The other day, I felt a slight pang that I hadn’t talked about landlords for a while. For so long, while this silly Brexit business was going on (and on and on), and the baton was being passed from Cameron to May, and from Osbourne to Hammond, the focus was on all of the heavy measures these guys had dumped on landlord’s shoulders, and there was plenty for me to talk about on the subject. Then things went pretty quiet.
The gist of it, if you hadn’t read any of the many newsletters on the topic from last year—or turned on the TV, or otherwise had your head buried in a place where there was no news (ahh, bliss!)—was that the government was out to get landlords. And, of course, they were. They taxed them to the hilt, got the taste for their new blood sport and, revelling in the cheers of support from tenants in the stands and on the sidelines, felt emboldened to tax some more.
Even the former Prime Minister’s wife, Cherie Blair, herself a landlord contemptuous of the new measures, attempted in the High Court to force the government to perform a U-turn but was told by the judge in no uncertain terms to get out of his court.
And now? Section 21
Basically, landlords were getting nowhere and had to suck up all of the tasteless gruel being dished their way. Some sold up their portfolios, some worried and did nothing, others formed limited companies. All incurred heavy burdens in the form of costs.
Recently, the government expressed its intention to abolish Section 21, a move that will change the current nature of the landlord-tenant relationship, giving tenants greater security. This intended policy change, currently in consultation, is a clear overture to the 11 million (and rising) number of renters in the country. And it’s causing a bit of a stir.
Generation Rent bangs the drum
You may well have heard the phrase Generation Rent being bandied about. This is the cohort that by and large has grown up in the shadow of the so-called Boomer Generation, with the latter owning much of the UK’s domestic property while the former is obliged to rent it. Of course, it’s not quite that simple and things vary from area to area, but demographics point to the fact that Britain is fast becoming a place where market forces, quantitive easing, and government interference have all played their part in driving average property prices far from the reaches of even mid to high earners.
Whereas, back in the day, Boomers on a low salary could still hope to save and own their own property, these days, short of some kind of overleveraging through schemes like Help to Buy, or getting help from family, there’s little hope for low earners to achieve homeownership. Many are left with no choice but to rent and stay that way.
A recent Eurostat report reveals that Britain now sits in fifth place in Europe as the country with the highest number of renters. Only France, Germany, Denmark, and Austria pip it to the post, placing Britain, when it comes to the proportion of people renting, above 23 other European nations.
UK renters don’t have the same level of robust rights as tenants in the four other countries at the top of the renting chart either. In Germany, for example, it’s common for tenants to rent indefinitely with rent caps commonplace.
But, in the UK, rents can theoretically be increased beyond the pockets of existing renters and Section 21 used to start the ‘no fault’ eviction process to get those who can’t afford such an increase out.
But this lack of protection for tenants looks increasingly likely to change.
June 1st changes
The first shot through the bows came on June 1st when new measures were introduced preventing property agents from taking renewal fees from tenants, enshrined in the Government’s amended How to Rent guide. It marks the beginning of a new era of changes that affect the balance of power between landlords and their tenants. Section 21 is most likely to be next in line for an overhaul, or outright abolishment.
The main reason, and it’s a clear social reason, is that Section 21 has been cited as one of the main causes of homelessness in the UK. And, just to be clear, we’re talking about families with children and working professionals, too. As we drift deeper and deeper into the realm of renting rather than buying, the voice of tenants is growing louder than the protests of landlords, and could soon drown them out.
A numbers game
Lest we forget tenants are voters, too, and they currently outnumber voting landlords to the tune of around six to one. So, forget how many MPs have nice little (or large) portfolios of their own, when it comes to appealing to the masses and giving them what they want, renters and tenants are going to have greater say in future outcomes. It’s a numbers game. Because if there’s one key issue parties can focus on to win over the hearts and minds of the many disenfranchised Millenials, it’s the issue of property and the rights surrounding them. And while more youthful generations might not be able to demand ownership as though it were a right, they will have a far stronger case for demandingsecurityas a right.
More homes or greater security?
Jeremy Hunt may have recently promised generation rent another 1.5million homes, but it is protection from no-fault evictions that tenants want, and younger voters unable to buy and forced to rent will view this as a key tenet of any political party’s manifesto. Having a secure home is deemed to be a basic human need, and shelter is one of the key tiers in Maslow’s hierarchy of needs.
Landlords: barking or biting?
Growing support for the abolishment of section 21 has many landlords threatening to throw the towel in. The thought of being unable to oust tenants, as and when they choose, is the removal of an element of power and control they’ve had, and taken for granted, for years.
Adding this to the raft of tax measures that have pushed some landlords into the red when they were once, with the same business model, in the black, might be a bridge too far. Just a litmus, I know, but the RLA’s biggest ever survey of 6,500 landlords and agents, on this issue, suggests that nearly half are thinking of selling up.
But will they, really? Landlords bandy together, complain, lobby, but letting go of bricks and mortar is hard. Perhaps the government will find a concession for them somewhere else, such as returning stamp duty fees to landlords who buy properties with sitting tenants, or things like that.
But in the end, it is the sheer volume of demand from renters that will drive change, not the protests of a cluster of landlords—of which I am one by the way—that many, mistakenly or not, consider to be the privileged minority.
Rest assured, there’s a battle going on, and the outcome is far from certain. I guess all we can do for now, is watch this space. And in case you were wondering, it’s not up for rent.
We invest in Hotels. Why? As seasoned investors, we’ve found hotels to be the best place to secure your capital and gain a healthy return when it comes to bricks and mortar. To learn more, get in touch with us at Shepherd Cox.