BTL is in desperate need of reform

Graham_Devon

Fair article?

Personally, I think so.

Many Guardian readers have chosen to do buy-to-let and, as a money section, we have a duty to let them know the best deals. Lots of landlords are ethical and responsible people who care for their properties and their tenants.

But while on an individual level buy-to-let has (mostly) made financial sense, the societal impact of more than 1.3 million buy-to-letters – and more to come – is having a devastating impact on working people.

The dream of a property-owning democracy is receding fast. Young workers, burdened with college debts, face ever higher rents, preventing them from saving for a deposit. They have no choice but to live in shared properties on short tenancies. Meanwhile, the type of properties that in the past would have been "starter homes" – small terraced houses – are being gobbled up by the buy-to-let brigade, who need only repay the interest on the loan.

First-time buyers are only offered more expensive repayment loans. No wonder they are persistently outbid for family homes by landlords.

Tenure is important. Workers forced into unstable short-term leases cannot plan for their future and inevitably delay starting families. Remote landlords destroy the fabric of local communities. If that sounds exaggerated, take the example of a development of flats close to where I live, in Denmark Hill, London. It's in immaculate condition. Why? It bans buy-to-let. Other blocks that allow buy-to-let rapidly become uncared for and start deteriorating.

Meanwhile, property wealth becomes ever more concentrated in the hands of the few rather than the many. Non-productive rentier capitalism is the enemy of enterprise, channelling the nation's resources into the dead end of house price bubbles. Wouldn't we rather it went into rebuilding Britain's battered industrial base?

Three reforms are necessary. First, we need to bring buy-to-let under the regulation of the FSA. Given that it was behind the economy-wrecking surge in "wholesale" lending, it is bizarre it still escapes oversight. Second, the FSA should require buy-to-let loans to be written on a repayment basis. It's not only prudent, it puts them on a level playing field with first-time buyers. Third, we need better protection for tenants, such as the abolition of assured shorthold tenancies, to be replaced with longer-term contracts and rules preventing landlords raising rents by more than inflation.

Full article: http://www.guardian.co.uk/money/blog/2011/apr/23/buy-to-let-needs-reform

chucknorris

If I was forced to only raise rents by up to the rate of inflation and longer contracts introduced I would immediately do 2 things:

1. Stop renting below the market rent.
2. Stop rewarding long staying tenants by increasing rent at zero/below the rate of inflation (unless the rate of inflation could be taken over a number of years rather than restricted to an annual calculation).

Wee_Willy_Harris

chucknorris wrote: »

If I was forced to only raise rents by up to the rate of inflation I would immediately do 2 things:

1. Stop renting below the market rent.
2. Stop rewarding long staying tenants by increasing rent at zero/below the rate of inflation (unless the rate of inflation could be taken over a number of years rather than restricted to an annual calculation).

Why such a knee-jerk reaction? You have told us why you keep your rents lower than the competition and why you feel retention of good tenants to be worth more in the long run than a few extra quid a month. So why would a regulation which prevents others from doing something you won't do anyway cause you such a problem?

chucknorris

Wee_Willy_Harris wrote: »

Why such a knee-jerk reaction? You have told us why you keep your rents lower than the competition and why you feel retention of good tenants to be worth more in the long run than a few extra quid a month. So why would a regulation which prevents others from doing something you won't do anyway cause you such a problem?

Because currently I always have the option to revert to the market rent (even if I choose not to), if future rent rises (along with longer rental contracts) were capped at the rate of inflation I would no longer have this option. I would not wish to be 'trapped/locked' into a below market rent situation.

The few extra quid is currently around £4,000 a year, ok not a fortune but significant enough to have a rethink if goal posts were being moved.

StevieJ

It is about time that 'accidental landlords' were given tax relief on their rental income from primary residence. This would allow people to rent out their property and rent elsewhere in times of market malfunction without being heavily penalised.

Wee_Willy_Harris

chucknorris wrote: »

Because currently I always have the option to revert to the market rent (even if I choose not to), if future rent rises (along with longer rental contracts) were capped at the rate of inflation I would no longer have this option. I would not wish to be 'trapped/locked' into a below market rent situation.

Get rid of the tenants, apply market rents, get new tenants. Seems fair to everyone that way. And oh so simple.

chucknorris

Wee_Willy_Harris wrote: »

Get rid of the tenants, apply market rents, get new tenants. Seems fair to everyone that way. And oh so simple.

Not with longer rental contracts. if you are only halfway through!

Third, we need better protection for tenants, such as the abolition of assured shorthold tenancies, to be replaced with longer-term contracts and rules preventing landlords raising rents by more than inflation.

Wee_Willy_Harris

StevieJ wrote: »

It is about time that 'accidental landlords' were given tax relief on their rental income from primary residence. This would allow people to rent out their property and rent elsewhere in times of market malfunction without being heavily penalised.

Quite the opposite. It's about time ALL landlords were regulated (and charged for the pleasure). The problems caused by know nothing, "accidental" landlords are costing us all a fortune. The sooner they either wise-up or get out, the better!

chucknorris

StevieJ wrote: »

It is about time that 'accidental landlords' were given tax relief on their rental income from primary residence. This would allow people to rent out their property and rent elsewhere in times of market malfunction without being heavily penalised.

What sort of tax relief are you advocating Steve? I think I am probably with Wee Willy on this one though as I think they can be problematic for tenants and unwelcome (if they receive additional tax incentives) competition for longer term landlords.

Wee_Willy_Harris

chucknorris wrote: »

Not with longer rental contracts. if you are only halfway through!

Third, we need better protection for tenants, such as the abolition of assured shorthold tenancies, to be replaced with longer-term contracts and rules preventing landlords raising rents by more than inflation.

I was responding to your comment about rents, which quoted a section of the report regarding rent increases and nothing else. At the moment, you have a commercial advantage over your perceived competition. Throwing that away and jumping into the ring with them can only increase voids while decreasing your ability to cherry-pick tenants, both have a cost implication which would easily outweigh any pure revenue increase.

chucknorris

Wee_Willy_Harris wrote: »

I was responding to your comment about rents, which quoted a section of the report regarding rent increases and nothing else. At the moment, you have a commercial advantage over your perceived competition. Throwing that away and jumping into the ring with them can only increase voids while decreasing your ability to cherry-pick tenants, both have a cost implication which would easily outweigh any pure revenue increase.

The comment I made about rents was obviously based on the OP which makes it quite clear that the call is for longer contracts AND inflation capped increases. However I have now edited the post to make this crystal clear.