Communities and Local Government CommitteeWritten evidence submitted by Carl Thomas

Committee Members,

I would like to make a submission based both on the sector generally and as a response in advance to the Landlord’s Association.


As more and more families are forced into the tenure, the PRS urgently needs reform. It requires a more “continental” approach in terms of security of tenure, control of rent increases, and the rights needed by a tenant to feel “at home” in their rented property. It also requires changes to eviction procedures to make them more efficient and less stressful on landlords.

The PRS has a supply problem, however this supply problem is due to issues with the owner-occupier market. This issue will not be resolved by simply transferring housing stock from owner-occupiers to landlords. Mortgage availability is not the problem, housing is too expensive and the banks know it, so charge higher deposits than historically. Due to the demand for PRS housing rents are high, creating a loop feeding back into itself with zero benefit to anyone, apart from landlords, and yet more money flowing into unproductive bricks and mortar rather than purchasing goods and services and creating jobs.

Buy-to-let has ceased being beneficial to the economy and country overall, institutional investment is required in order to offer the longer term stability and professionalism that is required. Buy-to-Let mortgages should be stopped, immediately, they are pulling funds away from small businesses through the Funding for Lending scheme, all “first time buyer” schemes should immediately cease, banks should be required to cease excess forbearance and place bad loans onto balance sheets.

Introduction to Writer

I am a 34 year old tenant in the Private Rented Sector, with my wife and 10 year old daughter. She has already moved seven times in her life. Myself and her mother didn’t move once until we were 18, despite neither of us living in owner-occupier households.

I have experience of both social housing, I was raised in a good quality four bedroom semi-detached property, and the private rented sector, my family are, for the first time in a decade, now living in a house having moved seven times on the way here.

I have seen the best of the PRS, a longer term lease with a landlord that had professionals do repairs promptly, and the worst, a landlord demanding money for repairs that weren’t our fault and threatening to come around “gang handed” to use his words, and throw the three of us out onto the street.

I am in the top 10% of earners in the country however I am unable to purchase a property near my daughter’s school due to house price inflation, high deposits and high rents.

Submission Body

There are links to citations via the internet throughout the text.

There are a number of issues with the PRS as it stands today.

Without any security of tenure due to the six month terms made common by Assured Shorthold Tenancies tenants feel no attachment to their communities and generally do not participate in them. Each property feels transient. The result being a lack of community cohesion, which is, after all, the glue that holds the “Big Society” together. Without feeling involved in society at a local level it’s difficult to feel involved at a national level.

The UK has an extremely small percentage of institutional investors which needs to be addressed. Institutional investors are the dominating kind of investor in the PRS on the continent and this is reflected in longer and more secure tenancies and things that simply make being in the PRS feel more “human” and welcoming, such as being able to redecorate and to own pets. Such minor things have been shown to be good for wellbeing which in turn has benefits throughout the economy and country. Happier people work harder, are more productive, and are more involved in society.

Private landlords can be extremely hit and miss. In my own experience a property which appeared to be fairly well presented has become a disaster. A kitchen built by a landlord’s relation, the clue being the hidden holes in MDF board, things not quite fitting, etc, clearly not a professional job; repairs being done by landlord’s relatives as they are the ones in the family handy at DIY all in the name of saving money.

I would understand this if I were renting a cheap property at a low price, however simple internet searches indicate that the landlord is receiving a rent some 80% higher than their likely mortgage repayment, and this on a property purchased in 2010. It is clear there are massive issues with the PRS at this time when such premiums are achievable.

There is much talk of supply for the PRS being an issue. I disagree. Shelter’s research indicates that over 80% of renters do so reluctantly and want to buy their own home. The supply issue in the PRS could be fixed by the government simply not propping up house prices and allowing them to fall the 20—30% that most economists and commentators believe they should fall to return to a sustainable level. Those reluctant renters may then be able to purchase, freeing up capacity in the PRS.

For those who may dispute the government propping up house prices:

Here’s an article noting Funding for Lending increasing mortgage availability. Interesting, I thought it was intended for productive lending to businesses, but obviously such caveats were forgotten about when the taxpayers’ purse was opened:

Firstbuy—a way of avoiding that deposits are too high because house prices are too high. Banks cushion themselves against expected price falls by demanding higher deposits, and the deposits themselves are proportions of larger prices—20% of 250k is more than 20% of 175k.

Quantitative Easing—It’s naïve to think government don’t have any input into the BoE and indeed the Chancellor actively fought against increasing the barriers between BoE and treasury:

Also noteworthy from that first story is the mortgages and businesses that are only being held together by cheap credit and forbearance. Failure is painful but what is being done is simply slightly less pain on a much longer scale. Failing businesses must be allowed to fail so that the capital can be put into productive enterprises that are not failing. The same for mortgages; while repossession is an agony is it not similar to that feeling the tenant gets when that notice is up and they have to move? There is no forbearance for the tenant, if they cannot afford the rent there is no interest only option or government influence to avoid foreclosure, they have to go.

We also have issues of investors from abroad, buoyed by the weaker Pound, putting money into Prime property with the resultant ripple effect of prices and availability reducing elsewhere.

Knight Frank indicate 23% of all new build in Central London is purchased by Singaporeans.

The committee may wish to be aware that 85% of Singaporeans live in public housing:

In addition that they have foreign ownership of property controls, while for Central London property is purchased by anyone. We are also, I might add, exporting the salaries of all those who rent those properties to Singapore. The result being a one-off export on the balance of payments when the property is purchased followed by year after year of the only export being a high rent that could be going into goods and services in the domestic economy. A short-termist view all too common among some politicians who seem incapable of considering anything beyond the next election when issues like housing are generational.

I appreciate the argument that foreign investment is needed to complete some developments and the very simple response is that if builders have spent their funds buying land and can now not afford to build on it they should be allowed to fail, rather than propped up with schemes like the above. Companies that don’t have access to the necessary funding to operate should go bust, not rely on corporatist schemes from the government or sell housing in the UK off-plan in Singapore.

As a country we definitely need more housing. We need housing of the right kind in the right places where people want to live. A huge supply of housing across all tenures, owner-occupier, social housing and indeed built-to-let housing is needed however I would put to the committee that the build-to-let PRS housing should be targeted at institutional investors in the same manner the Olympic Village was, offering longer term tenancies of, say, six years, making them suitable for families and in addition allowing the tenants to redecorate and to own pets, with agreed rent increases throughout term.

Buy-to-let mortgages should stop. Landlords complain about their tax treatment because they are a business, so they should return to requiring normal business loans rather than being allowed to use slightly modified owner-occupier loans to purchase property. There is absolutely no good reason for Buy-to-let to be allowed to continue in its current form. Institutional investors will take up slack as far as newer builds go, especially if given the appropriate incentives, and much other stock that is advertised as being investment property can, perhaps, return to how it used to be advertised—a starter home.

Stopping buy-to-let mortgages will improve the PRS almost immediately as amateur investors, sold on the dream of easy money and a regular comfortable income from property they may see on television shows who gained equity during the boom of the ’00s, cease to join the market while professional investors with large, well and professionally managed portfolios and institutional investors can continue to progress.

Now, in response to the Landlords” Association I’d like to make a few points. There are a number of figures and responses that are always trotted out when the subject of the PRS comes up.

“Landlords provide an essential service.”

Yes they do, however over 80% of those using the service do so reluctantly and have no choice but to use that service. It should be an option, not a compulsion.

“Most people are very happy with their accommodation.”

Indeed, it probably hurts them when they are forced to leave it at the end of the lease, they’d be happier if it belonged to them! For some they have no choice but to be happy with it, if they raise problems with the landlord they receive their notice to vacate the property.

“Landlords don’t price out potential owner-occupiers.”

The Bank of England puts the total effect of Buy-to-Let at somewhere between 5% and 10% of the property inflation during the ’00s boom. However a brief glance at an estate agent’s window and the true story is shown. Properties being marketed to investors are at the lower end, those properties that would traditionally be starter homes. The impact of Buy-to-Let on first time buyers is far greater than the effect on house price inflation overall. Factor in price competition, that a landlord has finance to hand, and other factors, it’s obvious.

“Landlords take risks with their own money and don’t make huge profits.”

Many newer landlords are not taking risks with much of their own money at all. They leverage equity gained during the ’00s property boom to use as deposit on a loan to purchase an investment property. The investment, even if it yields 0% after all costs, taxes, etc, retains value and can be sold. The only risk is that in the course of 25 years house prices fall in real terms, which is not a risk at all, it hasn’t happened in decades.

Indeed comment on risk is undermined by the Council of Mortgage Lenders:

The buy-to-let mortgage was first launched in 1996 when a group of lenders and the Association of Residential Letting Agents (ARLA) recognised that a growing number of individuals were interested in buying property to let out and that the mortgage products available to them did not meet their needs or properly reflect the relatively low risks compared to many other business ventures.

The first buy-to-let lenders recognised that lending to landlords was fundamentally different, and in fact, lower risk than lending to small businesses secured on the businessman’s home.

As far as profits go certainly profits vary throughout the country, however some are making prodigious profits, such as my own landlord.

“It can be excessively difficult to evict problem tenants, the law should be changed.”

I agree! The law should be changed to more properly reflect the need for shelter against the desire for profit. This is what it comes down to and equating the two as being somehow even in any way, shape or form is appalling.

The law should provide for a problem tenant to be removed from the landlord’s property quickly and efficiently. It should, likewise, absolutely ensure that the tenant who pays the rent on time, doesn’t annoy the neighbours, and treats the property with respect can treat that property as a home. That’s the key word, home, not a six-month long hotel stay without the maid service, but home.


The Buy-to-Let mortgage needs to cease being offered, immediately, to deter “amateur” investors and ensure being a landlord is a profession rather than an accident—there are real people and real lives that can be heavily affected by this tenure.

Institutional investment should be sought to finance developments; pension funds, not private investors from Singapore. Foreign ownership controls should be introduced to ensure that investors purchase many units within a new build, not a single one.

Landlords should be required to offer longer term tenures with increased rights to tenants. A simple guide would be to allow a tenant to do all that is reasonable, within the structure of the property, to be able to consider it a home, rather than a roof and walls.

Government should allow house prices to return to where the market wants them to be. This is achievable through ceasing schemes to offer cheaper credit, lower deposits or part-ownership, and instructing the FSA to cease pushing banks to offer forbearance to underwater borrowers, all of which support higher house prices. Deposits are high because banks are waiting for prices to drop. There will always be people in negative equity at the end of every boom-bust cycle and it has to happen at some point. These measures are, as Tidjane Thiane, the Chief Executive of Prudential said, storing long term trouble by minimizing short term pain.

January 2013

Prepared 16th July 2013