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Rent controls would not work in UK, research suggests
Rent controls and similar policies which are thought to work well in other countries cannot be easily replicated in the UK’s private rented sector, according to findings from a new interim report. The interim report by the London School of Economics and Political Science (LSE) and commissioned by the National Landlords Association (NLA) looks at evidence from the UK as well as from other countries where stronger regulatory policies are already in place, including Germany, Ireland, San Francisco, New York and the Netherlands. It suggests that in Ireland, which apparently provided the model for the Labour Party’s proposals in the run up to last month’s UK general election, controls introduced in the last few years have had very limited effect. The country is experiencing a housing crisis, with rapidly rising rents and a near standstill in new housing production. In Germany, often cited as the best example of a country with a stable private rental sector, the system of indefinite security and in-tenancy rent stabilisation has in the past been cushioned by low house prices and demand. Moreover, initial rents can be well above current market levels in high-demand areas. It also says that in San Francisco and New York the main beneficiaries are older middle class households and the young hardly get a look in. ‘The report is required reading for those such as the Labour leadership and London Mayor hopefuls, who seem to be ignoring both academic evidence and the overwhelming rejection of similar policies by the electorate last month,’ said Carolyn Uphill, chairman of the NLA. ‘Private rented sectors in many countries, regulated or not, are facing major problems in high demand areas. Market fundamentals cannot just be regulated away,’ she added Kath Scanlon of LSE London said the research found clear evidence that inflexible controls reduce supply. ‘But the strongest message was that what may work in one country cannot simply be transferred to a different market and institutional environment,’ she added. During the election there were also calls to abolish business tax relief for buy to let, alongside the introduction of rent controls. However, the LSE report found that where rent controls are already in place the negative impacts are usually offset by a more favourable tax treatment of landlords, an area which the UK falls behind in comparison with other countries. ‘The taxation of buy to let is a touchy subject for some, even though landlords in the UK receive no special treatment compared to other businesses. This report reinforces why successive governments have chosen to treat landlords as businesses. Doing so encourages best practice and, above all, helps to ease the housing crisis,’ Uphill concluded. The full details of the report are due to be published later this year and will include more detail on London. Continue reading
Research reveals differences between landlords and tenants on maintenance
There is significant confusion when it comes to where responsibilities lie in rental properties when it comes to issues relating to property maintenance and care, new research shows. The biggest discrepancy between what tenants and landlords believe relates to providing meter readings at the beginning and end of the tenancy period. Some 73% of landlords correctly think it is their tenants’ job to do this, but only 35% of tenants think so. The research from landlord and tenant insurance provider Endsleigh also shows that 60% of tenant respondents consider it as the landlord’s responsibility to touch up paintwork, yet 45% of landlords cite it as the tenant’s. Tenants and landlords are also unclear when it comes to the responsibility for pest control. Some 32% of landlords believe pest control is the tenant’s responsibility, yet 84% of tenants consider it as the landlord’s. Endsleigh, together with the London Landlord Accreditation Scheme (LLAS), has created a responsibilities guide to clear up the confusion when it comes to rental property maintenance and care. ‘Relationships between landlords and tenants can become strained when rental responsibilities aren’t fulfilled,’ said Marcus Latchford, Endsleigh's lettings and landlords manager. However, sometimes it’s just a case of one side being unaware of their responsibilities. Individual contracts will often spell out who should be taking care of what, but the small print is often the last place people look,’ he added. Jessica Alomankeh, projects coordinator at the London Landlord Accreditation Scheme (LLAS) said that while most of the responsibilities for landlords and tenants are well understood by both parties but some things are still confusing. ‘Landlords deal with repairs to fixtures and fittings, boiler servicing, as well as arrange buildings insurance if the property is furnished. Tenants look after tasks such as keeping the garden in check and the internet installation. For tasks such as pest control and touching up paintwork, the landlord is responsible,’ she explained. ‘What’s more, at the beginning of a tenancy, landlords should provide tenants with an inventory pack, containing contact details of the current service providers. It’s then up to the tenant to check metre readings and set up new payments with the suppliers,’ she added. Continue reading
Younger UK home buyers think they will still have a mortgage into retirement
A new survey has found that around half of 25 to 34 year olds in the UK believe they may need a mortgage that lasts into retirement and are concerned they won’t be able to get one. Some 27% of people in this age group also think they may struggle getting a mortgage into retirement because their credit history, income level or age will count against them, the poll from the Building Societies Association says. ‘We are all now living much longer and getting on to the property ladder later in life. Many younger buyers are realising that they may not be able to pay off their mortgage until after they retire. As the average age of a first time buyer increases, borrowing into retirement is becoming the new normal, rather than a niche form of lending,’ said Paul Broadhead, head of mortgage policy at the BSA. He also pointed out that the Mortgage Market Review, introduced just over a year ago, has had an impact on borrowing. ‘The application process is much more rigorous and borrowers now have to contend with strict affordability assessments that factor in other commitments,’ he explained. ‘This means they may have to borrow over a longer term to secure a mortgage. These demographic and regulatory changes mean some borrowers may find their mortgage application is rejected if they need to borrow into their anticipated retirement. The mortgage market needs to change to cater for this shift in borrowing,’ he added. However, he also pointed out that despite the concern shown by younger home buyers, it isn’t all doom and gloom. ‘The building society sector tends to be more flexible and willing to offer mortgages that extend into retirement,’ said Broadhead. ‘ Some societies do not have upper age limits, tend to take the case by case approach to applications and are keen on developing long term products that cater to first time buyers who may want or need to borrow into older age. The sector is also keen to debunk the myth that once you are over 40 you are too old to get a mortgage,’ he added. ‘Given that the population is aging and house purchase later in life is more common, the Government, regulators and the financial services sector needs to cater for this change. Paying off a mortgage by the age of 65 is no longer a reality for many,’ he concluded. Continue reading
