9:36 AM, 4th March 2019, About 6 years ago 63
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I came across this posting on another forum and wanted to share it with P118.
“Sian Berry, The Green Party’s London Mayor candidate plans to introduce a right to buy for tenants. Sian Berry has been influential to Sadiq Khan, The London Mayor who has adopted Green policies and also Jeremy Corbyn so there is a risk this could become Labour policy.
I would encourage you to challenge them publicly on social media about it. They are responsive to adverse publicly and this needs to be nipped in the bud. Search on twitter @sianberry @sajeraj and @tom_chance
A Right to Buy and to Co-op for private renters
Dear All, this is based on the work Tom Chance and I did with Sian to produce this report: We’ll be consulting a number of housing organisations and other relevant parties on this as well.
Motion title – a private renter Right to Buy and Right to form a Housing Cooperative
Synopsis: Private renters are often left without control over their housing situations. This motion seeks to establish a Right to Buy for private renters and Right to form a Housing Cooperative in order to improve the control, conditions and finances of private renters.
Motion text:
Private renters in a house of multiple occupancy (HMO) will have the right to form a cooperative in order to exercise a right to buy from a private landlord. They would receive a discount on the cost of the home that would be paid out of the landlord’s capital gain. Renters would also have the option of contracting with an existing housing co-operative to manage their home. Tenants that chose the co-op option would still be protected by the same tenancy provisions, including secure tenancies and rent controls.
Cooperatives will be provided 5-year loans to help co-ops buy properties. After those 5 years the co-op would have gained sufficient equity in the property, and have a financial track record, to be able to secure better deals from ethical and other lenders. Loan and grant funding will be provided for property improvements and extensions. A Green government would also work with existing housing co-operatives in London to leverage their asset base and their cash holdings to support new co-operatives.
Private renters will have a Right to Buy their home from their private landlord. They would receive a discount on the cost of the home that would be paid out of the landlord’s capital gain. The price the renters buy at should not be less than the original price the landlord paid plus expenditure on subsequent improvements and inflation (CPI), so that no landlord can make a loss. Landlords with between one and three properties should also be entitled to financial advice including an assessment of their options to achieve income or capital growth in more socially productive investments. The Right to Buy would be limited to homes that are at least 25 years old, to avoid deterring investment in new build properties. Homes bought through this mechanism will have a covenant applied restricting the resale price to the original price paid plus inflation (CPI) to preserve future affordability.”
My initial thoughts are (after “OMG, FFS!”)
– “left without control over their housing situations” – except for minimum 2 month’s notice, no retaliatory evictions, able to reclaim rent & deposit and sue LL if they cock up, free legal advice at court, HHRS, compliance with licensing regs etc etc
– HMOs tend to have more transient tenants by nature – why would they buy? What happens if one “owner” wishes to move on? Will other tenants be obliged to buy them out? If so, who’s going to fund that? What happens in a falling market?
– What would happen in a HMO with say 6 tenants, 5 of whom want to buy but the 6th doesn’t? Will they evict the 6th tenant or buy as a group of 5, thus making the 6th tenant a lodger? Will lodger’s have a right to buy?
– Why should LLs take the risks, finance the properties/maintenance/refurbs, save for the initial investment with the aim of making a living, only to hand over the profit to people who have taken no risks or made the sacrifices to save for the investment?
– How will they balance the loss of revenue to HMRC for reduced CGT and Income Tax on rental profits?
– Para 2 infers that they will bring in secure tenancies and rent controls which will mean more LLs leaving the market and higher rents.
– Who will fund these 5 year loans? Taxpayers? How will the Treasury do this out of reduced receipts? Who’s paying the legal & SDLT or will that be covered by taxpayers too?
– Their assumption that the property would gain sufficient equity in 5 years shows their total lack of understanding of property. After 10 years, some areas in the UK have not got back to pre-crash levels. What happens if the tenants default on their mortgage – how will the lenders feel about pursuing 4,5,6+ mortgagees? Who do they expect will pay for loan & grant funding for property improvements and extensions? Will every home owner in the country be eligible for these loans, or only those in a HMO Co-Op?
– The 5 yr initial mortgage for this RTB would have horrendously high repayments – especially in London/SE – where many HMO Tenants may well be claiming LHA – hence any repayments would need to derive from net earned income – whilst also satisfying the strict MMR lending criteria.
– They state we would get PP + improvements + inflation so we don’t make a loss – but why would anyone become a LL to just break even?
– Fab! We can get financial advice on how to achieve income or capital growth in more socially productive investments. But they don’t say this will be free financial advice (nor what they consider profit-making socially productive investments).
– The majority of homes in this country are over 25 years old. It will deter investment in new builds as no LL will invest. And what about all the hundreds of Rent to Buy apartments that are springing up all over the country?
– Does the R2B means that tenants can force the sale of a property without the LLs consent? Can the LL evict tenants to prevent the forced sale? Or evict them so he can sell on the open market (perhaps giving tenants first refusal)?
– Compulsory R2B would mean the mortgage market drying up as lenders won’t want to take the risk of a LL having their property effectively confiscated. This would cause a market crash and another recession.
– As someone else has pointed out: There will be a form of securitisation from collectives’ loans. So as Lehman Brothers proved so successfully lending millions of loans to uncreditworthy people does not give you a credit worthy product. What it does do is allow you to slice and dice the risk better. But who takes the last tranche? Would tax payers?
– This is an asset-grab for political gain and nationalisation by the back door.
Heather
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JB
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Sign Up21:53 PM, 4th March 2019, About 6 years ago
Off to rent someone else's house now with a view to a nice cheap purchase later
Kevin Biggins
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Sign Up22:20 PM, 4th March 2019, About 6 years ago
It seems that if you become successful and save and invest in something necessary like a house then someone comes along and changes the rules saying we will take that off you as you are doing better than others. Ideology at its worst as it does nothing to encourage people to do well as it will be taken away.
A similar policy has been tried before overseas most notably in Zimbabwe by Robert Mugabe to redistribute white owned farms to black farmers. It started with a system of willing sellers and willing buyers but then descended into forced evictions, a collapsed farming system and national economic disaster. Zimbabwe was the breadbasket of Africa and is now a failed state with famine. This affected the whole of Africa as they bought the food they produced. Why do we see mass migration from failed states to Europe and the West?
I use to vote for the Greens on environmental issues but then they started becoming, as Monty Python would say, the "Very Silly Party" with policies like these.
Mark Alexander - Founder of Property118
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Sign Up23:01 PM, 4th March 2019, About 6 years ago
If this comes to pass then professional tenants will seek to rent properties with the highest capital gains, then buy them, live in them for a while, sell for market value and then repeat. It could be quite a lucrative business model. It might even persuade me to come back to the dreary and dangerous living conditions in the UK to have a slice of this pie.
Second thoughts ... maybe it's not for me ... I'd miss the lifestyle and my tax status in in Malta and always be worried about acid attacks and knife crime. I think I’m better where I am thanks!
Gromit
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Sign Up23:06 PM, 4th March 2019, About 6 years ago
Reply to the comment left by Sue Twyford at 04/03/2019 - 16:42
,,..........perhaps she'd prefer it if you sold up and invested in BAT, BP or Exxon!
Hamish McBloggs
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Sign Up10:19 AM, 5th March 2019, About 6 years ago
Private renters will have a Right to Buy their home from their private landlord.
Simple thought experiments show this cannot work.
A discount to the prospective RTB owner from landlord's capital gains. CGT is variable. Also the rate is variable depending on your paperwork 18% or 28%. Another calculation, another set of rules, another department.
There is zero incentive for an capital investor. If they get back only what is put in then why bother.
Incentive therefore has to come from operating profit making the basis for setting rent as cost of capital+return. Otherwise, why bother.
Banks don't offer loans to get back what they put in.
Landlords will reduce the age of their properties in a tax efficient way and will always keep their properties for less than 25 years. (Though I'm doubtful that new builds around here will last that long)
Areas where prices rise above the CPI would mean the government pocketing the profit whilst leaving the RTB owner unable to afford to move.
Areas where prices fall would mean the RTB owner is guaranteed a good deal and someone would need to pick up the difference; presumably the tax payer.
The tenant may have an RTB but when they sell, the property must be marketed at the current market value and sold thus.
A covenant cannot be used to control the future value of a property making it different to those around. All properties would have to be controlled.
What about inheritance?
Perhaps it would be better to propose an LA buy property and hang on to it; writing down the value instantly so some government bean counter can't look at them as a slush fund when times get a bit tough. I believe they used to call them council houses.
I can see another government department, impossible integration with the tax and benefit system, burgeoning businesses for legal and accountants, unfairness in the application of rules we currently have to abide by. (presumably once sold, the rules would not apply).
A popular but currently run down property/business local to us is being sold with a covenant that says 50% of increase of value (not decrease) from a future sale goes to the current vendor. I believe this applies to all future owners and I assume the covenant applies to the vendor's heirs.
No one has bought it though lots want to. Why on earth would anyone want to put effort and risk in only to give half away?
Oh yes, Advisors. mmm Thatcher gave us personal pension advisors. That is why I have property.
Hamish
Beaver
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Sign Up10:54 AM, 5th March 2019, About 6 years ago
On "Why should LLs take the risks, finance the properties/maintenance/refurbs, save for the initial investment with the aim of making a living, only to hand over the profit to people who have taken no risks or made the sacrifices to save for the investment?"
I agree. With my property on the advice of my agent I am renting slightly low to encourage a long term tenant and reduce the risk of void periods. I am renting the property because I expect it's value to go up over the longer term - if a tenant had the "right" to buy my property off me and the "right" to take the long-term capital gain off me it wouldn't be worth my doing. In fact, if the law was about to change so that my tenants might have the "right" to buy my property off me without me taking account of the long term capital gain as opposed to just the current profit then I wouldn' t have any choice but to kick my tenants out.
It's not just investment in new build that this would discourage. It's investment in improvement in property. Some of us would have to kick our tenants out if this came in.
Furthermore, because on the advice of my agent I am renting slightly low to encourage the tenant to stay long term, and being open with my tenant about my plans so that they can in turn plan their own lives, these "rights" would result in my being screwed for being a responsible landlord who maintains and invests in his property and looks after his tenants.
It's not just about the initial investment and the short term profit.
michelle green
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Sign Up11:17 AM, 5th March 2019, About 6 years ago
It`s clear what is going on. They are squeezing out small landlords - look at the draft of new legislations over the past couple of years to make our lives difficult, yet on the other hand leaseholders are being fleeced left right and centre by freeholders and corporate management companies.
Please can you sign the "Abolish leasehold" campaign at
https://petition.parliament.uk/petitions/238071
Binks
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Sign Up12:35 PM, 5th March 2019, About 6 years ago
This woman is talking complete rubbish, someone mentioned Stalinist Russia and I'd agree on that. The ideology behind this is mind-boggling. I'd be interested in the opinion of someone with relevant legal background as to how this could possibly be in any shape or form compatible with the very basic principles of individual property rights and the state's obligation to uphold those rights.
Kathy Evans
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Sign Up14:35 PM, 5th March 2019, About 6 years ago
Well, if they have to pay me what I paid plus cost of repairs and improvements, I'd sell the lot right now. In this area house prices have still not recovered , so that would be more than the going rate. But I really don't see why someone who has done nothing to improve the property and just, in general, made it worse should get a discount. Perhaps I should get a discount off my residential mortgage just because I've lived in the property for a lot of years. Let's level the playing field ...
michelle green
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Sign Up15:01 PM, 5th March 2019, About 6 years ago
Yet how interesting that these are now flooding the country. Huge "build to let" corporations coming your way soon.
https://www.constructionenquirer.com/2019/03/04/build-to-rent-specialist-to-invest-300m-in-birmingham/
https://www.theguardian.com/housing-network/2018/apr/11/build-to-rent-developers-profiting-generation-rent
So...which is it..the right for home ownership...or not...