Housing’s free market free-for-all only benefits landlords

Homes, sweet homes: rented accommodation in London is unaffordable for most people – but there is not enough council housing available

There’s a simple way to solve the ‘housing crisis’, says ANDREW FISHER: build homes for the many, not investment opportunities for the few

Private renters in London are typically having to spend almost 40 per cent of their income on rent.

Wages may be higher in London, but housing costs are significantly more than in the rest of England, where according to figures from the Office for National Statistics, published last month, rent takes up 23 per cent of private tenants’ incomes.

Of London’s 32 boroughs, Croydon is actually one of the more affordable, with a one-bed flat costing a “mere” 35.6 per cent of a private renter’s pre-tax pay, compared to 40.6 per cent in nearby Lewisham, and 49.8 per cent in neighbouring Lambeth.

Rental rises: ONS data shows how private landlords have continued to increase their charges, in England more so than anywhere else across Britain

There are around 33,000 households in Croydon renting from private landlords. Between them, they are paying around half a billion pounds – £500million – in rent each year.

Given public sector workers had a pay freeze imposed on them last year, and social security claimants suffered a years-long benefit freeze under Tory Chancellor George Osborne, why shouldn’t the government impose a rent freeze on landlords? A freeze on rent increases could save Croydon households between from £15million to as much as £36million next year – money that would mostly be spent in our local economy.

Regrettably London – unlike dozens of major cities around the world – has no powers to regulate rents. It’s a free market free-for-all which only benefits landlords. London Mayor Sadiq Khan has asked the government to legislate to allow him and other metro mayors to establish rent controls in their cities. His pleas have fallen on deaf ears.

During the pandemic, the government offered stamp duty cuts which subsidised private landlords as they hoovered up more of London’s property market, while keeping first-time buyers locked out.

Landlords who hold properties in a limited company can offset 100 per cent of their mortgage interest against profits, while landlords that hold property in their own name can offset just 20 per cent. In 2020, there were 41,700 new buy-to-let incorporations, up by 25 per cent on 2019.

As the number of homes available for social rent – whether council houses or through housing associations – have reduced drastically in number, so private landlords, backed with tax subsidies under successive governments, have taken advantage of the market conditions.

The difference in rent is huge; the average council tenant in Croydon paid just £122 per week in 2019.

If just one-third of Croydon’s private renters were renting council homes, they would have an extra £100million in their pockets.

More money going to landlords means less available to be spent in the real economy, creating jobs and maintaining local businesses – and the accompanying tax revenues that that brings for the Exchequer. For the government, this dependency on the expensive private rented sector also increases the cost of housing benefit.

Out of reach: Brick by Brick is building thousands of flats, like these in Coulsdon. Most have gone for private sale, some are expensive shared ownership, and only a few are council homes

Building council housing is no easy task though.

Successive governments have devastated our council housing stock. The sale of council housing – through Right to Buy or wholesale stock transfer – has left more tenants paying more, and often for inferior or worse accommodation. Despite promising to empower working-class tenants, Right to Buy has more often benefited private landlords: 40 per cent of ex-council properties that have been sold under the scheme are now owned by private landlords.

It’s worth noting that housing funds are effectively ring-fenced – in the Housing Revenue Account – and so while Croydon Council’s day-to-day finances may be subject to extreme pressures, the housing budget is not.

For many years, though, councils were not allowed to borrow to fund the building of new council housing, meaning that in the last 40 years the proportion of households living in a council home has fallen from around 1 in 3 to just 1 in 10.

To get around the borrowing rules, in 2015 Croydon Council established Brick by Brick to build homes. Ludicrously, the government rules meant that while the council could lend Brick by Brick £200million, it was not allowed to use the same borrowing to build housing directly.

One of the few positive moves made by Theresa May when she was Prime Minister was in 2018 to remove the borrowing cap on councils borrowing against their Housing Revenue Account. This meant councils could once again borrow to build council housing – rendering the artificial structure of Brick by Brick unnecessary, as the council no longer needed the company to get around the rules on borrowing.

Whatever the management failures of Brick by Brick – and a report a year ago by PwC found the company had “significantly underperformed” – the upside is that the council, having underwritten the venture, will soon be acquiring 104 new homes (44 one-beds; 57 two-beds; and three three-bed properties).

If we are to make housing more affordable in Croydon, there are precious few options but to build and acquire more council housing.  But that cannot be done by the council alone.

All previously successful periods of council house-building in this country have been backed by national policy from central government, whether under Labour or Conservative administrations.

Building council housing, ensuring fair rents and clamping down on landlordism are they keys to ensuring housing is built to provide homes for the many, not investment opportunities for a few.

Croydon resident Andrew Fisher (pictured left) has worked as a trades union official, researcher and writer, and served as Director of Policy of the Labour Party under Jeremy Corbyn from 2015 to 2019. He is the author of The Failed Experiment – and how to build an economy that works

Read Andrew Fisher’s previous columns for Inside Croydon by clicking here

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News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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13 Responses to Housing’s free market free-for-all only benefits landlords

  1. Andy Szebeni says:

    I am a private landlord so presumably one of the hated voracious, greedy millionaires hoovering up properties across the country and preventing first time buyers getting those same homes. So I know that my comments run the risk of being dismissed in the same way as they were before when I commented on the subject but I will hope that some of this mud will stick.

    It is not a case of council homes are not being built because greedy landlords are snapping up properties. You will find that most economically-minded landlords would welcome more council houses so that the needy can get something affordable since they are not staying in properties offered by most law-abiding landlords. Why? Rents are high because capital costs (the cost of houses) is high, the burgeoing burden or red tape on landlords and increased taxation is a cost that a commercial enterprise (which a professional landlord is, just like your local Newsagent or butchers) as are pointless taxes like landlord licences and HMO licences that only penalise the law-abiding landlords and dont touch the bad ones who never bother registering.

    The private rented sector is MOSTLY occupied by conscientious and law abiding landlords who look after their tenants and fuflil a commercial need. The vast majority of these landlords own 3 or less properties, usually with mortgages. You don’t need to be an accountancy genius to realise this investment wont be have you holidaying in Acapulco every year.

    It is by no means a licence to print money as Shelter and this venerable web site seem to suggest. We need to cover the cost of the tenants who decide not to pay (some have genuine short term issues and any sensible landlord helps good tenants through those) and do the midnight flit. And Shelter, Crisis, Generation Rent and Councils positively ENCOURAGE this activity. An activity that is technically illegal as a breach of contract. We as landlords dont want sympathy, we want to simply run a business (as encouraged by successive governments, instead of investing themselves in public sector housing) that profitably and fairly fulfils the needs of our tenants.

    As to rent control – there is NOWHERE in the world that this has worked. Ask anyone in Berlin or New York what happens? Landlords don’t have the funds to invest in maintaining their properties, there are no new landlords coming in and the blackmarket in properties is rife while supply is drying up. Backhand payments are rife and tenants out-of-pocket costs are just as high as without rent control.

    As to your point about incorporation (Ltd companies) for buying properties, I know only too well that the additional accountancy cost, compliance and higher mortgage interest rates mean one is seldom better off than when owning in one’s own name, When landlords do buy through ltd companies it is not illegal or tax evasion, it is what everyone does – avoid paying more tax than you have to. So I don’t understand why you paint it as some underhand tactic.

    Rather than villifying ALL landlords, it makes sense to support the good ones to provide good quality housing AND for the public sector to invest in social housing, The two aren’t mutually exclusive. Unless one takes an ideological rather than a commercial view that public ownership of property is immoral and all profit is bad. But that is a political issue that is whole different discussion outside the realms of the status quo.

    • Oh dear. Bit of a private landlord’s guilty conscience at play here, it seems Andy…

      No one has used the phrase “the hated voracious, greedy millionaires”, except you.

      “It is not a case of council homes are not being built because greedy landlords are snapping up properties.” You’re quite right.It’s not. And nowhere in Andrew Fisher’s column does he state such a thing.

      “The private rented sector is MOSTLY occupied by conscientious and law abiding landlords who look after their tenants and fuflil a commercial need. The vast majority of these landlords own 3 or less properties, usually with mortgages. You don’t need to be an accountancy genius to realise this investment won’t be have you holidaying in Acapulco every year.” Well that’s a sentiment that is sure to win you the sympathy of every private tenant in London, I’m sure, Andy. Not.

      “It is by no means a licence to print money as Shelter and this venerable web site seem to suggest.” Oh we do, do we? Where?

      You make other claims without the slightest bit of evidence. Such as “tenants who decide not to pay… and do the midnight flit. And Shelter, Crisis, Generation Rent and Councils positively ENCOURAGE this activity.” Our italics. To highlight where you are lying about a group of charities and action groups.

      “We as landlords don’t want sympathy.” Another lie. You clearly crave it terribly badly.

      “As to rent control – there is NOWHERE in the world that this has worked.” Another lie. Rent controls work well in Germany and Canada, and they worked perfectly well in this country, too, until Thatcher, the great friend of the private landlord, did away with them.

      “When landlords do buy through ltd companies it is not illegal or tax evasion.” The article doesn’t say that it is. It is tax avoidance.

      “It makes sense …for the public sector to invest in social housing.” Yes. We know. That’s what this article advocates, though you appear to have missed the whole point, wrapped up in your defensive, poor little private landlord self-obsession.

      Really, Andy, you need to get over yourself. Or try to find another way to make your money, if being a landlord makes you feel so defensive about it all the time.

    • Anthony Miller says:

      Invest in land. They’re not making it anymore – Mark Twain. From oil to gas to water every limited commodity market has market controls because without it natural monopolies become monopolised destroying competition. But not housing…? Simple measures such as taxes on 2nd mortgages or an end to no fault evictions would be far more effective than the government directly controlling rent. Many of the rent controls we had for years until Mrs T were brought in during the first World War to protect munitions workers… Maybe it’ll take a third world war but one day they will come back…

    • Arianne says:

      I’m in a flat of two blocks, no owner occupiers here apart from me anymore, all the BTL landlords don’t care about the place, it’s just their investment but it’s my home… They all bought cheaply years ago yet the rents for their tenants are now constantly increasing whilst the BTL owners live in big, expensive houses. They own 2-3 in each block, they also then get their partner to buy in their name, they also own flats in multiple other blocks in the area. It’s pure greed, it’s ruined living in a flat as no one cares about the place, their tenants get fleeced, repairs not done as they like to keep things cheap in their flats and any owner occupiers still living there as a home have no community as constant tenants moving in and out and no one caring about the place and when there has been dangerous tenants or drugs they haven’t even done anything to resolve it as they are not having to put up with it. BTL is awful, it’s not done for any reason other than to make them money – I’m not even sure what they will ever do with all the money, some here are retired, in big houses yet still owning multiple flats rented out for huge profits, they could sell them all and still have enough profit to live out their days easily, they won’t ever get chance to spend it all before they die! I never thought much about BTL before having to put up with what it does to a block.

      • Andy Szebeni says:

        The poor standard of the block is down to the management company which is owned by the freeholder. In most cases, there is no connection between the freeholder and leaseholders (the flat “owners”). Sounds like your grievance is against the management company.

        I am interested to know how you are aware that all the “owners” live in big houses. Have you researched each lessee and their home address?

        As an aside, I agree with people who take issue with the way blocks of flats are owned and managed. I used to live in a flat and I took over the management of the block along with other lessees for that very reason. However, as the number of flats were increasingly let out, the standards in the development dropped because tenants took less care of the property than owner occupiers since they considered (probably rightly) that was down to the long leaseholder. Living in houses generally results in a better environment than living in flats in this country.

      • Ian Kierans says:

        Sadly Arianne we have had this for 30 years. The Council used to at least ensure properties were safe like in the 90s when the next door roof was falling off and landed on our house and car and injured two. Today not a peep from Croydon – no response at all.

        Anti social behavior ? If ever there was a useless regulation it was the landlord licensing Croydon put in.

        Too many Landlords are loathe to maintain property – One had the house burn down. Tried to blame the tenant – but they are not responsible for bad wiring and no alarms at the house.

        There needs to be new legislation overall addressing the issues deriving from the rental market and for Landlords also when people trash the place or do not pay rent due – but mostly to protect residents and neighbors.

        There also needs to be an overhaul of planning and developments ensuring there are ways to ensure the authorities prevent and prosecute people who damage others property or trespass and assault neighbors or victimise them for raising issues to the authorities.

        I am not an advocate for zero tolerance but there are rare circumstances where it needs to be implemented and Croydon Cowboy builders and Landlords with Anti-social tenants is an area most in need of that approach.

        But with a Local authority Executive and Councillors so entrenched in hypocrisy and disrepute it is probably unlikely to happen for decades!

  2. The mistake Croydon Council made, directed by Cllr Scott but not tempered by Heather Cheesbrough is that Planning Guidance Document SPD2, a gift voucher for developers, focuses on infill developments which just happen to be similar in size to the nine unit buildings that allow developers to build 100% private accommodation whilst sticking two fingers up to Croydon’s affordable housing needs.

    Of the 30 or so developments happening nearest me, ALL of them are 100% private tenure and other investment vehicles for private landlords. The development near me has 9 units: two are owned by European company directors, two are lawyers, one accountant, three are upper management and one is rented out via AirBNB.

    Could Croydon Council have got this more wrong?

    And then there is Sean Fitzsimons bleating on about the success of SPD2, but if he took time to scrutinise what’s been consented, he’ll realise he’s wrong. But that’s too much to ask in Croydon: that the Chair of the Councils Scrutiny Committee would actually scrutinise anything before firing off baseless statements on social media.

  3. Anthony Miller says:

    One of the problems is you used to have to have the money for a deposit on a house to get a mortgage. Not anymore. Now you just have to have assets the bank can sequest if it all goes pear shaped… Thus was born the buy to let mortgage… Often 100% and sometimes deposit free. So you have people buying houses who have made minimal investment. It’s obviously less risky to mortgage a house to someone who already has a house than someone with minimal assets… But where is the benefit to society? Actually many buy to let “landlords” are just agents for banks doing the day to day grind for them in return for a split on the property investment. Why has this happened? Banks make more money out of buy to let mortgages than those to first time buyers. Thus all the low level first rung properties are snapped up as buy to let’s. I live in a block of a dozen flats. Only two of us are now owner occupiers. This makes things like running a leaseholders management committee really difficult because it’s just me and a 70 year old lady. The buy to letters can’t be bothered because they can always instantly sell… Having the power to turf tenants out for no fault. This isn’t how the system was meant to operate and it could be fixed very easily with simple market controls and greater taxes on 2nd properties and incentives for banks to lend to struggling first time buyers instead of to lend to those who already have the money for their 2nd, 3rd, nth buy to let already… Or have assets to offset the risks. There is something wrong with a world where Harvey Keitel advertises Landlord Insurance before Home Insurance. The problem is not just the number of properties it is the number of middlemen in the system. It doesn’t help that Thatcher removed rent controls abolishing sitting tenants and vastly reducing the bargaining power the tenants in the system.

  4. Ugh Ihh says:

    Buy to rent should be baned. So called “landlords” do not contribute to economy at all cutting the hard workers from ow ing home

  5. Ian Kierans says:

    The solution has always been to build more homes. Sadly the homes being built are not at reasonable rents. The ones being rented are either too high for many or are pits as bad as Regina Court. HMO’s are needed but many are dangerous to those who live there. When was the last time Croydon Council actually went and did an inspection off its own back on those places?

    Setting up Brick by Brick may have seemed a work a round of regulations and controls. However they were there for a purpose. Croydon Council and Councillors avoided those controls and not only got it wrong but managed to excel in a manner Nick Leeson got a prison sentence for.

    However they are not at fault for the housing crisis which has many reasons including population growth. Many will argue that a (reason) is wrong or that it is right, dependent on political viewpoint.

    But what was wrong is the failure to deal with the fact that if you discounted property at point of sale that money had to come back from somewhere to maintain the social housing stock levels. Failure to do so would lead to rent inflation as demand outstripped supply.

    5 years of Landlord Licences and the amount of property unfit for habitation being let has become apparant to all. One has to say this Council never got a grip on anything and its processes were never fit for purpose. But did they ever have a reasonable chance to do so?

    What does a £1400 private 2 bedroom flat and Regina Court have in common? Both are in the North of the Borough. Both are mold infested. Both are subsidised by the taxpayer and both have caused health issues to the tenants. For the record the private flat in question was inspected and subject to an improvement order (after 20+ years) and some work was done. but it still has mold and is still a one bedroom flat cut into boxes and regularly let knowingly overcrowded.

    Yes there are many properties in the private sector that are clean and well maintained but not much at the lower end of the market or in the affordable range for many without some sharing of space (overcrowding)
    We now have a new type of Rachmanism. Maybe fueled by Buy to Let or not but sadly it is private landlords who have heavily invested in rental game and cut things to the bone. Have they done this with foresight? Perhaps not. But that is the outcome. Clarly Social housing is not much better in some areas. But there are many social housing properties that are in good order and are well maintained and maintainable and this Council has more of these than those like Regina Court and at affordable rents. Not so much private homes rented by Private Landlords

    What is and was very clear always was that neither legislation nor this local borough have been up to the task of running social housing or policing private rental housing and have a shocking record in preventing harm to residents from unsanitary conditions in both.
    But this is not just a Croydon problem. It is not just Rent control that is needed but annual inspections of all property let social and private and stricter enforcement of breaches. It should not be up to a tenant to have to repeatedly raise a complaint and risk eviction before authorities act.
    But fundamentally more homes need to be built and older ones updated or re-built.

    • Andy Szebeni says:

      “It is not just Rent control that is needed but annual inspections of all property let social and private and stricter enforcement of breaches” – I totally agree. This council TAXED landlords so that it could fund staff who effectively did nothing in the Landlord Licence Department. Good landlords WANT enforcement against bad landlords (good landlords dutifully pay these taxes, and follow the burgeoning compliance burden and have to pass those charges on to tenants of course). But this council, like almost all across the country, rarely enforce against landlords where the property is in poor condition (forgive my lack of facts but I am not sure if this council actually prosecuted anyone for not having a Landlord Licence). If they did, it would squeeze out the poor quality housing.

      However, this, in turn, removes the cheaper accommodation from the market (because it costs to keep your property clean, safe, dry, aesthetically appealing and to deal with tenant queries). This then puts pressure on councils to house those people and the don’t want that burden.

      “Yes there are many properties in the private sector that are clean and well maintained but not much at the lower end of the market or in the affordable range for many without some sharing of space (overcrowding)”. A shared house doesnt equate to overcrowding. HMOs are much cheaper than one bedroom flats and plenty of tenants only have £500 per month not the £950 per month for a one bed flat. If you assume all shared properties are overcrowded, remove all of those from the market, it would leave only the one bed flats. Where do low income earners or those wanting to save for a deposit live?

      “We now have a new type of Rachmanism. Maybe fueled by Buy to Let or not but sadly it is private landlords who have heavily invested in rental game and cut things to the bone.” Yes, landlords have invested heavily to provide the rental accommodation tenants crave and that councils don’t provide. Rachman was in cahoots with the Krays and died 50 years ago. A forest of laws now prevent all of his activities. Landlords only need to cut things to the bone where costs rise rapidly and the rents achievable fall. High inflation and rent controls would guarantee this…

      As an aside, where councils force developers to provide affordable housing, this reduces the profit margins for developers and they either DONT create the homes needed or cut corners. While it is easy to blame developers for the housing crisis, the issue is actually government policy and local planning issues. It seems to me that we either pay more taxes (local or national) and use that to build and support rents for the entry-level housing this country so badly needs or we make it easier for the commercial sector to build and provide that housing. What we have had for 30 years is a middle ground that has failed to solve the issue, and actually exacerbated it.

  6. Anthony Mills says:

    Rent controls have not been abolished. There are no new Fair Rent tenancies, but those tenancies made under Fair Rents which have not transferred to different tenants are still in existence as is ours and many others on our estate as it has a very low turnover.. It even transferred with us when we moved to a different home owned by the same landlord. Moreover, our landlord has never invoked the full increase permitted by the Rent Tribunal when reassessed every 3 years, and maintains the rent at social rent level. Many Housing Associations operate the succeeding form of tenancy, Assured Tenancies, also at social rent levels rather than the permitted and expected 80% of market rent, which is a form of voluntary rent control. Which demonstrates that even in these days of no subsidies for development and thus very few new social rent tenancies, when not blocked by the structure of the planning system and financial inequities, Housing Associations can and do provide tenancies at social rent, though in much more limited numbers than previously. A case in point is the new social rent housing being built as part of the Purley Baptist Church development scheme which is far in excess of even the Mayor of London’s rarely achieved target proportion. That is a socially responsible landlord. The cross-subsidy model is of funding a proportion of HA development by sale and shared ownership of the rest to fund some social rent tenancies is universally acknowledged to be broken. But there are 33.000 homeless families in temporary accomodation London alone which desperately need the structural changes to planning and finance that will support the building of homes for social rent not private profit.

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