As we meander to what I hope is an agreeably festive finale to 2016, it’s worth reflecting on a year that has seen seismic changes in our industry.
A tightening of the lending criteria for buy-to-let mortgages, the ban on letting agent fees and the 3pc rise in stamp duty on second homes all seem, in their own way, somehow designed to bring the lettings industry to a sudden and ignominious halt.
A bit like putting a stick through the spokes of Sir Bradley Wiggins’ wheel, the ensuing chaos has been loud and instant.
Earlier this month, various titles in both the consumer and national press gathered, in something reminiscent of a fortune tellers’ convention, and amid much wringing of hands prophesied the end of the rental market. To read the full spectrum of opinion, one could have been forgiven for believing the world was on the brink of being cast into a fiery and eternal hell.
But are things really as bad as we’re being asked to believe? I don’t think so.
Oh, the measures that have been implemented this year will have a catastrophic effect on some areas of the industry; I don’t doubt that for a moment. The question, though, is whether that’s really such a bad thing.
Let’s look at the ban on agents’ fees. If one takes pause to properly consider who is making the most noise about that issue, you find it’s coming from two quarters. The first group is made up of estate agents, who have suddenly found themselves stripped of an income stream for which they generally had to do precious little.
And the second group comprises landlords. And why are the landlords enraged? They’re enraged because they know what’s waiting just around the next corner – a mob of estate agents looking for someone to pay them the money they can no longer squeeze out of the tenants. And on that basis, I can hardly blame them.
But the fact of the matter is that sometimes you need to dismantle something to make it better – and I believe, without any scrap of doubt, that the lettings sector as it currently operates is inherently rotten and has long been in need of invasive surgery.
I’m no apologist for the Chancellor, Philip Hammond, or his government. Yet what he has done, particularly by ending what has often been sharp practice in the fees charged to tenants, is set a fire under what has hitherto been a house of plenty. And now we’re seeing the rats trying to get out.
Which is not to say that all estate or letting agents are rats. But the industry certainly hasn’t got the negative association it has through bad luck – and we all know there are enough bad agents around to taint them all.
But the good ones, the ones who’ll succeed and survive this perceived crisis, will find a way of re-gearing their businesses in such a way that the income generated to date by tenant fees is replaced by an alternative service that fairly meets future demand.
The others will get hurt or perhaps go out of business altogether. But that won’t be because they can no longer charge some poor tenant an average of anything between £202 and £337 (depending on whether you believe the Association of Residential Letting Agents or Citizens Advice) for a service that costs a fraction of that sum. It’ll be because their financial viability was entrenched in an outmoded and avaricious model they were incapable of changing.
The fact that lenders are squeezing the criteria for second home mortgages and the rise in stamp duty are also events not necessarily to be villified.
Around the periphery of the rental sector are many horrifying examples of appalling landlord practice. In many, but by no means all, cases, these relate to property owners who are operating on the very limit of their own financial possibilities. Basic safety measures go unobserved, maintenance is poor and conditions are execrable, and often because the landlord simply can’t afford to do the job properly and at the same time be able to generate profit. So one is achieved at the expense of the other.
If the new cap on borrowing and the hike in stamp duty serves to begin the job of removing these people from the food chain at source, then so much the better.
It won’t affect what I call the ‘accidental landlords’ who find themselves no longer needing to live in a property they already own and nor will it make any difference to existing ‘professional’ landlords already in the system – at least until they come to trade their property, at which point the survival of the financially fittest seems to me to be a perfectly reasonable process of natural selection.
Yes, there will be fewer landlords. But in the meantimeBack