Property expert David Lawrenson looks back on the 2010s…

Private Rented Sector Consultant at Letting Focus and Tenants Renting Guide, David Lawrenson:

“Private landlords have had to face a significant ramping up of taxes in the last few years, especially starting from the time George Osborne was Chancellor of the Exchequer. Taxes on rental income, capital gains and stamp duty land tax have all risen significantly for private landlords.

This has led to some private landlords leaving the sector – and there are some signs that the private rented sector may now be shrinking slowly from its high point of around 20%.

Of course, the government claims that increasing taxes on landlords was all about helping first-time buyers. But I think part of the government’s real thinking behind the increasing of taxes on private landlords was to try to make the sector less attractive to them and more attractive to institutional investors in private renting such as UK and foreign pension firms, (some of whom will, of course, make large donations to political parties).

I think there is a strong case for incentivising new build property for letting – so-called “build to let” – just as long as the playing field is not skewed too far away from individual or small groups of private landlords towards anonymous UK and overseas pension funds or other big players.

But the fact remains that the government cannot really “make do” without the smaller private landlord. The government and the housing associations do not have the cash to build large numbers of social (council) housing any more. And the much-vaunted, (by government, at least), institutional investors seem unable to build as much new housing as the government would like. (My own view of this is that this is because they struggle to make sufficient returns because they are far less efficient than the far more nimble small scale private landlords).

Also, institutional investors can only make their investments work in certain areas and where there is sufficient scale – think “me-too-identikit” flats on huge new-build estates. This still leaves the greater part of the housing market open to the smaller scale private landlord. So, still huge opportunities!

The fact is that across the UK there remains a shortage of the kind of homes that people want to live in. Many people either do not want to buy or are unable to buy their own home. And so they rent instead.

The ongoing shortage of housing stock in the private rented sector, the continuing failure of the institutional investors to deliver on build to rent and strong ongoing demand from tenants has led to rents starting to increase above the general rate of inflation in the last few years. So the picture remains very rosy indeed, especially for people who follow my guidance and buy the right type of properties in the right areas.

Of course, there will always be threats to the private rented sector.

But I believe most of these are not real threats. A good example is rent controls.

Many people on the far left rather like the idea of rent controls. What’s not to like in paying low prices for something? It’s like getting more income or winning the lottery – everyone says “Yes”.

But everywhere in the world and at every time in history where rent controls have been tried, they have led to a severe shortage of supply of rented accommodation and a reduction in the quality of that accommodation. Rent controls also lead to a proliferation of rogue landlords like Mr. Peter Rachman, who was famous in the 1960s in London.

Rent controls tend to have a knock-on effect, distorting supply on the rest of the housing market. A famous Swedish socialist economist, Assar Lindbeck, famously said, “In many cases, rent controls appear to be the most efficient technique presently known to destroy a city – except for bombing”.

His fellow Swedes clearly did not listen and rent controls in Stockholm introduced in the last few years have been the usual disaster – leading to an almost halting of new build and to 20-year waiting lists for rented accommodation.

But the UK government does not have to look to Scandinavia, New York or anywhere else to see the negative impact of rent controls, they only need to see the impact of lower housing benefit rates in the UK, which is like doing rent controls on a smaller scale.

The government decoupled housing benefit rates from local market private rent levels some years ago. As rent arrears soared for housing benefit tenants, landlords increasingly refused to let to people dependent on housing benefit.

Faced with rising homelessness, the government then set up separate pots of money where landlords are now given upfront cash incentives for housing people who are homeless. My own London borough, Bexley, is right now offering up to £8,000 to landlords to house a family on a long lease. Very nice!

This story proves that even when rent controls are introduced, landlords can still prosper. Indeed they will prosper as long as there is demand for the type of accommodation they can offer.

It will be interesting how Brexit plays out in the coming years. The risk here is that any restriction on migration from the European Union would dampen demand from that source for private rented accommodation. But the fact is that for the last three years, over half of migration is now from non-EU countries – and the numbers are increasing from this source. The UK will always need foreign labour and this will not change – Brexit or no Brexit.

To succeed in this more regulated climate for landlords, landlords will need to be more professional and better informed than their competitors. The new edition of my book “Successful Property Letting” shows you how to you can be fully informed and professional – showing you how you can still make money in the private rented sector, ethically and to have great fun as you do it too.”

David Lawrenson @LettingFocus – Advice for landlords and investors in residential property, Letting Focus and Tenants Renting Guide

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