Blain’s Morning Porridge – 24th March 2023: An Open letter to the Mayor of London, Sadiq Khan, and the Housing Minister, Rachel Maclean
“In a society rigged in favour of landlords over tenants, to rent privately is to be deprived of security.”
The Crisis in London Rents
Dear Rachel and Sadiq
I am writing to you both to demand immediate cross party, (and cross government), action to address the looming rental crisis across London. Accommodation costs in London have never been so loaded against its workers and young people. A revolution is brewing – we can either mitigate it now, or it will overwhelm us.
Outrageous rental increases and the naked greed of professional landlords will result in a dearth of young workers priced out of London. It will destroy the City’s economy and negatively impact the UK even more conclusively than the Luftwaffe, political mistakes, global banking crises, pandemics or recession.
The London Economy can only thrive if its workers; the nurses, the junior doctors, the engineers, the teachers, the bus drivers, the train teams, the young executives, the shop-keepers, the hospitality chefs and servers, and everyone in between, have sufficient disposable income to live, consume and enjoy the great city in which they live. Without the people, London will be nothing.
It is over four years since the government promised reform of the rental market. It still has not happened – a “Brexit Benefit” caused by a distracted government that has accrued to greedy Landlords. Private tenants across London are living with insecurity, rental demands well above inflation, and deteriorating conditions. It is mental torture and cruelty affecting millions of our citizens.
20% plus of London workers live in rented accommodation. That rises above 50% for workers below the age of 35. Inflation at 10% plus has eaten into Londoners take home earnings with energy, food, and especially rentals seeing the largest rises. 80% of London’s renters now say they struggle to meet their rent each month. No matter how carefully workers plan their finances, few can withstand double digit rent increases on top of rising taxes. Few young workers will ever benefit from plans for tax give-aways to higher earners, or pension handouts to the richest 1% of the workforce. They find themselves increasingly strapped in terms of their immediate discretionary spending.
No doubt some idiot reading this open letter will bray about young workers living within their means, or can’t they simply buy their own homes. They might as well suggest they go eat cake.
Average professional earnings in London are around £55k – but even a four-times salary mortgage plus a 10% deposit means most young workers aren’t close to owning their own homes. Bleak single room bedsits on motorway verges within distant commuting distance of town command prices above £250k. Aside from the fortunate few with parents wealthy enough to buy them a pad, few young workers, London’s future, have any choice but to rent.
The average individual’s rent now exceeds 50% of take-home pay – that is unsustainable. It makes it impossible for young workers to save. Pensions are a tomorrow issue. Our professional workers are additionally crippled by the highest tertiary education charges in Europe, financially shackled by the loans they took to pay for it. They have no choice but to rent – trapped within the system.
Meanwhile, the rental market has contracted dramatically. Rightmove reckon 25% of the rental housing stock has been pulled from the market, largely by the small, amateur Landlords who have given up because of tax changes and the increasingly onerous regulatory burden upon them. In their place are large rent-seeking private professional landlords in the market purely to maximise the rents they can extract from the sheeple forced to dance to their tune.
These avaricious bloodsuckers are exactly like the private equity, venture capital and private debt parasites that have used financialisaton to extract the value out of Britain – leveraging companies with massive debt to pay their new owners, and then leaving them to collapse. These landlords have commoditised London’s workers as targets to be milked financially. Being sucked dry by faceless landlords is the bleak reality for millions of young Londoners.
It is time Government stepped in.
This should not be a party issue – even the most Tory True-Blue country squire will agree with the campaigning inner-city socialist that enabling workers to work and paying fair rents will be an enormous economic benefit to the nation.
Rental prices are rising well above the level of inflation, between 17-25% across London depending on area according to property firms in 2022. Rightmove say the 16.1% rise they recorded in 2022 was the largest jump in London rentals on record. It is set to double this year as the professional firms exploit the scarcity of supply. According to housing charities, the quality and state of repair of rental properties has declined dramatically in recent years as Landlords gouge young workers with enormous rent increases, hoping to raise their incomes with higher-rated and higher earning professionals.
This is 2023 not 1823.
The importance of young workers to the economy must be recognised. They have a right to the enjoyment of their lives and not to be constantly in fear of the next rent demand or the eviction notice. It is time for the Government of London and the UK to Act together.
Last week professional global investors lost over $17 bln when the Swiss banking regulator insisted Credit Suisse bank wrote off certain capital instruments. These investors are bleating how unfair, how unreasonable, how detrimental to their wealth these losses are. They get the front pages of the financial media.
In contrast, a young teacher overwhelmed from spending 60% of her income in rent (before bills), while paying off a student loan, feasting on cold beans, being evicted to make way for higher paying Chinese students, gets nary a mention when she attempted suicide because of her dire financial position.
As CEO and Chief Risk Officer of The Bank of Dad (“TBOD”) I am acutely aware of the London rental crisis. My daughter has a fantastic job she loves in London. Her salary is someway short of the London professional average, but she is smart, clever and watches her spending carefully. Yet every month her overdraft at TBOD rises as she draws down her standby facility from Dad to meet the rent.
My girl shares a flat with 2 other girls. This week they received a notice of rent increase from £2400 per month to £3200. That is a rent rise of 32%. It is a small, three bed flat in Hackney Wick. The Landlord appears to be a small company – the registered owner of which will shortly be receiving a visit from my solicitor regarding the last set of accounts filed at companies house. The reality is the block its run by a professional landlord firm. It was erected for the Olympics in 2012. No one has ever met the Landlord or knows anything about them. The block of flats is supposed to be affordable housing for key London workers.
My recommendations to National and London government are simple:
- Nationalise professional landlords in London with immediate effect.
- Any landlord who has tried to gouge tenants by raising rents by more than 5% should be nixed. Compensate them nothing. Stop them functioning in London. Take over their assets. Let these owners starve – with prejudice – for their greed.
- Freeze all London Rents prior to a full rental review at pre-pandemic levels until further notice.
- Instruct the courts to cease all evictions if the renter is still paying rent at the lowest level over the last five years to retain their tenancy. Subsequently, takeover any professionally run property not up to the highest standards, and seek enhanced damages from its directors.
- Identify the CEOs and CFOs of these firms are leave their heads on spikes on Tower Bridge for a few years…
Let’s see the London Assembly enable and encourage renters to form action committees and refuse to deal with greedy landlords. After we’ve purged the Rackman Landlords, let’s incentivise the better housing associations to build, maintain and keep rents low, not just in London, but across the UK!
Bandiera Rosa! Stuff the Landlords – painfully.
Strategist – Shard Capital
Are you drunk this early in the morning? Worst piece of analysis I have ever seen and you claim to work in finance? You ought to educate yourself rather than rant just cause your daughter can’t pay her rent herself. Shocking really,
Excellent. Of course its the fault of young people. Daring to spend more money than they can afford. Marvellous. Absolutely marvellous.
This happens all over Europe when young people all want to live in the same neighborhoods unfortunately. I left London 7 years ago at the age of 27 and median rent is not 50% of earnings pretty much anywhere else. In fact most agents wont let above 35-40% rent to income. Were your daughter and flatmates born in Hackney? Do they have a birthright argument to be allowed to live there at a subsidized cost or an essential public job? In all other cases I’m afraid it’s pay up or leave like everyone else
In tandem with your open letter to the Mayor and Housing Minister which will no doubt have an impact somewhere between slim and none (with slim having just left town) might I humbly suggest a an open letter to the mortgage banks who’s actions have left many landlords with no option but to pass through sharply higher borrowing costs to renters.
My own buy-to-let mortgage payments have more than doubled since the middle of last year. This is before considering that Barclays managed to somehow levy 3x the normal mortgage product fee on top when I refinanced adding to the burden – something they didn’t spot until I brought it to their attention recently and even now has not been properly resolved with no proper explanation for this error, apology or confirmation that the previous payments have been adjusted.
I can only imagine how many thousands of mortgage customers have been impacted by such “systems issue” – who d haven’t checked their annual mortgage statements or complained.
Therefore as a priority it is the banks need to get their act together before landlords do.
I normally look forward to your articles which are invariably thoughtful and well considered but this one comes across as a somewhat unhinged rant. Hopefully it is a one-off.
Spot on. The current rental market situation , particularly in London, is a direct result of George Osborne’s budget decision a decade ago to “bash the private landlords” – easy political fodder – thereby encouraging institutions / large corporates who are faceless, remote , overseas owned and have no social consciences to fill the gap.
Oh dear Bill. I am usually entertained, and educated by your morning reports. This one is sheer nonsense. I am a small time london landlord – i rent out 2 properties. Have done for 30 years. Usually i never raise the rent. I have always fixed any repair/maintenance the following day, & have had harmonious relations with my tenants. Many landlords i know have left the market because of unfair demonisation of “rogue landlords” by successive governments, followed by onerous tax changes (eg withdrawal of interest deductibility) which makes it increasingly unprofitable to be a landlord. The government have yet again killed the market with the abolition of s. 21 HA, which was the main route by which landlords recovered possession. With now 11 successive rate rises mortgage costs exceed the market rent. So you own an asset, which loses you money month on month, which takes time and money to manage, & you may not be able to recover possession of your property by new government law changes. A lot of landlords have said “no thank you im out”. For me personally after 11 rate rises my debt (mortgage) servicing costs have risen from £2500 per month to £8000 per month. Increasing costs, bone-headed government regulation, mean less supply of properties, and those who remain have to cover their own costs (hence rent rises). It is not rapacious capitalism Bill, it is the reality of poor government policy, and supply and demand. As an economist Bill you should know this. Your piece im afraid was a knee jerk poorly researched, and thought-through, rant. Must do better Bill!!
Yes, a bit of a rant but, speaking as a parent who has been in that situation, a perfectly understandable one. Sadly I agree with Rabin’s comment, your chance of getting the governments attention is vanishingly small, which is not to say that you shouldn’t try. However, I suggest that one of your solutions – rent controls – is a mistake. This has been tried before in many cities and the results are uniformly bad: the supply of rental properties dries up and, perversely, rents actually increase. Unscrupulous landlords are adept at finding loopholes in the legislation and tenants, desperate for somewhere, anywhere, to live don’t dare challenge them for fear of eviction.
A better question to ask is why aren’t local authorities investing in rental properties themselves? Apart from attracting exactly the right kind of people to their boroughs (young, affluent – thank you TBOD – who spend money in shops, pubs and restaurants) they can earn a decent rate of return on their investment without gouging the tenants. And, with competition, the owners of the over-priced, badly-run properties will either have to lower their prices or improve the product.
From another reader:
I appreciate this is a rant based on an unhappy personal experience but it makes no sense from an economic perspective. The reason residential accommodation, both for sale and for rent, in London is so expensive is simply the supply demand imbalance. If we want to address that we either need to reduce demand or increase supply. Reducing demand makes no sense if we want London to thrive and is not really practicable anyway. So we need to increase supply. That is where the government, both central and local, can help. At the moment it is doing the opposite – it builds very little itself and the planning system is so expensive and time consuming that it severely restricts supply. Your policy of demonising and punishing the global investment community who are currently prepared to invest in the sector to increase supply will simply reduce supply. Look what happened with the supposedly tenant friendly legislation introduced after the last war. As with all markets, investors are not forced to invest their capital and there are plenty of other markets in plenty of other countries who would be more than happy to welcome the institutional capital that is currently investing in the sector in the U.K. As your note says, part of the problem is that the government has made it far less attractive for private investors to invest in the sector due to tax and regulatory changes which has reduced supply from that group. If we go further and drive out the institutional capital as well by legislating to prevent their return keeping pace with the inflation their cost base is experiencing , we will simply drive out the institutional capital as well.
There are some great comments today – there are two sides to this argument, and some of the folk who say I am wrong to demonise landlords make excellent points.
I shall put these together into a more “balanced” note for next week.
Thank you everyone..
But I still think a 32% rent hike is just naked greed.
Enjoyed the rant and loved the ‘debate’ – am afraid the outcome will be plus ça change……
I googled Bandiera Rossa and found this historic call to arms:
A great point to make, but done with a very narrow view Bill – most unlike your style. Some lateral thinking required and less London-centric view would strike more of a chord
Not a rant but a passionate position based on life experience I will take that any day. Same situation in Scotland. Outsource housing this is what we get, our vote our choice.
John, quite right, IMHO. There are lots more examples of government interference in London rentals. Any and all such examples increase the cost of housing which is then blamed on “greedy” landlords. The govt. actions also serve to decrease supply as landlords can no longer afford the money nor time to keep up with the socialist agendas of all UK so-called governments.
Hmm, I need more information. Yes, a 32% hike seems absurd, but was it the first hike in 10 years, or one of many hikes? The situation in the New York City area where I live isn’t any simpler, from what I read in the New York Times, though I live in New Jersey.
I could not agree more, Bill! It’s not only London. In Austin, Texas rents have risen almost 100% in 4 years. How do you afford that when you get a 2% salary increase every year if you’re lucky? It is completely unsustainable.
I agree there’s a problem Bill but not your solution. This is an interesting article on the history and decline of social housing.
In my opinion this needs to reverse. Having an adequate supply and range of affordable decent social housing would also help recruit and retain public sector workers, particularly in expensive areas, as well as addressing the other issues in your article.
Withdraw and consult, Bill. Withdraw and consult.
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The UK rental market is medieval.
Your suggestions here are drastic and I think in jest partially but you are correct in calling out this disgusting behavior by monopolists taking advantage of a deeply flawed system.
1) All rental tenancies should be 5 year minimum term by default – No 6 month standard and give the tenant notice to throw them out on the street
2) If a tenant defaults on their rental payment 2 months in a row during 5 year tenancy then the landlord has the right to evict the tenant
Those two measures put the balance of power from landlords to a more balanced relationship in equilibrium with tenants. It’s fair and reasonable and gives renters a better chance of settling in their area of work.
3) Rental price increases can only be implemented in line with the official inflation rate. Therefore, if inflation is 10% then that is the maximum amount permitted to raise the rental price. Another option is to allow annual rental increases of 2% maximum and no more regardless of inflation figures.
4) Once 5 year term ends assuming the tenant is paying rent on time the landlord must give 12 month minimum notice to vacate the property should they no longer want the tenant residing there. They have a 6 month window after tenancy to give notice and if not a new 5 year tenancy begins by default. The 12 month notice of eviction gives the tenant ample time to find a new rental property and not forced onto the streets after a poor 3 month period where their options are limited.
Problem solved and no more exploitation.
Oh. Also interest rates back to a positive rate in a free market and no more QE and a 15% minimum deposit on all property mortgage purchases both residential and buy-to-let commercial. No more “Help-To-Buy” nonsense.
The ponzi ends.
You can have a look at Berlin’s rent “market” and the quotes here are in purpose. The rent prices are stricktly limited by regulation (including no option for increasing as long as the same tenant keeps on renting the property). And the situation is simply a huge disaster.
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