nearly broke local authorities are becoming inudnated with evicted tenants who must by law receive some form of emergency accommodation - there’s been a near 90 percent increase in the need for emergency accommodation in ten years.

Conclusions

High asset prices, namely houses, along with renting prices, is a world-wide issue, not simply confined to the UK as you are led to believe by the national media. Much is made of our home grown housing issues, but rarely if at all is the bigger picture even mentioned.

So, UK landlords are left to bear the brunt of this country’s angst, the backlash of the housing crisis which is leading to intolerable stress for many, including landlords themselves.

It is still possible to make reasonable returns from letting property, especially for portfolio landlords small and large, those with low or no debt.

More should be made in the media of the stirling work many private landlords are doing in the face of adversity in these difficult times.

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