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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AJ
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Sign Up20:08 PM, 5th March 2019, About 6 years ago
I have a crazy idea
how about private landlords get a right to the rent from private tenants, landlords will be awarded 100% of the rent paid on time, in return the tenant will get safe secure housing.
The landlord will not be persecuted for making a living, and will be positively encouraged to become a landlord.
TheMaluka
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Sign Up20:51 PM, 5th March 2019, About 6 years ago
Reply to the comment left by AJ at 05/03/2019 - 20:08
Careful, the Thought Police might come for you!
Lenin Benin
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Sign Up8:42 AM, 9th March 2019, About 6 years ago
Reply to the comment left by Alan bus at 04/03/2019 - 17:32
I'm in the same boat, having bought my extremely run down London flat in 1995 from Southwark council for a ridiculously low amount and lived in it for 20 years, it has now been refurbished, inside by me and outside by the council, and I'm told could sell for nearly 400,000 pounds!
Renting it out, I now live in the country and it is my only source of income. I had to pay over 20 thousand pounds for the major works and have spent a similar amount on the inside. The tenants are delighted with the flat and the rent is below average for the area. I've just had to get an expensive "HMO' licence as Southwark classes 3 bedroom flats with sharers as an HMO. The article appears to suggest that it is HMOs which will be purchased under this scheme.
As I see it, I now face 2 choices: sell now before the scheme starts and risk getting less (because of Brexit) or give notice to my brilliant tenants who love my flat and get a family in so that it is no longer an HMO! If I sell, I'll have to pay a lot of capital gains so I won't be able to buy another rental in London and get enough to live on. My mortgage in the house where I now live depends on the income from the flat.
This is a disaster for me, and, I feel, totally pointless, as the new owners of my compulsory purchased flat would be likely to sell it on at a later date for a huge profit, when I am the one who lived in it in a dilapidated state before putting in a huge amount of work to get it as it is now. I can't see how this scheme will relieve homelessness, as the new owners would quite likely just end up as landlords themselves, having robbed me of my only asset and my entire income!
Laura Delow
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Sign Up9:32 AM, 9th March 2019, About 6 years ago
Reply to the comment left by Lenin Benin at 09/03/2019 - 08:42Hi Lenin. I do not think/I hope we should not panic about this PRS R2B being brought in but in todays world you can never tell. The good news is, should you choose to sell (based on the information you provided) you will not pay capital gains tax at all. This is because you mention it was your primary residence for 20 years from 1995 (when bought) to 2015, plus you also get relief for the last 18 months ownership of the property, even though you would not have been living in it (from April 2020 this will reduce to 9 months). On top of which you get Lettings Relief.
Example
- You bought at £100,000 in 1995
- you sell it on 5th April 2020 at £400,000.
- You can deduct costs of buying, selling or improving your property from your gain. These include; premium to extend a lease, estate agent selling fees and solicitors’ fees to buy/sell or extend a lease, costs of improvement works e.g. an extension (normal maintenance costs, such as decorating, do not count)
- you make a gain of e.g. £300,000 when you sell your property, which you will have owned for 25 complete years as at 5th April 2020. You lived in the whole property for 20 years, then let it out in full for 5 years.
- You get Private Residence Relief for the time you lived there (20 years). You also get relief for the last 18 months you owned the property, even though you were not living in it.
- This means you get Private Residence Relief for 21.5 of the years (86% of the time) you owned the property.
- You get Private Residence Relief on the same proportion (86%) of your gain.
- This means you will not pay capital gains tax on £258,000 of the £300,000 gain.
- The remaining 14% i.e. £42,000 of the gain not covered by Private Residence Relief is your chargeable gain.
- If you qualify for Private Residence Relief and have a chargeable gain, you may also qualify for Letting Relief. This means you’ll pay less or no tax.
Claim Letting Relief:-
You can get the lowest of the following:
• the same amount you got in Private Residence Relief
• £40,000 (£80,000 for a couple)
• the same amount as the chargeable gain you made from letting your home
- in your case it would be £40,000 (or £80,000 for a couple)
(Letting Relief does not cover any proportion of the chargeable gain you make while your home is empty).
Example
Because you made a chargeable gain of £42,000 while letting your property (after £258,000 in Private Residence Relief), you can claim £40,000 in Letting Relief. This means you’ll only pay Capital Gains Tax on £2,000
- this is less than the current annual CGT personal allowance of £11,700 [x 2 if a couple] so in effect no CGT is due.
(from April 2020, lettings relief will be reformed so that it is only available to those who are in shared occupancy with a tenant).
So CGT is not your worry.
Cristian
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Sign Up10:19 AM, 9th March 2019, About 6 years ago
Not sure if it has been said before, but here is my comment. The banks providing mortgage to HMOs will see the value of their collateral going down and immediately force many LL to sell or increase the collateral or increase the interest charged due to higher risk. This proposal can spark a financial crisis straight away.
Mike
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Sign Up10:49 AM, 9th March 2019, About 6 years ago
To put it mildly, the greens have stuffed their own heads up their backside, they really need to pull it out and see the actual reality, and breath some fresh air rather than their own farts. No can do Mr Greens, get your head out of your anus. How rude for coming up with such a stupid ill thought policy! What do you take us for? Mugs.
Mike
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Sign Up11:13 AM, 9th March 2019, About 6 years ago
That was my mild reaction, well in reality, this might not even happen, none of the tenants in my HMO get on with one another, they hate one another with vengeance, so I should be OK, on the other hand if you put in a bunch of mates who get on fine with one another, then there is a simple way out of stopping them exercising their right to buy, you simply don't let all rooms to tenants, keep one or two rooms for yourself and become a tenant yourself, that way not only you have right to come and go as and when you like, you also oppose joining in a Right to form a Housing Cooperative and oppose R2B, as the time goes, get rid of HMO, put in a family. Why do some bastards think we can let go off our life long investments?
Mike
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Sign Up11:15 AM, 9th March 2019, About 6 years ago
That was my mild reaction, well in reality, this might not even happen, none of the tenants in my HMO get on with one another, they hate one another with vengeance, so I should be OK, on the other hand if you put in a bunch of mates who get on fine with one another, then there is a simple way out of stopping them exercising their right to buy, you simply don't let all rooms to tenants, keep one or two rooms for yourself and become a tenant yourself, that way not only you have right to come and go as and when you like, you also oppose joining in a Right to form a Housing Cooperative and oppose R2B, as the time goes, get rid of HMO, put in a family. Why do some green party members think we can let go off our life long investments without putting up a serious fight ? No boy we will come to the streets.
TheMaluka
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Sign Up11:22 AM, 9th March 2019, About 6 years ago
Reply to the comment left by Mike at 09/03/2019 - 11:13
Mike a good use for the last room in the HMO that has been declared too small to let. On paper live in it yourself (its not too small for an owner occupier) and oppose any R2B.
Mike
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Sign Up11:58 AM, 9th March 2019, About 6 years ago
Absolutely David, just put a small table and a chair, and a filing cabinet make it into a small home office for yourself, connect up to internet and off you go to a landlord come tenant, see who can stop you. In this digital revolution everyone has the right to work from home, you do not need planning permission to work from home if you use your computer to conduct work related to your job.
don't forget to bring in a kettle and a tea mug for coffee or tea sharing the kitchen and the bathroom, be your own tenant and feel free to come and go as and when you like. Pay your self rent, sign up an agreement, do it legally!