Buy to Let - Why all the bad press?
Thoughts from our CEO, John Goodall
A few days ago an applicant for a software engineer role at Landbay withdrew from the interview process as he did not want to work for a buy to let lending business as he felt that it was preventing first-time buyers getting on the house ladder.
To my knowledge this is the first time that this has happened, certainly at Landbay. Can it be that in some people’s minds, buy-to-let sits along the tobacco, arms and gambling industries as unethical industries that people may not want to work for?
My immediate thoughts were dismissive, but the candidates view is certainly not unique. It is clear from wider sentiment, that negativity is endemic in our industry today, despite the obvious need for a thriving rental property market in the housing mix.
So is there an argument suggesting the private rental sector is indeed unethical, especially for first time buyers?
The cost of housing is one factor in the difficulty for first time buyers to get on the property ladder. It is true that the cost of property has gone up faster than earnings. However, this is not a recent phenomenon but has been the case for last forty years. To lay the blame at the doors of landlords is simply not credible. Rents have been rising broadly in line with inflation and so the cost of renting has not risen in line with the cost of buying.
Since the Mortgage Market Review came into effect in 2014, affordability tests are much tougher. Buyers can typically borrow less than they could ten years ago and thus deposits need to be bigger. Graduates are leaving university with much more debt these days, which also impacts the ability for young people to save. Throw into the mix very low interest rate environment (where the returns on savings have typically been negative in real terms) and saving for a deposit becomes an even harder task.
These three things; MMR, student fees and low interest rates cannot be blamed on buy to let landlords, but unfortunately landlords have politically proved to be an easy target. The fact is that these landlords are effectively small businesses who provide a crucial service to the economy - providing housing for those that want to rent. The vast majority do it very well.
We now have a very flexible and open labour market so that people migrate both from overseas and within the UK. People move jobs far more frequently than they have done in the past and having the option to be able to rent a property is crucial for them, employers and the broader economy.
The other question to ask is do you believe that we need some rental housing stock in the economy? If this did not exist, people would be restricted to working where their parents live (and remaining in their parent’s homes) and migration would virtually be impossible. Job mobility and flexibility would be severely restricted.
If you therefore agree that we need rental property but question whether this should be provided by the private sector, the alternative would be to expect the public sector/taxpayer to fill the gap. With five million rental properties in the UK, costing an average of £200,000 each, that’s a whopping £1 trillion gap to fill.
It’s time to start supporting the private rental sector and landlords up and down the UK!