Landlords to Blame for Derby’s Housing Crisis?

Isn’t it strange that nobody boasts they are a buy-to-let landlord anymore?

Roll the clock back to the early millennium and you couldn’t go to the local golf club, meet up for a pint after work or shop at a Waitrose without someone dropping “buy-to-let property” into the conversation as easily and as often as the weather.

Yet now, Derby landlords have almost pariah status, as they often feel like placing a brown paper bag over their head when they enter a letting agency, lest they be recognised as such. They can easily be recognised though, as the average age of a UK tenant in a property is 32 years old, whilst the average age of a UK landlord is between 40 and 61 years old.

Joking aside, if it wasn’t for buy-to-let landlords, Derby and the rest of the country would be in a rather difficult position when it comes to housing our local people.

Many people believe that if you take buy-to-let landlords out of the loop of the national property network, then it would be the land of milk and honey for first-time buyers priced out of the market. Those Derby landlords provide those Derby tenants with a mixture of homes to live in and using market forces, ensure the right number of Derby homes are available.

In fact, the stats show that… Derby landlords provide 17,504 Derby homes for 41,491 Derby tenants.

Landlord Perception

However, the retort from many tenant organisations would be that Derby landlords are wealthy middle-class people, voraciously exploiting the failing Derby property market for their profit and greed.

You can’t argue that the demographic of an average Derby landlord is that they do tend to come from more fortunate backgrounds, with 3 in 4 of Derby landlords aged between their late 40’s to late 60’s and 4 in 10 having a degree level qualification.

It also wouldn’t surprise anyone to learn that those who do invest in a buy-to-let Derby property are likely to be better off than those who have not yet been able to buy a home.

Yet, that is the nature of the country we live in and it’s a consequence of a competitive free market economy – the alternative didn’t go to well in the Soviet bloc

Saying that buy-to-let represents a transfer of wealth and money from tenants to landlords is like saying that the pub represents a transfer of wealth from drinkers to the pub landlord!

Tax Loopholes Diminished

Don’t get me wrong, the tax loopholes for landlords up until 3 or 4 years ago were a little ‘too’ generous and these were closed by the Tory’s themselves.

However, should the Government try to place even more burden on landlords like some are suggesting, forcing them to sell, I am certain some Derby first time buyers would find it cheaper to buy their first Derby home. This is because they wouldn’t be in competition with Derby landlords to buy the starter homes both types of buyers crave, meaning house prices would drop – its the basic economic rule of supply and demand.

Yet, if the supply of Derby privately rented homes contracted at a greater rate than demand due to landlords leaving the private rental sector, this would make renting more expensive for the vast majority of Derby tenants who were still renting a Derby home; again due to supply and demand.

Irrespective of whether property values dropped, it might take years for a tenant to save for a deposit, whilst the rental properties the landlords want to sell, the tenants only need to be given two months’ notice to leave so the property can be put on the market.

Just Build More Houses

So, the answer is obvious isn’t it? Why don’t the local authorities build more council houses?

Well, the actual numbers are appalling. Government funding has been tight because of the credit crunch deficit since 2009 and going forward because of the current situation with Covid-19, it will get even worse. In fact, of the 617,230 new homes built in the country over the last 4 years, only 8,270 or 1.33% were built by local authorities, meaning only just over 1 in 100 of all new properties built in the last 4 years were built by the local authorities.

This is important as the number of people in rented property has been growing over the last 20 years. In fact, when you look at all the tenants in council and private rented accommodation locally…

34.2% of Derby people live in a rented property

Interestingly, the demographic of a council house tenant is totally different to that of a tenant in a private rented home. The average age of a council house tenant is 52 years old compared to 32 years old for a private rented tenant, so it appears the older generation have the upper hand on council houses. So again, who exactly is going to house the people of Derby, especially the younger generation that can’t afford to buy?

Local authorities haven’t got the money, Housing associations get their money from central Government, so the only other source of housing is private landlords. The problem existed before private landlords filled the gap. No doubt many Derby landlords have certainly gained from the problem, especially between 2000 and 2007, yet at the same time, they have helped home millions of people.

Consequently, are Derby landlords greedy and selfish?  For most law abiding Derby landlords, who look after their tenants and their properties really well, nothing could be further from the truth… and yes they have made some money – yet if you take into account property maintenance, mortgage finance, taxation, agent fees, surveys and inspections – it is often not the gold mine many think it is.

Ease the Planning Laws?

Not until all the political parties stop using the housing issue as a political football will this issue be sorted.

For example, it makes sense to allow mass building in the South East, again driving up supply and making property more affordable, yet that would wind up the Tory voting home county heartlands. It’s a shame because we do have the room to build more homes, in fact…

Only 1.2% of the country has houses built on it.

The country needs a massive root and branch change to sort things out, yet I have grave misgivings that any politician has the stomach or the political resolve to do anything about it.

If Covid-19 does affect the confidence in the property market, that will be in fact good news for Derby landlords, as long as the Government doesn’t put its big size 11 boot into the rental market by taking even more money out landlord’s pockets.

Historically, ambiguity in the property market typically results in an expansion in activity in the private rental market. Prospective home movers will rent in between selling their home and buying the next one, while budding first time buyers typically postpone their purchase and stay in the private rental market for marginally longer… which all increases demand for rental property.

What do you think?