Councils of Britain are you ready for Osborne’s Housing Crisis?

Reply to the comment left by "CaZ " at "20/11/2015 - 21:31":

Totally agree

I haven't heard any of the self proclaimed experts ie the Armstrongs or Progressive's or any of the other companies that will take your cash in return for a training package offer any comments or advice on the forthcoming changes...

A common voice is needed-do we need to each put cash in a pot to fund a challenge?

I would be happy to contribute

Reply to the comment left by "NW Landlord" at "21/11/2015 - 13:13":

Me too

Hi all,

Here is the main body of what I have typed to Leicester's Mayor, Peter Soulsby (themayor@leicester.gov.uk) and the Leicester City Council housing department (housingoptions@leicester.gov.uk). I am also going to put the Labour MP Keith Vaz on CC (keith4leicester@gmail.com and casework@live.co.uk). My constituency MP is the Conservative Edward Garnier, but he has already replied the half-baked Government lines on this. Keith Vaz is more closely positioned to the City Council both party-politically and geographically. I obtained these e-mail addresses within a few minutes using Google.

Please feel free to comment, imitate, copy & paste selections for your own correspondence:

The ability of the Council to house the people on its housing waiting list, and the number of people present upon this housing waiting list both depend upon the supply of private rental accommodation to both the Council and the public at large.

As you are no doubt aware the overwhelming majority of this accommodation is owned and maintained by private landlords with buy-to-let mortgages. Because of this, severe cost increases levied upon landlords with buy-to-let mortgages, will in turn have severe effects upon the rents they charge and the availability of their accommodation to the UK’s rental market.

During the period 2017-2021, the aforementioned severe effects are destined to develop to (and remain at) crisis levels as a result of Clause 24 of the Finance Bill 2015-16. The Government proposes to break normal business taxation practice and require landlords to pay tax on almost all monies allocated towards the payment of mortgage interest. By the year 2021, it will still be possible to get a deduction for finance interest, but the amount will be capped at 20%. This is a big change because in most cases, finance costs will be the landlord’s largest cost.

I currently own a flat on which I receive £425/pm. From this I pay monthly expenses of £293/pm mortgage interest, £53/pm ground rent and service charge to the building’s owner, and £10/pm landlord’s contents insurance. This leaves £69/pm profit, from which I will usually expect to see £27.60/pm (40%) paid to HMRC in tax. Unfortunately after 2021, 80% of my mortgage interest payment will be taxed in this same way as if it is profit. So my tax liability is set to increase from £27.60/pm to £121.36/pm. Because my actual profit is only £69/pm, I will be making a loss of £52.36/pm (£706/pa). So to keep my flat afloat and a roof over the heads of my tenants I will need to increase my rent from £425/pm to £477.36/pm. This however will not allow any spare funds for maintenance and repairs: for this the rent would need to be around £500/pm. Purely as a result of this change in tax policy I now need to raise my rent by 17.6%!

Yet in the context of this five-flat building, my flat has the highest yield. The landlord of a flat on the floor above receives £395/pm from her own tenant of three years (who works part-time and is dependant upon a working tax-credit). From this she pays monthly expenses of £306/pm mortgage interest, £53/pm ground rent and service charge to the building’s owner, and £10/pm landlord’s contents insurance. After 2021 this landlord’s tax bill will be £108.32/pm compared to her profit of just £15.60/pm. To maintain her meagre profit of £15.60 and have a small amount of money set aside for basic repairs, she will need to increase the rent of her low-income tenant by 24.8%! The government is trying to tax profits that do not exist.

Such rent rises will be replicated across the entire rental sector. An interim survey of 1,146 landlords by the Residential Landlords Association (RLA) has revealed that 65% of landlords are already considering rent increases to mitigate the impact of the Government’s rental property tax levy. Yet the incomes of the poorest and most vulnerable are set to remain the same or decrease. The £26,000/pa cap on benefits is being reduced to £23,000/pa in London and £20,000/pa elsewhere in the UK. Working age benefits meanwhile are to be frozen for four years – including tax credits and local housing allowance. As landlords are compelled by increasing tax liabilities to let to higher earning tenants in full-time employment, poorer renters will be pushed out of the private rental sector and on to your council housing waiting list. Furthermore, the number of landlords able to let to those already on the council housing waiting list will be significantly decreased. Though now council housing waiting lists are already grossly oversubscribed throughout the United Kingdom, the situation to come (the product of George Osborne’s tax on buy-to-let), will be utterly cataclysmic by comparison.

Landlords unable to obtain the necessary additional rent to cover their increased tax liabilities and escape financial trouble will be compelled to sell some or all of their rental properties, as a means to eliminate their mortgage outgoings. If landlords decide to sell to avoid unaffordable tax bills, they will want to sell with vacant possession and tenants will be forced to move as a result of the Government’s tax policy. Some tenants may find themselves homeless if lenders repossess landlords’ properties. We are concerned that the supply of rental properties available to those on benefits will fall and that this will result in people having to move into temporary, unsuitable bed and breakfast accommodation at considerable expense to the public purse. The demand for social housing will increase at a time when there are already very large waiting lists for social housing. This fall in the supply and competition of private rental properties will result in rents further increasing.

It has been suggested that these effects will be mitigated by renters becoming owner-occupiers. In light of this reasoning I feel I must be clear as to who my tenants are: they are primarily 1) young people beginning their working life in a new city after finishing university elsewhere in the UK and 2) Polish and Eastern European immigrants working in the UK on a temporary basis. Both of these groups are people living and working in a period of transition, who specifically require temporary accommodation instead of a purchased, near-permanent residence. Within the apartment building from which my examples are derived, the other landlords’ tenants are people of restricted working incomes, receiving house benefit or tax credits to compensate for their hours of childcare: they do not have the savings or credit ratings to buy homes, they NEED rental accommodation. In short, these demographic groups represent a very large and constant demand for rental property, and it is we, the buy-to-let landlords who are currently meeting this need. If therefore buy-to-let landlords are to come under pressure to dramatically increase rents or sell their properties, people will be forced out of the private rental sector in great numbers and on to your housing waiting list.

Myself and other landlords have written to our constituency MPs warning of the inevitable social impact of the Finance Bill 2015-16. Yet for reasons of apparent political expediency, both the Conservative and Labour members of the House of Commons have so far chosen to ignore the mathematical reality of Clause 24 and the role within society of buy-to-let landlords. There is even a public petition against the measure (https://petition.parliament.uk/petitions/104880). It is therefore imperative that councils across Great Britain prepare themselves for the impending perfect storm of decreasing private rental provision and dramatically enlarged housing waiting lists. You need to begin investing in greater council housing provision NOW, because the pressures put upon your housing department and workforce by Osborne’s Housing Crisis will be worse than anything they’ve experienced so far during the course of this century.

Reply to the comment left by "Gareth Wilson" at "21/11/2015 - 16:13":

Gareth,
A very concise and well written letter.
I will adapt and send to my local MP, Housing department, etc.

Reply to the comment left by "Worried by Budget " at "21/11/2015 - 18:29":

Cheers! Watch out though I just noticed I mistakenly typed "house benefit" instead of "housing benefit".

Hi Gareth,

I can briefly put you straight on a couple of things to bring you up to speed.

1. We already have a single-voice campaign group for 118 and do lobby on everyone's behalf. This has gone on for some time now.

2. Much as I love the idea of a legal challenge, and would heavily contribute, it has been researched and discounted.

3. It was me that wrote about the difficulties of getting the landlord associations to work together. There will not be a single united voice, ever, but some of us are working very hard to see that as many landlords as possible are represented to those who make the decisions.

That's all I can say here.

Reply to the comment left by "James Fraser" at "26/11/2015 - 07:45":

Where's the 'single voice' thread and what can we on this thread do to contribute?

Hi Luke,

Please see >> http://www.property118.com/budget-2015-landlords-reactions/76164/