19 May 2015

Help To Buy?

This posts follows on from the last, which outlined housing policies from the main parties for the general election. There was a lack of policy addressing issues faced by Generation Rent in private rented accommodation by the Conservatives. Below is an analysis of their policies intended to help people get on to the housing ladder.

There is clear value in owning the property in which you live. There are saving and security advantages for the individual as well as benefits to the community. Much of Generation Rent aspires to it, and for these reasons, it makes sense for the government to encourage it. The purpose of this blog is to discuss whether the current initiatives are the most effective way of achieving home ownership with the resources available.

The Initiatives

The infamous Right to Buy was introduced under Margret Thatcher in 1980. This allowed tenants of council houses to purchase the home they live in at a discounted rate. Now the scheme is to be extended to housing association tenants, which will enable a further 1.3m tenants the right to buy their homes.

The Help To Buy equity loan scheme, introduced under the coalition, enables those who can afford monthly repayments, but not a deposit, to obtain a mortgage by guaranteeing a certain amount of the loan. This has also been extended until 2020. 

The Help To Buy ISA was the headline for first-time buyers in the Conservative General Election manifesto. This initiative tackles the issue of saving for the deposit, with a bonus of £50 (up to a maximum £3,000) from the government for every £200 saved.

Current Housing Situation

The average cost of houses soared by more than £12,000 during the past 12 months, despite zero inflation during February 2015 (for the first time on record). This raises questions over the effectiveness of the ISAs when you consider the average cost of a house is already £264,550 and they only cover costs up to £250,000 outside London and £450,000 inside.

The current demand can be attributed to a combination of factors: a buoyant lettings market, attractive capital gains, and relative security; particularly in the South East. This blend attracts significant investment from home and overseas. The prospect that lots of foreign money is “dirty” is also a concern, but a discussion for another time. 

Commentators including Danny Dorling, an Oxford social geography professor and author of All that is Solid: The Great Housing Disaster, have suggested that the issue is one of inequality and wealth concentration rather than supply, as there are already more bedrooms than people in London.

Alternative Solution?

Regardless of cause, cost is the crux of the UK housing crisis for many and the initiatives above are not addressing this.

An appropriate solution would be to reduce cost, however the “Help” initiatives increase the spending power of purchasers, which reduces cost for individuals in the short term, but ultimately it increases the cost of housing. Subsequently it is hard to view them as the most effective use of resources.

The Right to Buy is more difficult to support. If the depleting stock was being replenished with new houses than it would be fine, however it is not and it’s going to cost the country dearly. Official figures show that last year private landlords earned almost £10bn from the taxpayer and this figure is set to rise considerably.

If inadequate supply is driving up cost then building more homes makes sense, however if the issue is improper use, then taxation and legislation to redress the imbalance would seem appropriate. As it appears that both are contributing, it is suggested that a combination of building and regulation is required.  

Shelter claim the money spent on housing ISAs could build 65,000 more affordable homes, another third of what has been promised in this Parliament. I believe this would be a better use of resources, as it would address the issue of cost longer term.

As for regulation, I’m not well versed enough to suggest anything too specific, especially relating to tax, but I would hazard a guess there is opportunity (i.e. politically viable) to tighten up rules around foreign investment in residential property. Currently in the UK 610,000 homes are empty!

I’m not anti-growth, anti-business or anti-investment. I think it’s good to make money; that’s why I created Resident Review! However, a better balance is required because otherwise we are in danger of displacing a real wealth generator: working class people.

05 May 2015

General Election 2015: Housing Policies

According to Ipsos Mori's Issues Index, housing is one of the most important issues for voters in the 2015 general election. This should come as little surprise; generations of poor regulation, insufficient building, increasingly high demand and a depleting social housing stock have all contributed to what is now commonly defined as a crisis. 

Below is a summary of the main parties’ positions on this key pre-election battleground. In brief, the Tories are looking to get people on the property ladder, Labour are primarily focused on the private rented sector, the Greens want to sort out social housing, and the others occupy middle ground.

The Conservatives are committed to extending the “Right to Buy” to 1.3 million housing association homes in England. David Cameron has pledged 200,000 “starter” homes well as a new “Help to Buy” ISA to assist first-time buyers save for a deposit. This will run concurrently with the “Help to Buy” scheme that was introduced by the coalition in the last parliament.

The Tories have also committed to creating a £1bn regeneration fund for brownfield sites (land previously used for commercial uses or industrial purposes), which should create space for 400,000 new homes.

Labour’s key policies include capping rents to inflation, secure three-year tenancies for all that want them, and a ban on letting agent fees. There is also talk of landlord registers and punitive measures for those who rent properties that do not meet basic standards.

For aspiring homeowners Ed Miliband will scrap stamp duty for first-time buyers on properties under £300,000 and has committed to building 200,000 new homes per year by 2020. Labour will prioritise local first-time buyers in new housing areas and punish developers who hoard land and avoid affordable housing requirements.

The Liberal Democrats will increase house building by 300,000 a year, bring 70,000 empty houses back into use, and designate at least 10 new garden cities. Nick Clegg has also promised to build 190,000 more “affordable” homes than Labour and reduce mortgage costs.

The Lib Dems have also proposed an innovative ‘Help to Rent’ scheme to enable 18 to 30-year-olds borrow up to £2,000 to put towards a tenancy deposit. 30,000 “Rent to Own” homes will also be built by 2020, which would enable tenants to retain equity through rent.

UKIP will build one million homes on brownfield sites and stamp duty will be removed for the first £250,000 of homes built on such land. Greenbelt land will be protected and legislative changes will ensure it is easier for tenants to extend their leases and challenge charges more easily.

The Green Party are looking to build half a million social homes by 2020 and bring 350,000 empty homes back into use. They plan to ban letting agent fees, introduce compulsory licensing for all landlords, cap rent to the consumer price index, and introduce 5-year tenancies. They will also abolish the “Right to Buy” council homes.

The SNP want to abolish the “Bedroom Tax” (or the “Spare Room Supplement” depending on your inclination). They would back investment for building 100,000 new homes per year throughout the UK and continue the “Help to Buy” and shared equity schemes currently in place.

Plaid Cymru would introduce schemes to help young people in Wales get onto the housing ladder as well as increase the social house stock. They would supplement energy efficient home improvements and reduce VAT on home repairs to 5%. The current “Empty 

Properties Scheme” would be extended to bring more derelict and empty homes back into use. Rent controls will also be introduced as well as further regulation of the PRS and tenancy reform.

One thing that is striking, notwithstanding different solutions, is the consensus that not enough houses are being built. However, this is not surprising when you consider that in the UK we haven't built fewer houses in peacetime since the 1920s. Lots of numbers are banded around about how much we need to build, but c.250,000 homes per year is a number that recurs time and again, so it is a concern that all the policies, bar the Liberal Democrats, fall short of this number!

Apart from Labour and the Greens (and to a lesser extent the Lib Dems) there is little concrete policy for Generation Rent to work with; however, if house buying becomes more affordable, in theory, that should take demand out of the rental market and have a positive impact (assuming that the “Help” initiatives are not abused) so it's not all doom and gloom! 

31 March 2015

Revenge Evictions

A significant increase to renter’s rights has gone relatively unnoticed in the last few weeks. Revenge evictions, those arising from tenants who ask for repairs or complain about inadequate conditions, are to be outlawed.

As the law stands, there are statutory obligations for landlords to repair fundamental faults in a rented property. However, a landlord can evict a tenant if they pursue these rights to repair.

Revenge Evictions occur more frequently than you might think. Housing charity Shelter claims 213,000 people were subject to revenge evictions in 2013, around 2% of all renters.  Yours truly was even subject to one when I requested that my student house be pest free!

This situation is completely crazy when you compare it to other consumer protection. The Sale of Goods Act 1979 is a good example. This requires all goods purchased to be as described, of satisfactory quality and fit for purpose. Anything that falls short is the responsibility of the retailer.

So you are better protected when you purchase trivial goods then when you rent a home, arguably one of the most important facets of life.  

However, on Monday 16th March 2015 a significant step was made towards improving things. A Lib Dem amendment to the Deregulation Bill, to prohibit landlords from serving a no-fault section 21 eviction notice (Housing Act 1988) for 6 months following the issue of a local authority improvement notice, has been passed. 

There is a formality of Royal Assent, but 2015 lookslikely to be the year revenge evictions become unlawful. 

This is an issue close to heart; as I said above, I was subject to a revenge eviction. But my housemates and I were lucky, there is an abundance of property in Liverpool and we had the money to put down another deposit. But what if we didn’t have the money? What if we were a family on the breadline or old and vulnerable? 

On the other side of the fence, landlords will argue the necessary powers to evict are being eroded. However, the power to evict under sections 21 still exists, just not within 6 months of a local authority improvement notice. Having shelled out for the repair, which a responsible landlord would, it makes no sense to incur further expense evicting an existing tenant and finding a new one. However, if a landlord wants or needs to sell, the issue is more complex, but it is suggested that such a situation should be viewed as part of the risk of being a landlord. 

Whilst not a strong as MP Sarah Teather’s Tenancies (Reform) Bill last year (which was derailed by 2 Tory back benchers) this can only be seen as a step forward in rental rights and for that, it is most welcomed. 

I must commend Shelter on their work here. Their campaign, 9 million renters was started to end revenge evictions and I have no doubt it played a pivotal role in getting revenge evictions banned; certainly their research has been the basis of a lot press coverage on the topic. 

There is still a long way to go to bring renters rights in to the 21st Century, but this is a great step in the right direction.

13 March 2015

How does RR make money?

This first post has been a long time coming; I’ve been snowed under networking, testing, de-bugging, designing, fund raising, developing, advertising, strategising and everything else that you’ve got to do to get a start up off the ground. Excuses done, I am pleased to announce we have lift off!

The site is working well, people are writing amazing reviews, we’ve been featured in The Independent and the BBC, traffic is increasing every day and most of the feedback has been overwhelmingly positive!

So now all we’ve got to do is inspire the nation to review!

I’m going to use this first blog to answer a question I receive often – how do you make money? And the short answer is, we don’t yet.

Well that is not strictly true, we do run display ads, but you can just about count on your fingers how much revenue that has generated!

Resident Review was created in 2013 with compensation from a bed bug fiasco in 2010 (check the ‘About Us’ link below if you’re yet to hear our story). Since July 2014 we have been funded by a private investor who shares our vision to improve the private rented sector. Which is pretty handy, because to date there has been no return on his investment!

Whilst not generating any revenue is limiting in terms of marketing budget etc, the approach allows us to adhere to our one of our fundamental principles, transparency; our independence allows us to develop a platform that is quality through impartiality.

Looking forward, we have a number of revenue streams in the pipeline. One is charging a subscription fee to agents and landlords to access certain features, but doing this now would potentially put us at the mercy of bigger suppliers – what happens if we start relying on that income and they threaten to stop it if we don’t remove reviews?

So for the time being we’re keeping the ship tight and costs low, but that doesn’t impact on the service we offer. Whilst it might take a few extra hours to resolve bugs, review content and reply to emails, we are doing all the things we need to right now.

If things take off *touches wood* we will implement the ‘freemium’ model above, as well as affiliate schemes and potentially look for more funding, which should allow us to continue what we’re doing and maybe even take on more people and grow even faster!

As for this blog, we intend to use it give our take on topical housing issues (with the general election fast approaching hopefully they’ll be plenty). We’ll also keep you up to date on developments and goings on behind the scenes and hopefully we’ll have a few guest posts too.

That’s all from me for the time being. Thanks for reading and please check back soon for more!

Mitch | Co-Founder | Resident Review 

About Us    |     Blog    |     Terms and Conditions    |     Privacy Policy