Renters’ Reform Coalition demands compensation for ‘no-fault’ evictions

Reply to the comment left by Keith Wellburn at 04/10/2024 - 12:25
Lots of banks have build to rent arms:

https://www.paragonbank.co.uk/development-finance/build-to-rent

https://www.securetrustbank.com/real-estate-finance/build-to-rent-finance#:~:text=Build%2Dto%2Drent%20finance%20(,developed%20explicitly%20for%20rental%20only.

https://www.gatehousebank.com/business/prs-build-to-rent

https://www.onlinemortgageadvisor.co.uk/development-finance/build-to-rent/#build-to-rent-lenders

What all these build to rent banks share though is that they are typically prepared to lend 60-70% of the value to you. In other words you have to stump up 30-40% of the value and the bank takes no risk at all in the event of a downturn.

It is unlikely that a build-to-rent bank would lend to you if they couldn't see that you were able to get rent in and I suspect they'd want to see several years worth of tax returns showing that you could do it. That's because the bank takes no risk and you take all the risk.

You don't need to be a genius in maths to realise that a small downturn in value of your property results in a high proportion of your equity if you own only 30-40% of the equity. Anything that makes it harder for you to get your property back or perhaps forces a sale with a sitting tenant has a disproportionate impact on the BTL landlord and almost no effect on the bank. So without an efficient courts system, anything that the SNP, labour, generation rent or the Renters Reform Coalition does that doesn't result in you being able to get your property back when you need to dramatically increases your risk as a BTL landlord and drives up rents for tenants.

And in an environment where the government needs investors to invest in housing that results in a disproportionately high risk for the investor will not result in the houses that the government needs to resolve the housing crisis actually being built.

S21 exists because the courts don't work and it can easily take you a year to get your property back even if you've done nothing wrong as a landlord.

Tom, Darling, please, ...shut up ! You've just gone top of the class in the BS lesson.

Reply to the comment left by Beaver at 04/10/2024 - 14:39
Yes, of course it’s a core activity of banks to provide finance - just to clarify Citra is a division of Lloyds and it builds and rents out the houses as part of its business activities. (I have done well with the shares after selling the majority of my portfolio).

Reply to the comment left by Keith Wellburn at 04/10/2024 - 15:08
It is indeed...but what the likes of the Renters Reform Coalition either don't understand or choose to ignore is that as ever, banks pay themselves big bonuses and dividends to shareholders but take no risk. The risk is disproportionately borne by the landlord.

So if any tenant deserves to be compensated by anybody for a section 21 eviction it is the government that needs to compensate them via perhaps the benefits system for not putting an effective system in place for landlords to get their properties back when they have a problem tenant. The truth is that the costs of high-risk tenants are visited upon the good tenants in the form of higher rents and everything that this coalition does to exacerbate that drives rents up even further.

Reply to the comment left by Beaver at 04/10/2024 - 15:14
Of course Citra is just a small portion of Lloyds overall activities but looking just at Citra, Lloyds IS the landlord as it owns Citra and Citra receives the rents from its property portfolio. I also don’t see how there is no risk to shareholders from lending going bad in any sector, dividends are not guaranteed to be paid (except for REITs where it’s minimum 90% of rental income derived profit).

It seems to be a corporate must do for many businesses not just banks to own a build to rent portfolio (a complete turnaround to when I started as a landlord and corporates wouldn’t touch residential with a barge pole). John Lewis was planning to go into build to rent and derive a substantial part of its profits from rental income.

Reply to the comment left by Keith Wellburn at 04/10/2024 - 15:35
The proposals from the Renters Reform Coalition don't just apply to the likes of Citra. They apply to all of us.

An organisation like Citra is going to be capable of putting procedures in place to maximise their rents. And of course they are going to do that otherwise shareholders will not invest their money with them, or leave it invested with them. I wouldn't consider investing if they didn't.

I think that groups like the Renter Reform Coalition need to ask themselves the question "...who do you think is most likely to treat you fairly? A small landlord? Or a bank?"

I would also make the point that the interests of large scale corporate build to rent and smaller traditional landlords, incorporated or not, aren’t aligned.

This idea of making a payment to tenants on ending a tenancy is just a nonsense full stop. But if it were in place, I suggest it would be a worse deal for a landlord with a coupe of properties than it would be for large corporate landlord.

Assuming it wouldn’t be paid unless it was for the ending of a tenancy with no fault of the tenancy, for a start a corporate would never be in the position of wanting to move into the property themselves in any case.

These big corporates would be less likely to seek vacant possession to sell like a small landlord may need due to unexpected life events (or even planned ones like retirement).

A big corporate wouldn’t be worrying about a void period and refurbishment, EPC upgrades and coping with Section 24 tax whilst paying the mortgage AND having to find the tenants leaving present.

A big corporate in build to rent will be charging premium rents in the first place and may even profit from rents going up to cover these leaving payments if they can charge even more, their tenants stay longer than the PRS in general and last but not least - anything that pees off more small landlords who leave the market is good news for the big built to rent players.

Reply to the comment left by Keith Wellburn at 04/10/2024 - 16:26
Absolutely right on all counts.

Reply to the comment left by Beaver at 04/10/2024 - 16:19
The idea is daft I agree, I just did a general comment on why it may actually favour large build to rent- this Tom Darling could be accused of being rather disingenuous seeing as build to rent may actually gain.

My own position is starting selling down from fourteen back in 2015 with one left now - none of this is really a surprise considering Osborne made it perfectly plain where small landlords stood, and logic suggested it could only get worse with Labour.

Reply to the comment left by Keith Wellburn at 04/10/2024 - 16:32I think that you are right. Daft ideas like this favour build to rent and larger institutions who have good processes to maximise rents, evict problem tenants and efficiently manage void periods. Void periods are a bigger problem for smaller landlords who tend to hold rents down to avoid them.
So my question really was in relation to your perfectly sensible comment that the general direction of regulation favours build to rent,

"...who do you think is more likely to treat you fairly, a good small professional landlord? Or a bank?"

The reason we have section 21 is that we do not have anything else that results in landlords being treated fairly when they have problem tenants. The costs of those problem tenants are visited upon the good ones.