Landlords attacked for being wealthy fallacy

Perhaps a few letters to the editor of the evening standard should be made point out these basic factual errors on the then chancellor (Osborne). I wonder whether the evening standard editor (Osborne) will publish them?

While this has no bearing on landlords affected by clause 24, I would like to add something that further puts the lie to the assertion that landlords are wealthy fat cats.

In September 2014, the NLA published figures that showed that a quarter of small landlords were in fact running at a loss or just breaking even. One would hope this figure is lower now as the economy is healthier than back then, but many landlords will still be struggling on very small incomes as they will be unable to take up work, or qualify for a mortgage to release equity and expand their portfolios.

For example, in the summer of 2015 I was taking statements from diverse Croydon landlords in support of our campaign against the Croydon Council landlord licensing scheme. Many of those landlords were on very small incomes.

Among those that particularly stood out was a gentleman who had a small portfolio and was forced to quit his full time job to care for a sick elderly parent. He didn't qualify for benefits because of his rental income, but after his mortgage and maintenance costs were paid, he had little left to live on.

Another elderly landlord was letting a property to an elderly tenant at below market rent, which she just couldn't bring herself to raise as she didn't want to put her tenant in the position of applying for housing benefit.

Neither of these landlords was in a position to take up a job, even part time.

How do we go about fixing (or at least improving) the housing crisis?

I don’t think I’ve heard any dissenting voices to the opinion that the housing crisis that we’re in is being caused by the imbalance of supply and demand.

We’re not building enough homes and our population is growing.

It doesn’t take a Nobel winning economist to work out what that will lead to.

Since the 1980’s - we have seen an increasing consolidation amongst house builders. This means that small and medium sized builders and developers now build approximately 60-70% fewer homes than they used to and it means that 70% of our homes are delivered by about 10 different house builders.

Why is this important?

Well, consolidation reduces diversity and choice, and increases the power of the oligopoly.

This means that the big 10 can build what they like, when they like and that isn’t good for supply. Is it that surprising then that a recent RIBA report suggested that 75% of us would never buy a new-build home.

How can we improve both the quantity AND quality of the new homes being built?

Here are 5 actionable suggestions for Mr. Sharma, our new housing minister:

1) Create a farmer’s market of housing, where large sites are broken into smaller ones, where small and medium sized developers and builders can make a difference.

Exactly the same phenomenon has taken place in the supermarket industry. We have seen a consolidation of grocery shops so that the vast majority of our food purchases are through the big supermarket chains. We used to spend about 2 hours cooking every day and we now spend about 27 minutes. This is mainly due to the rise of the ‘ready-meal’ - which are tasty and convenient, but have too much salt and too much sugar in them and our nation is getting more obese as a result.

The rise of the farmer’s market increases diversity and encourages that back to basic cooking from ingredients.

2) Disincentivise land trading by killing the planning arbitrage market.

It makes no sense that planning generally now costs tens of thousands of pounds and takes over a year on average to be successful.

3) Scrap stamp duty!

I know that this is not really your bag, but please have a word with Mr. Hammond. Stamp duty is a (potentially) huge tax on transactions which discourages people to move out of their homes.

If we want the elderly to move out of their large homes and downsize into new homes freeing up space for the younger, we need to make the transaction as cheap as possible for them.

If we want families living near good schools to move on when their kids leave the school, we need to make that easy for them and cheap for them to do so.

4) Introduce a capital gains tax on all home profit sales over a certain level.

Fourth (again, a word to Philip), to offset the lack of tax take from stamp duty and to discourage flipping of homes and the holding of homes as investment assets, we should introduce capital gains tax on all home profit sales over a certain level.

5) Improve affordable housing.

At the moment, policy dictates that developers should provide around 50% of new housing as affordable (borough/council dependent). In reality this never happens because of ‘viability assessments’.

Additionally, once a developer has agreed to provide the affordable homes, they are strongly incentivised to make these as low quality and as cheap as possible.

Instead, councils should build their own affordable housing - they know that building higher quality will pay dividends over the long-term as maintenance and refurbishment (whole life-cycle costs) are reduced, so they should do so, just like they used to.

If you found this article insightful, useful or even just amusing, read it in its entirety on our blog - How to solve the housing crisis: An open letter to the government at https://www.inhabithomes.co.uk/custom-build-blog/how-to-solve-the-housing-crisis