2007 - 2020

The Rental Crisis in Corona Time

A unique situation. Unprecedented times. Force majeure. An act of god. Nobody saw this coming. Except for one enormous Covid-19 crisis racing onwards at speed, signposted with sirens: the chaos in rented housing.

With staff being furloughed from already poorly paid jobs, or being self-employed and paid nothing if they don’t qualify for government schemes, a situation simmering for decades is boiling over. Rents are too expensive, and increasingly tenants are in debt to landlords. A perfect storm is here not just reality, but also, the perfect cliché. For decades, rents have been rising, work increasingly insecure and wages haven’t kept pace. Shelter shared an infamous but increasingly relevant statistic that a chicken would now cost £51.18 if food had prices had risen to same febrile levels as rent.

Inevitably Scotland’s property Tribunal will be gridlocked for some time. Meanwhile basic Holyrood policy seems to be, we won’t evict you for a while, which isn’t good enough.

Another entirely predictable crisis then: a mass of evictions due just as winter approaches, one answer is to ban all evictions in winter, as is the case in France. The SNP already reformed renting to allow for faster, less contestable evictions for non-payment of rent in return for increased security for tenants. But there are loopholes in the grand plan, such as the right for no-fault notice to be permitted ‘if the owner wishes to live in the property themselves.’ This is not policed, and is consequently abused: an acquaintance’s landlady was possessed by a sudden desire to return to Glasgow from Surrey, not even pretending this wasn’t a ruse to get rid of the tenants.

Many landlords recognise these are (unprecedented times klaxon…) unprecedented times, and can be reasonable. A newly unemployed friend has negotiated his rent down from £700 pcm to roughly £250. But that magic number is simply the cost of the landlord’s mortgage payments, alongside a few expenses such as insurance. Profits in renting were once made from accumulating capital in increased property prices. Living Rent highlight bailouts for landlords.

Reliably, Labour have stumbled at an open goal. New leader ‘Sir’ Keir Starmer is already tacking rightwards under a light breeze, having chosen (as a human rights lawyer) to prioritise the ‘human rights’ of landlords. The Momentum left are outraged, but Starmer might have a valid point; it’s not simple to cancel all outstanding rent debt. Housing lawyer Giles Peaker said on twitter, “Based on average rent, a full ‘rent waiver’ would cost £4.4 billion a month, on private rents. If we include social rents £6.4 billion a month. NHS budget is £11 billion a month. And yes, Govt would have to fund it.”

A petition is being circulated, requesting the following: cancel, at the tenant’s request, payments of rent, for any tenant experiencing any drop in income, cover, at the tenant’s request, utility payments, for any tenant experiencing any drop in income, and halt all eviction processes due to failure to produce rent until employment stabilises. Independence supporting Green MPs are also on board with all that.

Rent debt deferral pushes the problem down the road. Few tenants have savings and renters are required to repay all rent missed over two years: the equivalent of a 12% rent rise during the worst recession for three hundred years. Universal credit is still limited to LHA rates, which were temporarily lifted for new claimants but not ‘legacy’ housing benefit claimants.

The amount of Labour, and SNP (not to mention Tory MPs) who are landlords, provides context to any political reluctance to enact real change. Tenants pressure group Living Rent say:

The government’s eviction ban is nothing more than a plaster; simply postponing a tidal wave of evictions that will engulf tenants when the lockdown is lifted. We need to ensure that everyone is protected and that housing remains the government’s priority in defence against the pandemic. Our society is only as healthy as its most vulnerable members. The government must recognise the needs of renters — working people and families across the country. They must act to protect us now.”

Another possibility is to accept that tenants cannot, and should not pay. While negotiating proper rent controls, and while building those beautiful Parker-Morris standard houses, cancel the debt to tenants, but register it as a charge on the property; when sold, this debt has a priority over any profits. Socialist Councillor Matt Kerr has the excellent idea of “… a buy-out rather than a bail out”. That is a share of the profits in turn for a rescue package for rentiers.

We’ve once again put all our eggs in one financialised property basket (eggs which would cost £5.01 if food prices had risen at the same rate as rents.) There are too many small landlords, but also many corporate investors in the PRS. Tenants are in effect subsidising pensions for rentiers they will never have themselves. Remember too that it is not unusual for there to be no mortgage on the property tenants struggle to pay rent on. Over the past few years we’ve shifted from social to private housing, until recently sold below costs straight into the hands of private, even corporate landlords. This means not just that tenants are struggling, but this cost is covered by housing benefit (LHA and universal credit.)

Disaster capitalists and investors are circling to make the world even better suited to financialised property. A better answer is a massive social housebuilding programme, proper low rents, and genuine security.

Comments (12)

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  1. Chris Connolly says:

    Well said. When I moved into my first private one-bedroomed flat in 1980 the rent was £8.50 a week. If it had gone up along with general inflation that would still now be less tha £40.

    It was a popular opinion when the benefit cap was first introduced that £500 a week was very generous. Not if your rent takes the whole lot, it isnae. Since then the cap has gone down so someone living on benefits in London or Edinburgh will probably have to turn to crime or prostitution just to keep a roof over her/his head.

    According to home.uk the average private rent in Edinburgh is now £1433 pcm. The average for a single room in a shared building is £549 pcm. Astonishingly, in Glasgow the average cost of renting a single room is £668 pcm.

    In my home town of Stranraer the average for a one-bedroomed flat is £325 pcm. That’s much better, except it’s the only rental property that home.uk’s search engine could find in the entire town.

  2. Paul McMillan says:

    Answer is simple:
    1. Rent controls set by the local authority.
    2. Abolish by to let mortgages
    3. Social housing and lots of it with it written into law that NEVER will the properties be sold into the private sector.
    Houses are homes not ‘investments’.

    1. Michael says:

      ” Abolish buy to let mortgages” – exactly!

      Given the toxic result of deregulating mortgage lending (money creation) in the 80s – essentially allowing millions of homes to be turned into sure bet invest vehicles – I wrote to Tommy Sheppard in Jan this year asking him why we don’t regulate against Buy-to-Let mortgage lending and how could this be done?

      He wrote a thoughtful and detailed reply. The following is a pertinent fragment of his reply, explaining that: “the rules which mortgage must adhere to are set in London, not Edinburgh, on a UK-wide basis by the Financial Conduct Authority. The Treasury and the Bank of England also make decisions which affect mortgage lending in important ways.”

      We need these powers in Scotland!

      1. Paul McMillan says:

        To be fair the real de-regulation of the mortgage market came in the Blair/Brown years and the light touch (i.e no touch) approach to the City of London (remember Blair telling us he had no problem with people becoming obscenely rich?).
        I bought my first house at the age of 23 in 1987. Cost me £12k (2 bed terrace), i had to go in to the Building Society for a face to face meeting (and take my Dad with me…the shame!) At the time I was earning £5k a year and since leaving school had managed to save £2k(Scots dad/yorkshire mum…money is NOT for spending) which I had to put down as a deposit. The same house today is now circa £85k so if I was 23 again (dont get me started) I would have had to save circa £15-20k and be earning at least £30-35k to borrow responsibly. Herein lies the problem…houses are now investment tools, part of your ‘portfolio’ and so we have a ‘bubble’in the market, bubbles though eventually burst.

    2. Alasdair Macdonald says:

      Paul, In addition, there has to be land reform legislation allowing councils to tax land that is lying undeveloped. In Glasgow, some of these sites have been empty for decades. Most are owned by large companies, whose ‘beneficial owners’ are hard to identify, because of the use of skeins of shell companies, registered offshore. The purpose is to keep the land off the market to force up land prices, create a scarcity of housing and so force up both house prices and rent. A substantial rate of taxation, which will escalate each year the land lies empty, would result in the land being sold as whole lots or, perhaps as small parcels which could be used for self-builds, for example. This would put more land on the market (or in local council hands) and land prices would fall, thus reducing house prices and rents. All new land owners would have to have a named person whose principal address is in Scotland and be properly recorded in a restored land register.

      1. Paul McMillan says:

        Couldn’t agree more Alasdair. Land is too important an issue to be left to the ‘market’ but where are the politicians to take these vested interests on?
        Both left and right (i hate those terms…so C19th) are in the pockets of the speculators.

  3. Papko says:

    Interesting article and am sure touches a raw nerve with many folk.
    Rent is very burdensome.

    One solution is do like the article references and adopt some French tenant protection laws (no eviction in Winter)
    The Germans have similar very strong laws to protect tenants rights.
    hence am inherited property is not so much a windfall as a burden, and you are better off selling it rather than renting out .

    Would only need a few tweaks to the law and many BLT landlords will sell up causing a property slide.

  4. MBC says:

    Some history here: it was Thatcher in 1989 who deregulated the private rented sector in her Short Assured Tenancies Act. This act abolished two tenets of private renting which had been in place since 1916 after the Glasgow Women’s Rent Strike led by Mary Barbour – fair rents, and security of tenure. Her act made it legal to charge ‘market’ rents and to offer a tenancy for as short a period as six months. This guaranteed the landlord profit and the ability to gain vacant possession after six months.

    Prior to 1989 it was very difficult to end a tenancy. Eviction was possible, it some extreme circumstances, but very difficult. Rents could be appealed by application to the Rents Tribunal if they were too high. Profitability was minimal and risk to landlords was high.

    There were several bad results of this. Firstly, property fell into disrepair because landlords could not get vacant possession of property to renovate. Secondly, nobody in their right mind would enter the private rented property sector because the law was too much in the favour of the tenant. As a result, the supply of private rented property dried up. Many properties were shed to long standing sitting tenants as owners sought to disburse themselves of unprofitable burdens before they became too burdensome or too decayed, and as mortgages became more readily available.

    The shortage of supply of homes to rent resulted in a crisis amongst the sector of the population that needed temporary accommodation, students, and those moving to another part of the country to take up jobs. It basically meant you were stuck where you were. Landladies might rent out rooms to lodgers, but that was about it. Singles might move about, but for couples or families, moving to another part of the country to take up a job offer was out of the question as there was no accommodation available.

    After Thatcher passed her act there was a property revolution in cities like Edinburgh where there was high demand for private rented flats, mainly in university towns where students needed temporary accommodation. Rents sky rocketed and this accelerated when buy to let mortgages became available in the mid-1990s.

    The sector has moved from one extreme to another. I have seen exploitation go both ways. It was very difficult to find private rented accommodation in the 70s and 80s. The safest bet was personal connection; if you knew somebody who happened to own a flat who was willing to rent you a room in it or even have the whole flat while they were away. I knew of at least two people who mercilessly screwed their better off friends, by refusing to move out of the flat when the owner wanted to sell, and forcing them to sell it to them at far below the market rent so that the friend lost most of their money. The friends were not wealthy people, just wealthier than the former flatmates who had exploited them.

    Since the 1990s and buy to let, there has been a huge inflation in the market value of rentable properties, to the extent that they became unaffordable to first time buyers and more and more people were forced to rent, and rents have also sky rocketed. The whole sector is out of balance. A link needs to be restored between rents and income. Because at the same time as rents rose, employment was casualised and reduced in relation to cost of living.

    Everyone should have the right to a secure affordable home. If you work 35 hours a week, whatever your job, it should put a roof over your head.

    1. Chris Connolly says:

      Aye, my friend, and folk that don’t work should all have a roof too, as I’m sure you agree.

      After Covid-19 there’ll be a muckle more unemployed people and short-time workers, which would be by no means a bad thing if we weren’t obliged to work just to provide basic necessities like somewhere to live, the capacity to keep warm and enough food to keep us going. I’d love to think that in the future working class folk will not be so eager to believe that if you don’t work you are not entitled to a decent life unless you happen to have been born into the aristocracy.

      I’m going to confess something now to avoid being found out in the future and called a hypocrite: I once bought my council house. It was cheaper than renting and we needed another room for a child with Asperger’s Syndrome but these are poor excuses and I regret having done it. Public housing was a brilliant idea and although Scotland became synonymous with badly planned and poorly constructed schemes it should never have come to that.

      I don’t envy young people at all now. The world in which they live seems less pleasant and more vicious as well as fraught with financial worries. I know there’s a strong element of rose-coloured glasses here but some of us haven’t half had some lucky breaks.

  5. Tony Perridge says:

    During the course of my life, I saved enough to buy a small, one-bedroom flat in order to bolster the state pension (one of the lowest in the EU) when I retired. This now constitutes one third of my income. When my tenant was furloughed, I reduced the rent because it seemed to me to be the decent thing to do and she has been an excellent tenant. I do not consider myself to be a wealthy man, I drive a sixteen-year-old car, but I have no debts and have been careful to prepare my situation for my old age. I made sacrifices during my working life in order to be able to invest in a small property to give me a reasonable standard of living when I retired, something impossible on just the state pension. My point is that not every landlord is a greedy capitalist with a huge property portfolio, interested only in screwing up the rent. Some of us just try to get along on what is a very basic income. We also supply a need for accommodation for those who cannot afford to buy or who just want short-term housing.

    1. MBC says:

      Thanks for this. Some balance is needed. There are indeed many small players in the private rented sector including ‘accidental’ landlords like my neighbours in the flat opposite. He had a one year contract which he hoped would be renewed, but wasn’t, and as an EU citizen post-Brexit, it was unlikely they would get unemployment benefit, so he has now been offered a job in the EU and they will be moving soon but will have to rent out their flat here until they are more settled and in a position to buy over there. The private rented sector is a spectrum like that with many landlords owning just one property to boost their pensions whilst other properties have been scooped by large companies with dozens of flats in their ‘portfolios’. Many of these are owned by people not even resident in the UK which means that the money they have bled out of tenants here is just going abroad. At least you are spending the rent you receive from your tenant locally, which is helping other people here to stay in jobs.

      In other countries the private rented sector compliments public housing, and that is the way it should be. In Germany for instance, rents are set by the local authority, so that they remain fair and in balance with the local economy. ‘Market’ rents in the UK simply means the maximum the landlord can get away with squeezing out of the tenant before the tenant falls into arrears because the rent is unaffordable. It’s crazy. Rents should be at a level that allows the tenant to save and build up some resilience and ultimately become an owner themselves if that is what they wish.

      The former tenets adhered to by all parties since 1916 were fair rents and security of tenure. Security of tenure was problematic, as I have explained, because it meant landlords could not get access to their properties to upgrade and renovate them. The stock was just paralysed and a declining asset and was unsellable.

      The article highlights how the new security of tenure with the let out clause (which is not policed) that landlords can still gain vacant possession if they wish to live in the property itself. But this is never checked, meaning that it is a bit of a chocolate fire guard in terms of providing real security for the tenant.

      I think Norway has a better system of three year leases, which of course can be renewed as often as the owner wishes. There are also get-out clauses for both parties, with penalties. Either party may end the agreement within the three year period but in the case of the landlord it must be for certain good reasons that they can prove, such as that they wish to undertake renovations that require the tenant to leave. And in that case they must offer some compensation to the tenant for breaking the lease and give a notice period. Otherwise they must wait until the three year period is up if they wish to sell, occupy, or do major renovation to the property. Three years is a good period, it enables a person to complete a degree, get settled into a new job if they have just moved to the area, or to have a baby and get established as a household. It also enables a supply of privately rentable homes to ensure there is flexibility to move to another area, which was a real big problem before 1989.

  6. Angus Bearn says:

    The crows have been circling the private rented sector for decades. There have been proposals aplenty, but little is done. The increased stamp duty has brought a dampener and a tax windfall. Other than that? Pitiful.

    There are solutions, of course, and perhaps now we have seen bold decisions (over Covid) governments will feel empowered to take the decisions that make housing affordable for Britons.

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