Property

In February 2021 Kate and Jason moved with their three sons into a one-bedroom flat in Long Eaton, Derbyshire. By October 2022 it was riddled with mould, one window was wedged open, a wall-mounted kitchen cupboard had almost fallen onto one of their sons, and the shower emitted a burning smell. Warming the house, Jason told the Derby Telegraph, was costing “£10 to £12 a day”. In an effort to persuade their landlord to fix the problems, the couple withheld £2,000 of rent payments; instead, the landlord simply issued an eviction notice. But the age of the private landlord is coming to an end. For several years, new regulations have made it an increasingly unpleasant proposition, and this week the Bank of England signalled that the freely available credit that has underwritten the nation's small landlords is drying up; David Bailey, an executive director at the Bank's Prudential Regulation Authority (PRA), wrote to lenders warning that it plans to scrutinise how they manage credit risk – particularly around buy-to-let mortgages. In 2019 the bank Kent Reliance published a report claiming the UK's two million landlords contribute £16.1bn a year to the UK economy through their pre-tax spending on property maintenance and improvement, but the private rented sector is also an exploitative and unaccountable industry in which one in four properties fail to meet the government's standards for decent housing and a fifth are susceptible to damp and mould. After the financial crisis, as cheap credit became the norm, buy-to-let boomed. By 2015 it was clear a new army of would-be landlords was causing house prices to spiral. Faced with the unenviable task of slowing growth while keeping his voters – many of whom had just sunk their life savings into a buy-to-let property – happy, George Osborne, the chancellor at the time, opted for a weak deterrent: scrapping tax relief on interest payments for buy-to-let mortgages. But cheap credit continued to make owning someone else's home an attractive investment, so tighter restrictions have followed, including caps on tenancy deposits and longer notices for “no-fault” evictions. In 2025, landlords will be hit by strict new regulations on energy efficiency. The effect has been to reduce the number of landlords in the UK. Figures released in June by PropertyMark, an estate agents' industry organisation, indicated that the number of homes available to rent had fallen 49 per cent between March 2019 and March 2022. Then came the Liz Truss government's mini-Budget in September: as interest rates spiked in its wake, many landlords decided that, with fixed-rate deals averaging above 6 per cent, refinancing mortgages wasn’t worth it (times were even tougher for the one in six on floating deals). That trend will persist. According to UK Finance, new buy-to-let lending will fall 27 per cent this year. “The party will stop for many soon, as they will struggle to increase rents in line with their debt servicing costs,” wrote Samuel Tombs, chief economist at Pantheon Macroeconomics, in December. Last week Jon Cunliffe, the Bank of England’s deputy governor, said he expected landlords to sell and “take the capital profits”. [See also: Richard Blakeway: “Landlords are too dismissive about damp and mould”] For renters, landlords selling up may appear to be bad news, because it will reduce supply, pushing rents higher. Figures from Zoopla, the listings website, showed rents rose 12 per cent in 2022, and across the UK rent now makes up more than a third of the average single person’s income. But the exodus of buy-to-let landlords could also mean Britain's dysfunctional market is consolidated: rather than the number of rental properties falling, they may simply pass into the hands of fewer, bigger landlords. This was already happening. The 2021 English Private Landlord Survey, published in May, showed 43 per cent of all landlords owned just one rental property, down from 78 per cent in 2010. In October, as the effects of the mini-Budget were becoming clear, Lawrence Bowles, a research analyst at Savills, told me this trend would accelerate. “We’re expecting to see a greater proportion of the rental market shift to those larger-scale landlords,” he said. Renters might understandably worry about the further commercialisation of the market, but this won't necessarily lead to higher prices. In Germany, where just 40 per cent of people own their own homes (one of the lowest among developed countries, compared with 65 per cent in the UK), the market is dominated by larger landlords – but the share of people on low incomes but very high rent (more than 40 per cent of income) is half that of the UK. The appalling conditions in the UK’s rental sector are partly the result of what estate agents call “granularity” in the market. If the house you live in is the sole investment of Mr Bloggs, he may not have the cash flow to do something when your boiler breaks, or understand his obligations, or care if anyone considers him a poor landlord. As his only tenant, your bargaining power is also limited to putting up with him or seeing if you can find a better landlord. If your home is one of hundreds owned by Bloggs Incorporated, you and other tenants can take collective action if your service isn’t up to scratch, and the company will rightly conclude that the administrative, legal and PR costs of being a terrible landlord outweigh the cost of fixing things on time. Bigger companies tend to be longer-term investors, which is good for tenants: a private landlord may suddenly find they need money and sell up, as happened in the case of a disabled man, Gary Taylor, who was housed in unsuitable temporary accommodation after his landlord suddenly put his flat on the market. “If you've got a landlord who is going to guarantee to sort stuff out when it breaks, and who's got somebody on hand to respond to your emails when something goes wrong, rather than getting an out-of-office from an investor who doesn't really want to deal with the property because they thought it was basically a bond – that can only be a good thing,” said Bowles. The problem, of course, is when those systems don’t work and large landlords – despite their economies of scale – fail to ensure their properties are properly maintained. That’s where stringent regulation comes in: if the government’s job is to ensure laws are in place to keep rental properties properly maintained, dwellings might stop being regarded as “bonds”, the rental market might start being regarded as a proper, professional sector – and rather than being an “investment”, houses and flats might revert what they were meant to be: homes. [See also: Why Jeremy Hunt is gambling with thousands of small businesses]

Property

Good riddance to the buy-to-let landlord

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