Steep rise in tenant evictions

“What we’re seeing already is a steep rise in the number of tenants, entirely blameless individuals, who are becoming homeless because their landlords can’t pay their mortgage and their homes have been repossessed,” said Shelter chief executive Adam Sampson.

Tenants can get just days’ notice to leave their home, says the charity, which wants ministers to “act quickly to give tenants far, far longer”.

So, it has started.  Tenants will bear the brunt of all this leveraged property speculation from the buy-to-letters.  Arrears are shooting up:

The buy-to-let sector has been the hardest hit over the past year. The number of landlords who are three months or more behind on their mortgage payments rose by 257 per cent between the end of 2007 and the end of 2008, as landlords failed to secure the rents they needed to meet their loan payments.

Property Industry Calls for Government Policy shift… More rentals and on longer terms…

NDUSTRY CALLS FOR NEW HOUSING AGENDA

Date

26th January 2009

Description

Property industry wants radical rental solution to housing crisis

Leading figures from the property industry will meet today at the British Property Federation’s (BPF) Annual Residential Conference in London to call for a radical shift to rental.

With repossessions almost doubling and tens of thousands facing negative equity, the BPF believes a professionalised, branded rental sector, where big firms provide long term homes to rent, could be the answer to Britain’s woes. Read the rest of this entry »

---

The Tenant’s Dilemma

The Citizens Advice Bureau has a valuable report on their site (thanks Owen!).  As the front line for helping out tenants in trouble, it’s amazing that they actually have to qualify their advice with a warning:

One of the frustrations which CAB advisers face when advising private tenants about disrepair is that any advice about their rights has to come with the warning that exercising these rights may result in the landlord issuing notice to quit.

This situation makes it clear why security of tenure is so important.  Without it, there is little or no point in providing other rights - the landlord can simply evict rather than deal with the problem.

The report details that there is overwhelming support from Environmental Health Officers and Tenancy Relation Officers for reforming the legislation on section 21 (only 2% respond that it is not needed).  It also has a very good section on how this works in other countries.  In general, you either have real security of tenure or specific law about retaliation (similar to employment tribunals).

I recommend you read this report, the case studies make shocking reading.

Housing benefit pushes up rents for the private tenant

A great analysis by Burning our money shows how housing benefit pushes up rents across the whole rental sector:

The Local Housing Allowance, because it is based on the median rent, is creating an ever-rising floor for rental rates that is completely disconnected from local incomes. If you’re a landlord, why would you rent for anything less than the LHA even if 50% of local workers don’t have the incomes to pay the LHA rents?

It’s free money. As landlords raise their rents to the LHA level, when the rates are recalculated each year, the lower 50% of the distribution has been truncated so the median will be progressively higher and higher following each round of recalculation. At the same time, because the government is guaranteeing landlords an above market rent, it drives up property prices and prices people who are actually working out of the housing market.”

Agents fear collapse in rents

It’s a great time to be a renter, according to the Guardian:

People who are unable to sell their properties because of the collapse of the residential sales market are now flooding the lettings sector with unusual, high-specification homes that are often being offered to tenants at bargain prices.

‘You have properties that have been refurbished for sale - real high-spec properties - now coming up for rent,’ he says. ‘These often make traditional rental properties, with their B&Q kitchens, somewhat tired by comparison and therefore more difficult to let.’

In the short term, this is obviously great for tenants.  However, I think this will only increase their precarity in the long term.  Living as a stop gap ‘until the market recovers’ does nothing to make you feel secure in your home.  I recently saw an advert that states (excuse the caps, they are from the letting agent):

PLEASE NOTE THAT THE RENTAL HAS BEEN REDUCED AS THE PROPERTY IS STILL ON THE MARKET FOR SALE AND TENANTS ARE EXPECTED TO CONDUCT VIEWINGS WITH PROSPECTIVE BUYERS.

So not only do you not have any security, you are expected to do the agents job as well - with obvious potential for fun!  The real issue here is that the owners letting them out will quickly tire of subsidising the tenant while waiting for the market ‘to recover’.  I was recently offered a let that was on the market for £275,000 at £750pcm.  This gives a yield of 3% after agents fees.  After costs, I can’t really see this being a winner for the landlord - it would barely offset the monthly fall in value of the property.  How long could it last?

The government considers giving tenants more notice of their eviction

The BBC reports that the government is currently considering changing the rules on giving tenants notice of repossession.  Currently, only two weeks notice is required.  This demonstrates just how precarious the rental life is in the UK, and RR would support changing this rule.  However, it would be better that tenants were never exposed to this risk through amateur landlords borrowing beyond their means.

Buy to letters want help too

The National Landlords Association wants the government to extend its mortagage support scheme to buy to let mortgages.  The spokesman is quoted as saying:

If the endgame is to prevent people losing their homes, then it makes no sense for buy-to-let mortgages to be exempt from these new measures. By giving landlords breathing space, they would have a chance to offer any struggling tenants a similar period to get their finances in order and prevent the homes being repossessed

This is obviously not the correct way to solve the problem. The correct way would be to offer the tenant housing benefit to carry on paying the rent.  Otherwise, the tenant is relying on the generosity of the landlord.  This is something I don’t want to test.

One example of the difference is that you cannot get housing benefit if you have over £16,000 in savings.  For the mortgage support scheme, the level is £60,000.  Why the difference?  These renters are also the potential first time buyers who are needed to ‘kick start’ the housing market.  Therefore punishing them for saving is crazy.

The real reason the NLA wants this is is to help landlords who may be subsidising their tenants to pay the mortgage, or experiencing a void due to rising unemployment.  Far more desirable for tenants would be the ability to demand a credit check on your landlord when moving in, and the requirement that the landlord places several months of their mortgage as deposit.

This sums it all up perfectly

The FT reports that Gordon Brown is proposing mortgage holidays:

Gordon Brown is to grant homeowners in financial difficulty the right to demand a two-year mortgage holiday, guaranteed by taxpayers, in a dramatic bid to underpin the housing market.

Why should someone in financial difficulty get special treatment just because they own a house?  Wouldn’t some form of financial help that did not discriminate on the way you live be in order?

These crazy attempts to prop up the profligate - at the expense of those who did not borrow beyond their means to enter a bubble which has brought the financial system to its knees - beggars belief.

Is there a case for long term tenancies?

Here are a few quotes from property investor to illustrate what we’re up against:

One of the chief attractions of the residential property market to investors is the ease with which landlords can get their tenants out

Today, landlords can serve a simple Section 21 notice on tenants: there doesn’t have to be any fault on either side

If there are abuses – and that’s a big if – it is that letting agents now routinely charge a renewal fee if the tenant stays on after the initial six months or year.

You can read the article here: http://www.propertyinvestor.co.uk/london/newsletters.asp

Join our campaign

If we are to be taken seriously as an organisation, we need to gather a serious number of supporters.  If you support our aims, I would encourage you to sign up now.  We only require a valid email and we will never disclose this, send you spam, or do anything else evil.  We may occasionally send you a mail to ask your opinion, or to inform you about our activity.