COMMENT: Will Labour come round to loving landlords?

With Labour’s predilection for bashing landlords (though the current Conservative Government needs no encouragement on that), you would expect a Labour government to double down on landlord bashing. But will they? Will reality dawn on the new shadow housing minister, announced this week as Angela Rayner? Will she grasp the reality of the problem?

Its a long time coming but Labour just might see the light on the private rented sector (PRS)

Harry Phibbs writing for ConservativeHome says, 

“…socialists in general do have a tendency to want to get rid of something without giving much thought to the practicalities of the replacement. One could make the opposite criticism of Conservatives, that temperamentally pessimistic, they are too passive in accepting what officials tell them, too deferential to the status quo.”

One group that true socialists have traditionally wanted to “smash” has been the rentier class, and the “fat-cat” buy-to-let landlords fall right in the middle of their sights on that. But even this Tory government has joined in the fray, making life rather difficult for the small-scale landlord, to say the least.

The small-scale landlord

In England private rented housing is mostly provided by small-scale landlord investors. Of the individual landlords (85%) own between one and four properties, with just under half (45%) owning only one rental property. The remaining 15% of individual landlords own five or more properties, that’s according to the latest available English Landlord Survey.

The small-scale landlord is a tremendous source of housing. They provide their own capital to buy, rent, build and renovate properties so that the right rental accommodation is there for those who need it: the young professionals, increasingly it’s also young families, older singles and couples, even pensioners form a large cohort of renters now, and there’s the very low income and down and outs.

The need to make a profit 

Naturally landlords need to charge a market rent and to make a profit – a dirty word in the far left Marxist camp. It’s not the landlord’s fault that property values have increased to the point where most young people around the globe struggle to buy housing.

Landlord bashing can only have one result: they leave the market. This exodus diminishes supply and drives up rents. That’s exactly what’s been happening. The National Landlords Association reports that over 150,000 properties left the buy-to-let sector last year. 

According to Paul Shamplina of Landlord Action, in a recent podcast shows that bailiff evictions increases last year are as follows:

– Section 8 evictions increased by 27%

– Accelerated Section 21 evictions increased by 47%

– Accelerated Section 21 evictions in Wales increased by 157%

– There’s been a 275 increase in bailiff warrants

– Evictions have been slowed dues to a lack of bailiff capacity and PPE equipment

– The social / temporary housing crisis in local authorities is also slowing up evictions

Landlords selling up

A lot of this increase is now down to landlords wanting to sell up. Rents are higher than ever and so is the unpopularity of the private landlord in the public eye.

Has nobody in government up to now, or those across the aisle on the Labour benches, studied elementary economics 101. It is said that the new establishment intelligentsia dominating Whitehall, on both sides, have studied PPE at Oxford? Perhaps they only read Marx?

With mass immigration putting even more pressure on housing, reducing rents will only be achieved by increasing housing supply, but a sclerotic planning system puts paid to that. Given the right incentive the small-scale landlord will find a way, they will come forward to provide their own capital, provide the housing that’s needed, and compete for tenants. They will not do that without incentive. 

Enter Labour MP, Sir Chris Bryant, MP for Rhondda, who has produced a new report “The New Housing Crisis: in the Rhondda

In Wales, the Labour Government has been particularly keen on “bashing” their landlords. But eagle eyed Sir Chris has spotted that the policies the Welsh Parliament has been following have caused a few problems, to put it mildly. His efforts have produced a report that unsurprisingly concludes that, as Harry Phibbs says, there are “many fewer properties to let.”

Sir Chris says:

“Landlords lack incentives to invest in the rental market due to caps on rent, reduction in tax relief for buy-to-let landlords and spiralling maintenance costs. This has led to a decrease in the number of new landlords entering the market, resulting in a shortage of rental properties for those who cannot afford to buy. Planning permission processes can also be lengthy and costly, and there are often restrictions on building in certain areas, making it difficult for developers to build new rental properties in areas where there is high demand.”

Hallelujah, has the penny finally dropped? 

To say there is a crisis in the housing market in South Wales is something of an understatement. 

Bryant goes on the say: 

“On a buy-to-let property, you must pay tax on the rental income. You pay differing rates depending on your income, between 20 per cent and 45 per cent. You must pay stamp duty tax when purchasing the property and capital gains tax when selling it. Previously, borrowing money through a buy-to-let mortgage could be a tax advantage. 

“However, now landlords can no longer deduct any of the mortgage expenses from their rental income to reduce the tax bill, with credit only being refunded at the basic 20 per cent tax rate, not at the top rate of tax. This means that landlords who are higher-rate taxpayers will pay double what they were required to prior to 2017.”

That’s not the only problem, as Bryant goes on to say:

“There are concerns that landlords may leave the sector if no fault evictions were to be outright abolished. The process for evicting tenants and being able to buy and sell properties will become more difficult and the process longer. The UK government’s plans to scrap no-fault evictions in the Renters Reform Act.”

Wow, what a revelation!

So the Tories, who are hell bent on abolishing the Assured Shorthold Tenancy, removing the unpopular Section 21 eviction – something to which the media and the housing charities between them have created pariah status – and bringing in indefinite tenancies. They are going down the exact same road that this Labour MP now warns against!

Landlords are not all “fat cats”

We’ve long ago moved on from the traditional land owning aristocracy, the absentee landlord and indeed the Scrooge type Rackman landlords who throw widows and orphans out on the street. Most landlords today are middle income workers who have invested in property because there’s been little alternative returns in banks and building societies.

Property has been, or had been, a safe bet, producing a good income with regular capital growth: an ideal vehicle to build an alternative pension pot for those without the benefit of an index linked pension our civil servants are blessed with. In providing this valuable housing resource landlords provided much needed rental housing without the need for government funding.

Chris Bryant says: 

“Many ‘buy-to-let’ properties had been bought to provide retirement income for landlords with just one or two properties to rent. Such landlords assumed that they would be able to continue deducting the interest costs of their buy-to-let mortgages against rental income – and that tenants on housing benefit would see their benefit rise in line with inflation.”

The UK Government has produced a hostile environment for the private landlord residential, but in Wales, as in Scotland, those devolved parliaments have placed extra burdens on their landlords, as well as on those housing associations providing social housing. 

“The Welsh Government’s new Welsh Housing Quality Standard 2023 has raised the benchmark that rental properties have to meet in a way that many Rhondda properties cannot meet,” Says Sir Chris Bryant.

He goes on:

“Bedrooms now must meet a minimum space requirement. As most properties in the Rhondda were built long before these regulations were in place, bedrooms in several properties are too small, making it illegal to rent them out and impossible or prohibitively expensive to alter.”

The Welsh Government has also widened the entitlement to accommodation, via local authorities, while imposing policies that reduce the accommodation available:

“The Welsh Government’s initiative to end priority need, while well-intentioned, has driven a sharp increase in the number of households deemed a priority. Whereas previously Local Authorities were only required to house those considered to be “Eligible Homeless and in Priority Need. 

“The amendment to the “Priority Need Order” placed a new duty to accommodate those who are deemed homeless. Using Rhondda Cynon Taf County Borough Council as an example, the number of applicants the Council now has a duty to assist through the provision of temporary and permanent accommodation has increased by 50%.”

Virtue signalling

The politicians in the Welsh government have been falling over themselves with their virtue signalling, setting out all the letting rules in a nice new Renting Homes (Wales) Act 2016. As Harry Phibbs writing for ConservativeHome says: 

“Each one showing they are more “caring” that the last by demanding ever larger bedrooms be found for an ever increasing number of people. Then just leave it to some poor sod at the Rhondda Cynon Taf County Borough Council housing department to deal with the impossible task of implementation.”

Bryant’s comments might just be a sign Labour is starting to see the light, to confront the harsh realities of the housing market? Labour might never learn to love landlords; it’s probably not in their DNA, but they just might have swallowed the fact that bashing landlords is counter productive. 

Harry Phibbs reports that even Labour dominated London Councils are lamenting the shortage of rented accommodation that had resulted from the extra costs and burdens imposed on landlords. 

London Councils represents the 32 borough councils in London and most of them are Labour. 

Cllr Darren Rodwell, the Labour leader of Barking and Dagenham Council has said:

“Action on this issue can’t wait and the government must step in to solve this crisis now.” The “dwindling supply” has left councils facing “growing homelessness pressures”. 

Punishing the landlords has been very effective, it’s driving them away. But the consequences of the politicians’ actions, of both stripes, it would seem, were never fully thought through.

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