Episode Details

In light of tougher legislation on landlords, Is property still a good investment?

First, we had the George Osbourne 2015 finance act phasing out tax relief on buy-to-let mortgages. Tax relief will be gone by next year as will many property owners and landlords as they start to pay more tax and even struggle to show a return on their investment. This is a travesty and goes against all principles of business lending.

The then Chancellor George Osbourne also removed wear and tear allowance, which will cost small landlords dearly.

If that wasn’t enough, the government are now proposing new rules to do away with Section 21 notices, which enables landlords to legally regain possession of their property without having to give a reason or find fault.

Many property owners have already sold up or reduced the size of their portfolio in order to cut borrowing. Property prices in many parts of the country have dropped for a number of reasons, including of course Brexit.

Some see this as an opportunity to buy more property as so-called amateur landlords run for the hills. Others worry that long term open-ended tenancies may be the beginning of the end for the buy to let business as we know it. The banks will certainly be concerned about gaining possession of their security in the event of a default on the mortgage.

The BBC and media have been all over the story citing cases of victims of unscrupulous landlords who apparently evicted them at short notice because they made a complaint about a repair job.

We usually only hear one side of these stories, which surprises me for two reasons.

1. Most landlords would want to maintain the property in good order and any that do not are shooting themselves in the foot and giving the vast majority of good landlords a bad name.

1. No landlord wants to evict a good tenant who is paying rent knowing that they will have a void and then have to pay an agent to get another tenant.

So what do I think of this?

• Housing Crisis

These measures will not solve the housing crisis. If anything, it will make it worse as more landlords pull out of the market to avoid open-ended long-term tenancies. If this happens, rents will go up based on the simple economic laws of supply and demand.

• Long Term Secured Tenancies

Private landlords were never meant to fill the gap in the market for long-term tenancies. Buy-to-let mortgages do not allow such tenancy agreements under the terms of a typical mortgage. Secured tenancies were traditionally was provided by council housing, which have not been built in any great quantity in the London area since the 1970s. Despite government encouragement and cheap borrowing, councils are often reluctant to build more council houses as they fear that they will lose them further down the road and the right to buy scheme. Many have even sold of housing stock to huge housing associations.

The government and local authorities must build affordable rental social housing as a matter of urgency. The current scheme of asking developers to give a percentage of the development over to affordable housing is just not working or providing enough stock. Frankly, in the south-east affordable housing is just not affordable. I have seen developers who cannot offload affordable housing even on shared ownership schemes.

• Has Right-to-Buy Passed its Sell-by Date?

The government also needs to restrict right to buy in order to keep housing stock within the social rented sector and remove the excuse local authorities use to sit on their hands whilst spending millions housing people in expensive temporary accommodation.

The right-to-buy was a revolutionary flagship policy under Margaret Thatcher‘s Conservative government in the late 1970’s