Labour's rental cap etc
Discussion
MODS: I accidentally posted this in NPE, can you move it to business?
I'm not starting this as a thread on the rights or wrongs of the policy, I'm just trying to understand it as someone who, with my gf, rents out a couple of flats. We're not BTL landlords who make a living out of it, just fortunate to have 2 properties as investments.
Initially the rent capped to inflation thing had me quite worried, but from digging a little more, it seems to only apply to increasing rent during a multi-year contract (which I didn't realise you could do??) or if re-letting to the same people on a new contract/extension? Is this correct?
If the latter, it just seems that it if the market moved significantly we might, for investment reasons, be forced to deny tenants who wanted to renew the opportunity to as the market may have moved 10% up but we'd be limited to say 1% with them, whereas if we found new tenants, we could again charge market rate (albeit having to divulge what the previous tenants paid).
Is this about the sum of it? Or are these Labour proposals more severe than this?
I'm not starting this as a thread on the rights or wrongs of the policy, I'm just trying to understand it as someone who, with my gf, rents out a couple of flats. We're not BTL landlords who make a living out of it, just fortunate to have 2 properties as investments.
Initially the rent capped to inflation thing had me quite worried, but from digging a little more, it seems to only apply to increasing rent during a multi-year contract (which I didn't realise you could do??) or if re-letting to the same people on a new contract/extension? Is this correct?
If the latter, it just seems that it if the market moved significantly we might, for investment reasons, be forced to deny tenants who wanted to renew the opportunity to as the market may have moved 10% up but we'd be limited to say 1% with them, whereas if we found new tenants, we could again charge market rate (albeit having to divulge what the previous tenants paid).
Is this about the sum of it? Or are these Labour proposals more severe than this?
Rather than heap yet more bureaucracy and costs on the economy there are many more ways to encourage lower or stable rents. Encourage the building of more houses or discouraging so many people from immigrating.
Labour are all about stifling entrepreunarial activity rather than helping grow an economy. They should never be trusted to run an economy ever agin.
Labour are all about stifling entrepreunarial activity rather than helping grow an economy. They should never be trusted to run an economy ever agin.
It does seem a bit poorly thought through to me.
On a 75% mortgage on a 200k property (numbers picked to make maths easy) 3% interest rates gives you an annual bill of £4500, a 1% rise in rates takes this to £6k, or 33% more. However, the rent rise allowed is capped to inflation so you're going to have the right to increase rent by low single figure percentage points at best.
As a landlord if I was in this position I'd have no choice but to sell up and kick the tenants out.
As I understand it most of the private rented accommodation in the UK is owned by small landlords, so the net impact of this policy is likely to be either nothing at all, or it will result in a small fall in house prices as landlords sell up if they don't want the hassle. Meanwhile rents will rise as demand will be broadly similar (even a 10% fall in house prices isn't going to significantly change their affordability) but the number of available properties for rent will fall.
On a 75% mortgage on a 200k property (numbers picked to make maths easy) 3% interest rates gives you an annual bill of £4500, a 1% rise in rates takes this to £6k, or 33% more. However, the rent rise allowed is capped to inflation so you're going to have the right to increase rent by low single figure percentage points at best.
As a landlord if I was in this position I'd have no choice but to sell up and kick the tenants out.
As I understand it most of the private rented accommodation in the UK is owned by small landlords, so the net impact of this policy is likely to be either nothing at all, or it will result in a small fall in house prices as landlords sell up if they don't want the hassle. Meanwhile rents will rise as demand will be broadly similar (even a 10% fall in house prices isn't going to significantly change their affordability) but the number of available properties for rent will fall.
rover 623gsi said:
the average private landlord owns five properties
I think there is a case for a rent cap - but not in the way Labour is proposing
How does the number of properties owned on average change things?I think there is a case for a rent cap - but not in the way Labour is proposing
Genuine question (albeit from somebody resolutely against a rent cap - and somebody that rents a hugely expensive one bed in London, and has just been subject to a rent increase by their landlord.)
iphonedyou said:
How does the number of properties owned on average change things?
Genuine question (albeit from somebody resolutely against a rent cap - and somebody that rents a hugely expensive one bed in London, and has just been subject to a rent increase by their landlord.)
the first point was just confirming something said in the post above As I understand it most of the private rented accommodation in the UK is owned by small landlords, so the net impact of this policy is likely to be either nothing at all, or it will result in a small fall in house prices as landlords sell up if they don't want the hassle. Genuine question (albeit from somebody resolutely against a rent cap - and somebody that rents a hugely expensive one bed in London, and has just been subject to a rent increase by their landlord.)
The second point is that housing costs are taking up an ever-increasing proportion of income for an ever-increasing number of people. I do not believe this healthy for society. Rent caps are one way of addressing this. However, I think the more effective method would be to massively increase the amount of housebuilding – the problem is that both Labour and Tories are fiddling about with rent caps and help-to-buy and mortgage ISAs etc but addressing the issue of supply and demand. We need more homes.
rover 623gsi said:
the first point was just confirming something said in the post above As I understand it most of the private rented accommodation in the UK is owned by small landlords, so the net impact of this policy is likely to be either nothing at all, or it will result in a small fall in house prices as landlords sell up if they don't want the hassle.
The second point is that housing costs are taking up an ever-increasing proportion of income for an ever-increasing number of people. I do not believe this healthy for society. Rent caps are one way of addressing this. However, I think the more effective method would be to massively increase the amount of housebuilding – the problem is that both Labour and Tories are fiddling about with rent caps and help-to-buy and mortgage ISAs etc but addressing the issue of supply and demand. We need more homes.
On the first point, I'd consider five rental properties small but then that's arbitrary so definitions will necessarily vary. But thanks for explaining.The second point is that housing costs are taking up an ever-increasing proportion of income for an ever-increasing number of people. I do not believe this healthy for society. Rent caps are one way of addressing this. However, I think the more effective method would be to massively increase the amount of housebuilding – the problem is that both Labour and Tories are fiddling about with rent caps and help-to-buy and mortgage ISAs etc but addressing the issue of supply and demand. We need more homes.
On the second; we probably agree. Supply side is the key factor, but most policy is directed at stimulating demand side. The rent cap is a preposterous idea in the vein of his energy market meddling which would have seen prices above current levels.
How about the fact that each local authority already sets a local housing allowance. Thus the cap that they will pay full housing benefit on
So there is the cap per city, done set out.
Of course the free market then says, if you aspire to live somewhere "better" than a typical lha capped type property, you can.
But you'll pay.
What were seeing again is problems with London and its housing market being possibly sorted to the detriment of the rest of the UK. Eg welfare reform, setting of bedroom standard and then bedroom tax. Pointless everywhere except London where it made sense.
Anyway labour will never manage to make their nonsense work.
So there is the cap per city, done set out.
Of course the free market then says, if you aspire to live somewhere "better" than a typical lha capped type property, you can.
But you'll pay.
What were seeing again is problems with London and its housing market being possibly sorted to the detriment of the rest of the UK. Eg welfare reform, setting of bedroom standard and then bedroom tax. Pointless everywhere except London where it made sense.
Anyway labour will never manage to make their nonsense work.
rover 623gsi said:
The second point is that housing costs are taking up an ever-increasing proportion of income for an ever-increasing number of people. I do not believe this healthy for society. .
Nothing like the proportion of income given in tax, maybe that should be looked at before anything else.All a rent cap will do is introduce a fixed rent for an area, all the decent property will be taken out of the private rental sector and replaced with the the cheapest possible.
In my case I have 6 BTL's at the moment, all of them are really nice properties, in really nice areas, with premium appliances and well decorated, one even has a concierge for the block.
I only do this because I rent my properties at a premium over the "market" rate, lets say LHA is £500 for a 1 bed I would look to get at least £650 my theory is that doing this will attract "premium" tenants, and by being choosy it has not let me down.
If rents are capped why on earth would I do this? It would make no sense at all if I could not raise my rents relative to the landlord that has the cheapo converted terrace house with tiny rooms and an avocado bathroom suite. Might as well sell my 6 and I could get 10-12 st boxes...
As a side, I am selling one flat, as it does not make me much money. I was chatting with my letting agent the other day, she recons lots of small landlords are not letting until after the election, she recons I would get £100-150 more than the previous tenant as there are so few properties coming up for rent...
nikaiyo2 said:
As a side, I am selling one flat, as it does not make me much money. I was chatting with my letting agent the other day, she recons lots of small landlords are not letting until after the election, she recons I would get £100-150 more than the previous tenant as there are so few properties coming up for rent...
Eh? Why would small landlords not be letting. Even if Miliband gets in and doesn't spend every day fighting with Sturgeon and Salmond, it will still take years for any changes to happen. They cannot simply introduce a rent cap or any of the other measures being mentioned, overnight.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff