Shock research findings: Landlords who sell up don’t destroy houses on their way out

This image enrages me every time I see it. Image: Getty.

It is a truth universally acknowledged that the rent is Too Damn High. And for many of us it rises every year. So when the property industry reacts to any government policy that might disadvantage landlords with warnings that “it will only increase rents”, the threat rings hollow.

Economic theory also tells us to be wary of such predictions: the rent is set by supply and demand in the housing market. Landlords already charge as much as they can get away with.

If a landlord pays an extra 3 per cent in stamp duty when she buys a house – a surcharge that was introduced in April 2016 – she can’t simply charge 3 per cent more than the market rent because other landlords in the market will undercut her. Similarly, if a debt-laden landlord sees his mortgage interest tax relief cut, he can’t pass that on to the tenant – because most landlords have no mortgage, won’t be affected by tax changes, and will take his business.

So if a landlord is already charging what the market can bear and still can’t make the numbers work, they will have to leave the market. Cue the second threat. “With fewer rented homes, where will renters live?”, the estate agents cry.

But in quitting the market, landlords don’t, as a rule, destroy the house they have been letting out. They sell it, either to a landlord or an owner occupier.

If a landlord buys it, great: no problem for renters there, eespecially if they can stay put. If an owner occupier buys it, great – either they are first-time buyers themselves, or their chain is freeing up a home for a first-time buyer (or possibly a landlord; see first scenario). More first-time buyers mean fewer people demanding rental properties. Even as home owners they would still be financially stretched and trying to make as much use of space as possible. So there is no change to the balance of supply and demand. Because households can change tenure, supply and demand in the rental market is intimately connected with supply and demand in the housing market as a whole.

Since George Osborne introduced his tax changes, we’ve seen first-time buyer numbers rise, and the size of the private rented sector shrink by 111,000 – the result of fewer landlords buying property, and more landlords selling up. We decided to see if this had affected rents.

Tenure shift explained. Click to expand. Image: Generation Rent.

In cash terms they are still rising in most parts of the country, but at a slower rate than before the tax changes. In London they’ve been falling. But, like prices in the wider economy, rising rents is par for the course – so we looked at how they behaved in relation to prices in the wider economy, i.e. in real terms.

If the property industry is right, inflation-adjusted rents would have risen as the private rented sector shrunk. If economic theory is right, they would be unchanged. In fact they fell, by 3.2 per cent.

Something similar happened ten years ago. Instead of a drop in supply of rented properties, there was a surge in demand after mortgage lending for first-time buyers dried up. But rents didn’t rise: they fell, by 6.7 per cent in real terms. That was, of course, around the time of the recession. Short of a revolution in building rates, tenants’ spending power appears to be the biggest factor determining what landlords can charge.

Real rents over time. Click to expand. Image: Generation Rent.

The lesson in all this is that the government should press on with legislation to raise standards within the rental market, particularly ending Section 21 of the 1988 Housing Act to provide greater security of tenure. Landlords whose speculative or exploitative business models rely on that ability to evict tenants without a reason might well quit – but their competitors, who value and crave long term tenants, will do just fine.


To ease what exodus there is, the government has a duty to help the tenants who aren’t in a position to buy the house themselves. Any tenant who is evicted having done nothing wrong should get compensation – three months’ rent would be reasonable. That would both give them the means to find a new home, and incentivise landlords to sell tenanted properties to other landlords in the first place.

There’s no question that rents still need to come down significantly, but building enough will take years. In the meantime the government should ensure that renters get a better deal for what they pay for: a secure home.

Dan Wilson Craw is director of Generation Rent.

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The Fire Brigades Union’s statement on Theresa May’s resignation is completely damning

Grenfell Tower. Image: Getty.

Just after 10 this morning, Theresa May announced that she would resign as Britain’s prime minister on 7 June. A mere half an hour later, a statement from Royal Institute of British Architects president Ben Derbyshire arrived in my inbox with a ping:

“The news that Theresa May will step down as Prime Minister leaves the country in limbo while the clock ticks down to the latest deadline of 31 October. While much is uncertain, one thing remains clear – a no deal is no option for architecture or the wider construction sector. Whoever becomes the next Prime Minister must focus on taking the country forward with policies beyond Brexit that tackle the major challenges facing the country such as the housing crisis and climate change emergency.”

I was a bit baffled by this – why would the architecture profession try to get its thoughts into a political story? But then Merlin Fulcher of Architects Journal put me right:

Well you know construction is a larger contributor to GDP than financial services, and most of the work UK architects do is for export, and at least half of the largest practice (Foster + Partners) are EU, so there's a lot at stake

— Merlin Fulcher (@merlinfulcher) May 24, 2019

So, the thoughts of the RIBA president are an entirely legitimate thing to send to any construction sector-adjacent journalists who might be writing about today’s big news, and frankly I felt a little silly.

Someone else who should be feeling more than a little silly, though, is Theresa May herself. When listing her government’s achievements, such as they were, she included, setting up “the independent public inquiry into the tragedy at Grenfell Tower” – a fire in a West London public housing block in June 2017 – “to search for the truth, so nothing like it can ever happen again, and so the people who lost their lives that night are never forgotten”.

Matt Wrack, general secretary of the Fire Brigades Union, is having precisely none of this. Here’s his statement:

“Many of the underlying issues at Grenfell were due to unsafe conditions that had been allowed to fester under Tory governments and a council for which Theresa May bears ultimate responsibility. The inquiry she launched has kicked scrutiny of corporate and government interests into the long-grass, denying families and survivors justice, while allowing business as usual to continue for the wealthy. For the outgoing Prime Minister to suggest that her awful response to Grenfell is a proud part of her legacy is, frankly, disgraceful.”

A total of 72 people died in the Grenfell fire. At time of writing, nobody has been prosecuted.

Jonn Elledge is editor of CityMetric and the assistant editor of the New Statesman. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.

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