Supplement 26 May 24 – Election Section (21)

May 26, 2024

“I prided myself on being unflappable even in the most chaotic of circumstances.” “Stormin” Norman Schwarzkopf, US Army General.

Before we get started, I’m delighted to say our next Property Business Workshop is still taking bookings (despite being on election day – get your postal votes in, folks) and there are still tickets available with an Early Bird discount.

This time Rod Turner and I will be taking on: The fundamentals of property investment. Risk mitigation and control. Relevant investment metrics. Differing secured debt arrangements and loan structures – and – Scaling your property portfolio/business – why, when and how?

Thursday 4th July, in a Central London location (Blackfriars). Early Bird tickets are available – and thanks to the early bookers who make it viable to book a room and organise the event – we reward them with 10% off! There are tickets still available here:

Welcome to the Supplement, everyone. Last week I said this, as part of the conclusion to a wordy effort: “Rental demand is going to continue to skyrocket, and expect rent increases at or above wage increases for some years to come. The future on that side looks incredibly dim for tenants, and strengthens the investment case quite a lot (remember, this isn’t the only fruit – what will compliance look like, what will changes in tenants’ rights look like – there will still be plenty to put people off, Labour aren’t going to be kinder than the Tories to landlords, that would be so forward-thinking as to be impossible). The housing market is going to get more and more broken.”

Oh, how timely. I would have laid decent odds at an election being called for “just about Q3” at the end of last week’s piece. You can see the only logic there is – growth figures look the best they have for a long time, inflation (optically anyway) “under control” (we should all know that print is going back up from 2.3%, but I will touch on that anyway). But – election it is. An act of spite before Rishi was pushed? Not sure I buy that. It likely is “their best chance”. But the betting markets are putting them at 2-3% for a majority (maybe will improve before 4th July) rather than say 1-2%. It looks very marginal that’s for sure. I popped a poll on my LinkedIn where one of the options, with me only half-joking, was that Sunak fancies a summer holiday this year.

I’m going to use a bit of a different format this week. I’ve stripped the macro right back – because I want and need to leave as much room and time as possible for a takedown, sorry an “independent review”, of the “independent review” from the Private Rented Sector Commission (not commissioned by the PRS itself, of course, which is too fractured to do such a thing) – simply because I have not been as concerned by the contents of a meaningful political report, which skilfully gives the air of having consulted all the relevant parties, ever. EVER. I was more concerned when Corbyn and McDonnell were too close to Numbers 10/11 for comfort – although they were never given a realistic chance of getting in. Watch Stephen Cowan, the author of this report, very closely in his political career is all I will say – there’s some holes to be poked in it and I’m going to drive a coach and horses through it, with room left for an armoured tank division to get in behind me. Then, I’m going to attempt to distil things right back down into some meaningful conclusions – they have five, so it would seem appropriate that we do too – or rewording their five to be truly independent and also meaningful might be a better shout. Let’s see…..

So – macro bulletin time this week. It was a slow starter but we still have 4 key areas of focus. Inflation. PMI flashes (you know I love them!). Consumer confidence. 5-year gilts and swaps (of course).

Inflation first. 2.3% was the headline – I had thrown my dart at 2.4%, because I thought the economy was just too hot. Retail sales did very badly in April, well below consensus, but Easter being in March was mostly blamed (even though that would have been baked into consensus). Perhaps consumption figures are indeed down further, and that will likely continue to be the case as people hate uncertainty, and elections bring uncertainty.

The rest of the economic world, having started the year confidently predicting we would hit “2% or below” in April, to which I scoffed, were at 2.1%. Including the Bank of England. So this was a miss to the upside, again, but this only counts for people looking really closely – like me, and by extension, you for reading or listening to this. I had messages expecting me to be confidently predicting a June interest rate cut – but as at Wednesday 9am I was at 90% no 10% yes. The markets were more like 20% for a cut at the time, I later found out. That was before the election announcement, which shouldn’t make any difference (!), but also before some more data was released which would lean more towards a cut (still nowhere near odds on for a cut in 4 weeks time though!).

Here’s the bullets – CPI 2.3% down from 3.2% in March, but based primarily on the large cut in the energy price cap for households from 1st April (12.3%). There’s another one now baked in as OFGEM has spoken and set the cap from 1st July to another 7.2% lower – still 22.7% higher than January 2022, but 22.7% is about inflation in this cycle – so it looks like the percentages have (on average – always dangerous) righted themselves. Expectation was 2.1% as I said, so a miss to the upside, apart from anything else. July now baked in to lower the print, but the “base effect” of super-high energy prices had abated somewhat compared to April 2023, so the effect won’t be as dramatic (still disinflationary though, although July’s print is likely the last one where it IS disinflationary).

Core 3.9% versus a 3.6% expectation. Too high. Month-on-Month core 0.9%. Highest since April 2023. Not to be a surprise at all for those who have followed the drum I’ve banged about the minimum wage increases – no surprise that prices would have to rise somewhat in suit to cope with that cost pressure on businesses. CPI month-on-month 0.3% up (in spite of the energy price cuts), RPI month-on-month 0.5% up. April is the month each year where lots of wages do go up, including national minimum, so we do expect hotter prints. RPI down to 3.3%, which looks positively manageable. More detail on inflation next month, though. There are bigger fish to fry today.

PMI flashes. PMIs were HOT HOT HOT for April, which is why I was so confident we would overshoot the consensus. It seems they are just not baked in enough. Anyway – these are the flash estimates for May, to be revised at the end of the month. I would think the revision will be downwards, because of the trend and also because of the election announcement being just after the data collection period. The tale of the tape: Composite PMI – 52.8 down from 54.1 for April. Manufacturing surprisingly strong – 51.3 – good news – and services surprisingly weak, but still printing 52.9 (consensus forecast was 54.7 so quite a big miss). This – and I always say be careful before interpreting one month’s figures – looks like another reason why the timing of the election was “smart” – that’s a fair drop from the 55.0 peak printed in April. It’s still a good number, but a bad direction, and we would always prefer 53 or above for an economy going forward. It doesn’t point to an overheating services segment of the economy (and remember, it is a MASSIVE segment) – but functioning well. Let’s hope we don’t drop that much again for June, though.

I’d imagine in terms of a variety of services, they may well pick up very strongly before the election. Tax planning, for example…….

Anyway – on to consumer confidence. The overall score was good at -17 (sad that -17 is considered good these days, one year ago it was -27). Every metric improved apart from major purchases (this is intent, not action) which moved down by -1. There was a VERY bullish print for personal financial situations over the next 12 months – +7 was the number. Things have improved on all metrics on the GFK survey over the past 12 months aside from those major purchases – I think people are preferring saving at this time, perhaps incentivized by those higher rates (I know readers and listeners aren’t excited by 4-5% before income tax, but some clearly are – and it’s all relative of course. It beats 1%).

Gilts and swaps, to end this wash-up, then. The 5y gilt had a miserable week, from all of our perspectives, as the inflation miss to the upside (and the core print as well) meant 15 points went on the gilt yield almost immediately at the open on Wednesday (the timeline is – inflation figures at 7am, gilt market opens 8am). We then tested 4.2% (boooo) and closed at 4.182% for the week, having opened at 4.02%. I actually thought after the retail figures a bit might come off this, and there IS evidence of disinflation if you look hard enough, but the inflation print looking back really was quite a miss (and a lot of eggs had been put into that basket).

Thursday’s close on the gilt was 4.17% and the swap 4.088%, so the discount level is preserved but there we are above the 4% number on the swap again. Yuck. We might be stuck there for a while although I think we will start to decay, I will look forward to seeing the finalised May PMIs because this hot streak looks to be coming towards an end (in growth) before it has even got underway. It’s quite symptomatic of the post-covid moves in other developed economies, but a bit of a quicker cycle – let’s see.

Anyway – it looks like Chris Watkin had the week off from the stats (at the moment) on the real time property market – I couldn’t find them on his LinkedIn or on Property Industry Eye – so we will leave those for the week and skip straight to the extensive main course.

The “independent” review of the UKs private rented housing sector. Here we go. Put it into context first up – it’s “just” a report. It comes from a good place, wanting to sort out good quality housing for people. Everyone wants that. The arguments are really two-fold – who pays for it (and cui bono – who benefits) and also HOW does it actually happen rather than discussing “nice-to-haves”.

We kick off the foreword with some powerful chat. The housing sector is broken – agreed. For “many” people (1% of the population could be many – and this is an example of the deliberately misleading and emotive language used throughout the piece which does nothing to hide the ideological bent behind it) the opportunity to live in a secure, affordable, accessible and good home is out of reach – we are told.

That’s set to remain for generations to come (inclined to agree). The system needs significant change (most would agree). Does it need Labour’s changes though? (strange, I thought this was an independent report, but on point 2, we are already talking about Labour – and this report very much assumes they are winning this election – something the main party have been keen not to appear to assume, of course, for fear of being seen as presumptuous or arrogant).

Between 2010 and 2020, the UK experienced the lowest amounts of new homes built since the end of WW2. This is blamed, in the report, on dramatic cuts in funds available for building affordable housing. This is a complex problem, and this is no doubt a major contributory factor, but isn’t the whole explanation by any means.

The UK is then accused of having “among the lowest rates of home ownership in Europe”. I thought time to do some fact-checking here, as things are getting a little emotive. Countries with lower home-ownership rates (and therefore larger rental sectors): Switzerland, Germany, Austria, Denmark, France, and Sweden. Comparables, competitors, and countries often painted as Narnia. I am not convinced that the home ownership rates in Eastern Europe, or Malta, or Luxembourg are particularly aspirational for the UK. In both Switzerland and Germany – looked at as two of the most desirable destinations in mainland Europe – home ownership is under 50%. So – on its own, is this a problem? Not sure that it is, and if this sets the scene for bastardising statistics to suit the argument, then prepare the hounds, Frederick.

England has 1.4 million fewer households living in social housing than in 1980. There’s no effort to see any of this as a positive – surely society’s success might be gauged by fewer people NEEDING to live in social housing? Right to buy has been been a huge problem, but at no point does the report attempt to address the fact that many tenants prefer the PRS to the social sector thanks to the poor standards, and poor locations, of much of the social housing left. Because the market has been involved, the better stuff has been bought, and the less desirable remains (this isn’t universally true, of course, but is also an inevitable consequence of the fact that people aren’t stupid!).

The report then mentions plans to restore house building targets (dropping them has been a mess, and a joke, to be honest – but will they be HIT?), reforming planning (always a Labour policy, that few developers will ever be against, of course – it upsets the Conservative heartlands who want no building in their backyards, naturally), and sorting out the compulsory purchase compensation code too. Sounds innocuous – the FT headline for the article quoted is “Labour plans to tackle housing crisis by forcing landowners to sell at lower prices” which sounds less ideal, of course – but they were happy enough to quote it in the report! They don’t mind a bit of intervention, the authors of this one……

Apparently (without reference) Government policy has long viewed the PRS as the best placed to meet short-term housing needs rapidly, but never envisaged it as a long-term housing solution for a “large” proportion (it is under 20%, remember, so it is a lot of people, but it isn’t a large proportion) for the population. This needs challenging and, again, fits an ideological agenda. It also runs against a lot of their argument – why try so hard for decent homes etc. if they are not fit for purpose? Sounds like the long run (ideological) objective is just to destroy the PRS……

Funding and policy support is essential, reducing the dependency on the PRS. It’s certainly worth a go – the PRS has simply plugged the gap left by abject failures of successive governments on housing policy – there seems to be no mention of those who were in charge in the middle of the biggest boom of all time in the PRS, remind me – started in 1996 with the buy to let mortgage and came to an end in about 2007 (for a few years, anyway) – who was that again?

Then the stats start, and we see some incongruence throughout the report. It is unfair to lay the blame for this at the report’s door – although one source of truth would be helpful – because the data collection on rental has been so poor.

They do grab this from the ONS – “There were just under 5 million privately rented dwellings in England in 2021, according to estimates published in the Department for Levelling Up, Housing and Communities’ Dwelling stock (including vacants) collection, and our Census 2021, Tenure dataset.” Most say 4.6 million or so, in the other datasets – and the problem with the census is of course it only happens every 10 years!

In October 2022, apparently 2.74 million landlords declared income from letting a property. Many of those may well have been couples or partnerships, of course, so that doesn’t tell us how many properties per landlord but it does give some idea as to the number of landlords that we do have!

It’s OK, though, because next comes one of the laziest, and most unacceptable, conclusions that I’ve ever seen in a report. EVER. Reproducing this in its entirety: “PRS is the most expensive of all forms of housing tenure and rents are increasing. In 2023 the Centre for Policy Studies noted: “Since 2010, the cost of renting has gone up by 44.5% according to the Halifax. During this period, wages have risen by 30.4% and inflation has risen by 24%. This is hardly a sign of a functioning market.12” There is significant regional variation in PRS rents.” Bulldust, frankly. Renting IS more expensive than buying – sometimes. It has flip-flopped in recent times, AND the comparisons are completely unfair. Often this is performed as “rent versus mortgage interest” OR “rent versus mortgage payment”. Both are WRONG. Costs of running a property can easily run to 20% of rents – simply in compliance, licensing, and maintenance. When there’s a new roof, that might often be 50% or more of rent that year on its own – similar figures for windows – this is just, frankly, a lie that needs to be exposed.

Here’s how I would PROPERLY compared the cost of home ownership to the cost of renting:

  1. Take the average deposit, and make an allowance for the fact that isn’t invested in a medium-risk ISA (or taxpaying account, if you prefer)

  2. Remember insurance, compliance, maintenance, and make an allowance for it

  3. Remember frictional costs – SDLT, legal costs, surveys – include those in your amount for 1)

  4. Compare council tax bands and bills on average – the running costs of an average rental versus an average OO property – regardless of which side of the argument it favours, this is the cost of actually attempting to be balanced and also to find the truth

  5. Amortise ALL COSTS over the average length of home ownership – 22.6 years at last count – rather than just fixing a leaky tap, or whatever

When that piece of work has been done, let’s have a proper discussion. I’ll do it – although I’d expect to be paid for that, so I won’t hold my breath! This report thinks it is OK to quote a paper from 2023 – that uses figures from 2021 – and, frankly, gets them completely wrong. It quotes inflation as “24.2% since 2010”. It ADDS UP the percentages, rather than compounding them. This is inconceivable mathematics if this is supposed to be a serious report. It also, handily, understates inflation but overstates rent increases by looking at years when rent went downwards. It looks like a lack of ability and/or carelessness, but at this point, I’m suspicious. Some questions:

  1. Why not use the ONS figures? Why use Halifax’s rental figures? Not because it suits your argument a whole lot more, is it?

  2. Why only look until 2021? Not because 2022 and 2023’s inflation figures would massively detract from the argument, is it?

  3. It isn’t the “cost of renting” – it is rent payments they are examining, and I don’t trust the source of the figures.

This is guff. Utter guff. And used for major conclusions. These numbers HAVE to be correct before they are put in front of “proper” politicians.

Rant paused. Breathing exercises completed. Onwards.

They mention “constant threats of eviction”. Everyone knows s21 is used as an easy (easier, more like) route to remove tenants from properties where they are not paying. Of course, there has been a large need to get properties vacant for sale since the interest rates have gone up. This nuance has been completely lost in the report. This is a tragedy – the tragedy of not even understanding the problem.

They also say: “The PRS is also where Britain’s poorest people live – and they do so in ever increasing numbers. In 2019, the National Housing Federation estimated 1.3 million children were living in poverty in privately rented homes in England, which was a 69% increase since 2008. It identified how “high housing costs both cause and worsen poverty”. Some 100,000 homeless households15 currently live in insecure, ‘temporary accommodation’ – much of it sourced from the private rented sector.” 

They don’t offer evidence of it being where “Britain’s poorest people live” and indeed the ONS and Bank of England recent reports would very much disagree. I’ll go a step further – the English housing survey published last year – used as the “bible” of the rental sectors in general, when it suits – but a comprehensive piece of work – proves that this is an abject lie.

The average and median incomes in social housing households are a lot lower than in the PRS. I’ve used that as this week’s graph, because these outright lies need to be called out where they are used.

More lies here as well. The temporary accommodation quote marks – imported from Shelter. Fair, most likely, because temporary accommodation can easily last over a year. Around half of people or households in temporary accommodation run over that one year mark. That’s a tragedy – a tragedy mostly based on there being nowhere for them to go. The lies though – “much of the temporary accommodation sourced from the private sector” – hinges on a report from London and Greater Manchester which cites, as its most damning piece of evidence, one fifth of all PRS stock being used for temporary accommodation.

So – “much of it sourced from the PRS” hinges on one scrap of evidence, in one report, regarding one London Borough in 2022, from a left-leaning think tank, given a “D” grade for the transparency in its funding – putting them in an equivalent position to the Institute of Economic Affairs, who are roundly criticised for their lack of transparency in funding on the other side of the political compass.

Then – now it’s time to use some stats from government and official sources, now it suits – we get some insight that we haven’t had before. 94% of PRS landlords are individual landlords. NINETY FOUR PER CENT. 83% have fewer than 5 properties. 59% see their ownership of a rental property as a long-term investment to contribute to their pension. This is from the English Private Landlord Survey (strange how they found that one, but not the English Housing Survey report – strange indeed).

71% are not and have never been in a professional organisation. It’s this sort of fuel that makes you realise why politicians HAVE pushed for more regulation. That screams “people don’t take their obligations seriously” – and we’ve all seen those who don’t. It isn’t 71% though! It does support the conclusion that the PRS is made up of amateur landlords though.

Comments around the Renters’ Reform Bill are – for the moment – null and void, since it isn’t going through in this Parliament. There’s chat over the court process – I suspect it will be left to rot with a token extra piece of funding if the ideologues get their way, although of course this would backfire badly. One very bad eviction process will soon get more and more of these landlords out of the market.

The worst bit here – stepping away – is the total lack of understanding or reference to any form of “transition period” away from “amateur landlords” to a professional sector. How long should that take? What will the outcomes for tenants be? How can we protect them in transition? Are these not questions you’d expect this side of the argument to be asking? Why do they not even go there?

The last sentence of the Foreword (and yes, we are still on the Foreword, so buckle up and get the kettle on again) – is the most arrogant of all: “Fixing the dysfunctional housing sector and its causes is a clear priority for Labour’s government-in-waiting. This report proposes some practical means of applying a framework that would raise standards and improve security for renters across the Private Rented Sector.”

It absolutely DOES NOT concentrate on practical means. It is not without merit throughout – and some of what is proposed is workable, and should be welcomed by a forward-thinking PRS – but it is absolutely not practical means, it is largely driven by ideological claptrap that will lead to WORSE outcomes for tenants/renters.

I’m going to press on through the Executive Summary of Recommendations. There is merit in looking in a much deeper dive, too, about rent controls versus rent pressure zones versus rent stabilisation. I’ll get into that at a shallow level today, in here, but one week will give that the full deep dive treatment, because we need to get into the economic merits and demerits. There’s much more cause for hope here than anything, but there are a few clips around the ear and more that are needed before we get to the sensible discussion stage.

Buckle up. There are 46 distinct sections here (some follow on from others) and five points upon which these recommendations rest. This “only” takes us to page 15 of this 118 page report – so I’m keen to put into context just how deep this report is – even though, as already discussed, it is woefully shallow and cherrypicks accordingly when it wants to.

Here we go. First of all, the typical disclaimer – these views only belong to the Private Rented Sector Commission (logo – the Labour Party red rose. Supported by the Labour Housing Group). But we gloss over that, consummate professionals that we are.

They then choose to make a distinction between two sorts of renters – those on low incomes who rely on housing support to pay their rent (more accurately, a portion of it, in the vast majority of cases in this day and age!) – and those who pay for their own. I’m not sure this is that helpful – but, that’s the distinction they’ve chosen. The overall weakness in the data is not their fault and will take years to improve (and will be a continuous improvement project anyway).

They now claim the PRS is now the default tenure for lower-income households. This isn’t referenced or evidenced. In fact, I think it is a lie. Only those who do not perform reference checks including affordability checks will let property to those who can’t afford it. I think that type of landlord is shrinking in number and will soon be killed off – let alone die out – by these idealogues who want corporate landlords just as their Blue counterparts did in 2015, and still do today. It could be accepted on the basis there is not enough social housing – the waiting lists have not made huge leaps forward historically, but again the data is too far out of date to be accurate or particularly relevant as at today. The next sentence is critical and does need to be accepted – “This report does not seek to offer a comprehensive suite of economic solutions”. Let’s dwell for a minute.

What use is the report then? Might be one pushback. Or – the problem is too hard to solve, that’s why it has been dodged? Any proposals that are not backed up with economic viability aren’t going to happen, at this time, after the warning shots fired by the gilt markets in September and October 2022 during the reign (or more like the drizzle) of Truss and Kwarteng.

However. They do then take it on board within the report to set out a framework to improve renters’ right and raise standards across the sector. Sidestepping economics is very convenient, but lets them off a hook they should never be let off. I’d like to take this opportunity to completely reframe the debate:

There is an economic cost to every further measure that is put into the private rental sector. It can only be funded in one of three ways – from the public purse (so from everyone who pays tax, which is everyone) – from the landlord, or from the tenant. In the real world, when the price of providing a service goes up, so does the cost of that service if the market allows. There is an economic concept that covers this nicely – it is called the Price Elasticity of Demand.

It varies from inelastic (demand doesn’t go down much when price goes up) to elastic (easily dropped, substituted, very price sensitive). Guess which one housing/shelter is? Inelastic, of course. Like petrol or diesel, housing is needed to make economic engines run. So – IF EVERY EXTRA COST FROM HEREON WAS FRAMED AS SOMETHING THAT COSTS THE TENANTS MORE THAN THE LANDLORDS – WOULD THOSE IN IVORY TOWERS THINK TWICE BEFORE IMPOSING THEM? YOU ARE SPENDING THE TENANTS’ MONEY AND THEN MOANING ABOUT HOW UNAFFORDABLE IT IS!

Rant break 2. Blood pressure check. Somehow still 120/80. Let’s press on.

Here comes the first of the five points. For each of these I am going to cut and paste, so you can read these in all their glory, and I’m going to line-by-line them:

First, we recognise that the crisis in the Private Rented Sector (PRS) can only be solved by a holistic approach to fixing all parts of the housing market. (Can’t argue with that) Labour will inherit a broken housing market so that will be challenging (Let’s not just walk away from 1997-2010 though, and the GFC?). It will require significant reform to planning and land development policies to increase the supply of genuinely affordable homes to rent and to buy (Here’s the problem with walking away from economics, when it suits to do so – there’s plenty of economics in this paper as time goes on. It will require a lot more – funding, bridging skills gaps – how about all of that?). That is why Labour’s proposed reforms of the planning and compulsory purchase compensation codes are essential. (Planning reform – standard Labour – no loyalty to the Home Counties etc who are stuffed with NIMBYs – realistically everywhere is! Fine on reform, not so great on compulsory purchase compensation codes perhaps, lots of meddling, some bad outcomes for some no doubt but I suppose “they deserve it” as long as you subscribe to the politics of envy?) Measures must be taken that urgently increase the supply of social housing so low-income and homeless households do not have to rely on the PRS. Social housing should return to being the second largest sector in the housing market, with home ownership being the first.” (I can’t make my mind up about this “goal”. I don’t think I like it. It will take so long to sort out the social sector that hopefully, by then, there can be more homeowners if that’s the way forward, or there can be more great quality rental properties if that’s the solution, provided by the private sector/private investment). 

“Second, a comprehensive, annually updated National Landlords Register (NLR) is the essential mechanism for managing and enforcing standards in the PRS. (I think it will have a use – WILL IT PROVIDE VALUE FOR TENANTS AS THIS COSTS TENANTS MONEY? Is it THE essential mechanism for managing and enforcing standards? It will make the job easier but the job is already easy – check EPCs of new listings in the council area. Wouldn’t take a single FTE to do that in most councils. If no EPC listed, enforce. Piece of cake, already – and not done) The NLR should legally require landlords to register themselves, provide details of their properties and rents, and demonstrate compliance with an annually updated PRS Decent Homes Standard. (Not clear whether everyone gets to see what nextdoor is paying in rent here. Commercial sensitivity issues and tenants’ privacy issues here I’d have thought? Compliance docs uploaded – fine. Millions of pounds to set up no doubt – but if you are SURE the tenants are getting value…..) The NLR should also oblige landlords to submit independent evidence of property and management compliance (gas safe certificates, electrical tests, etc.) and include a responsibility to undertake and submit a surveyor’s report regularly. (The broken record comes on again. A regular surveyors report – £500 + VAT or similar – good value for the tenant, right?)

“Third, tenants must have security. No fault evictions must go, including the back door no fault evictions introduced by the Conservatives’ Renters (Reform) Bill.” (Bit moot, since Wednesday, and now the RRB has missed out on this parliamentary term. Nonetheless, S21 leaving, if handled in the same way as S33 in Scotland being removed 7 years ago now, is not in my opinion a big issue. But they don’t WANT it the same way as S33 in Scotland’s removal – just wait……)

“Fourth, ‘first generation’ rent controls freezing or cutting rents will have a detrimental effect on the Private Rented Sector (PRS). HANG ON! A bit of common sense? Also backed up by numerous real world examples? Knock me down with a feather. But ‘third generation’ rent stabilization measures are essential and should be used to limit increases within tenancies to the lower of local wage growth and CPI.” Pause for a moment. Is this an unmitigated disaster on its own? I think not. Write this into the proposed model tenancy agreement they would have everyone using, and everyone knows where they stand at the start of a lease. The rent goes up annually on those terms. Nice and easy. That’s not how it would be implemented of course. “The lower of” is arguable – no other “double lock” works on the basis of “the lower of” but if the corporate lobbyists are happy – and Grainger say that they are – then that’s where we might well be. Not a disaster.

“Fifth, measures to stop PRS landlords moving to other sectors such as the short term and holiday let sector or the more profitable nightly-paid temporary accommodation and supported housing sector must be introduced to preserve the stock of homes available for long term let.” Oh HO! More meddling. The removal of the tax relief benefits for short term let, already enacted by Mr Hunt in the most recent fiscal statement, will mean that those incentivized by a better tax regime will no longer be so incentivized to move to short lets, so this is likely already sorted as well as it will be. But I’m interested. HOW will this be done? Planning classes? Is temporary accommodation being moved in to because it has been created – or are there constant waiting lists for temporary accommodation? We know the answer to that of course. The bigger bigger picture here though: “PRESERVE THE STOCK OF HOMES AVAILABLE FOR LONG TERM LET”. This absolutely WILL NOT be “preserved” (and needs to grow as discussed, not be preserved) by more regulation for landlords. They will come out, and accept the 4% in the savings account thank you very much. 

Here comes the reasoning, anyway. Thank goodness for that – I was thinking there wasn’t any. But apparently there is. So here we go with that:

The national register – already proposed in the Renters’ Reform Bill (not RIP, but paused to come back re-hashed in the next parliament). What’s needed (apparently) is “independently verified evidence of compliance with property and management standards and the new annually updated Decent Homes Standard.” It doesn’t give you a lot of faith that they know how compliance works, does it? If you need simply to upload gas certs (as required), EICRs and EPCs (ALREADY uploaded to the Government database anyway) – that’s not a biggie. Independently verified evidence of property and management standards – shall I just save us some time and tell you where that will go wrong?

Shall we go ahead and plan for the worst here – an annual report from an RICS surveyor on a property. Bad news for all – in my view – other than the members of the RICS, to which it would be absolute Christmastime – permanently. Although there wouldn’t be enough RICS surveyors to fill this requirement – although the popularity of the AssocRICS might go up a few hundred per cent.

I’m going to borrow a phrase now from the real world of landlording, from the agents that manage the bulk of our properties that are in Scotland. There’s about 150 or so such properties. They are either central belt (the minority) or a little further out, within 20 miles or so of a major city, usually Glasgow. Their turn of phrase is “the tenant doesn’t live well”. They say it, and mean it, in a caring way. It means the tenant doesn’t keep their accommodation clean and tidy.

When they say it, they usually mean the tenant is a hoarder (complex, of course, often other mental health needs manifesting themselves through hoarding), or someone with below average standards who doesn’t think you need to see the floor to be able to clean it on a semi-regular basis. Does that mean we don’t fulfil our obligations for compliance, or maintaining the structure of the property? Of course not. What percentage of tenants does this capture? A few percent, of ours – my gut feel says between 5 and 10%. How will a RICS surveyor write this report up? I look forward to finding out. “Couldn’t see much of the sub-floor to make any pertinent decisions on heave” might well be cut and pasted a few times. Or similar.

The broader point I am making here is that there is no allowance for the fact that – as I often say – “there are as many bad tenants as there are bad landlords”.

Landlords not registered on the register can’t go for possession, and rent paid when the landlord wasn’t registered can be recovered via RROs (rent repayment orders). Frankly, go for it – but enforce it for a change, will you?

It doesn’t scare me – just sounds like more red tape, more expense, and more of the tenants’ money being spent on something that will favour a very small percentage of society/shareholders.

They want to make failure to register a criminal offence if not done within a certain period of time. Lack of compliance already carries a custodial sentence (e.g. failure to comply with Gas Safe regulations). There’s a handful of (mostly suspended) sentences that have been given out after multiple breaches of the law including improvement notices being ignored. Seems fair enough. Sounds more like lip service but perhaps an effective deterrent?

“Compliance inspections should be carried out on NLR registered landlords from time-to-time by an inspecting body.”

Any chance of a cost-benefit analysis there, do you think? Sounds like a cushty, poor value public sector gig to me – or perhaps even privately provided?

“Annual registration fees and fines should fund the NLR and inspecting bodies.” – I believe at this point the correct phrase to use would be “ibid”, your honour.

Then we get to the most controversial part of the entire body of work, in my view. The bottom of page 8 of the report. SECURITY OF TENURE. Let’s go. This “beauty” needs replicating in its entirety, and we go back to the line-by-line format here:

Security of tenure (1) All privately rented homes should be open-ended periodic tenancies that can only be ended on defined grounds, most of them involving default by the tenant. This is not wholly different from the current housing act, to be honest – and in the real world, the vast majority of tenancies are brought to an end at the tenant’s behest anyway – always remember there are only 2 bodies that EVER end a tenancy in law – the tenant, or the court. 

(2) Wishing to sell the property should not be a ground for ending a tenancy. 


Here’s a property, today, with a tenant in. It was Rent £500 10 years ago, and Mortgage £200 thanks to a favourable base rate. Today, the rent is still £500, but the mortgage is now £600. There’s tens of thousands of these, if not more. Worse – the market rent is now £800. That just about makes it viable for the landlord to hold the property – after costs and tax they will break even, but they are OK with that. The tenant can’t afford it though. So – it goes to market. 

I’ll tell you for free that in the environment where point 2 is LAW, the MARKET PRICE of that property is about 500/800 of the Vacant Possession value. 62.5p in the £. They will trade at 40-50p in the £ at auction.

The landlord needs to sell the property because of financial distress. They have a 65% LTV mortgage on the property. The only way is to call the receivers in, because the value has been totally destroyed by the tenancy. Then a smart trader comes along and does a cash for keys deal, offering the tenant 3% of the value of the property, in cash, to move along and end the tenancy, creating the vacant value and realising it. But how much does the trader want to keep, in that scenario (clue – as much as possible).

Wow. Talk about a cottage industry. This is a disgraceful suggestion that contravenes private property rights and puts the rights of a tenant – who might only have had 6 months tenure – in front of the rights of a landlord. It’s ridiculous. This is a totally different level to the removal of Section 21. Preserve the private rental sector? With these policies? Don’t be so obtuse.

(Rant 3 over. Breathe. Enjoy the journey. Etc.)

(3) Wishing to occupy the property should not be a ground for ending a tenancy apart from cases falling within the current Ground 1 in Part 1 of Schedule 2 of the Housing Act 1988; that is, cases where the landlord used to live in the property as their only or principal home and wants to move back. 

Oh, rant 4 ALREADY now then. Another ridiculous one. Here’s a very believable and replicable scenario. Man and wife split up. They built up a property each over the years to let out when they got together, but never lived in them, and bought a third to live in happily ever after. There is no happily ever after, so time to go their separate ways. Neither can afford to keep the main res (Absolutely standard in divorce situations). Oh well. Sell that one and move into the rentals, right? Nope – you don’t have the right to do that? WHAT? As you say, Comrade Lenin, let’s just crack on then like nothing has happened? These people are off their boxes. 

(Rant 4 over in double quick time. More yoga prescribed. Heart rate elevated now).

(4) While lowering the notice period for the ground of antisocial behaviour is reasonable, this ground should be discretionary to avoid the risk of injustice to Disabled people and victims of domestic violence. Furthermore, we agree with Generation Rent that the threshold for an eviction should remain “likely to cause” rather than “capable of causing” nuisance.

No. It should be discretionary only in exceptional circumstances. Anti-social behaviour is NOT being used as an angle to evict tenants. Show us one SCRAP of evidence. There’s none. Let’s stick with evidence based anti-social behaviour evictions, and put the needs of the many (the neighbours and the community) ahead of the needs of the few. 

(5) Tenancy agreements should take the form set out in the Renting Homes (Wales) Act 2016. 

Wales. Sure. They are doing really well. How are they doing with the new LHA rates for example? “Wales has the lowest proportion of listings affordable at 5.5%” says Savills. I thought it was the 30th percentile though? Clearly not. So are they doing OK on rent growth with their great shiny new system as provided by Labour?

“Rental growth for all existing tenancies in the year to January has been higher in Wales than any other area of the UK, according to the ONS, at 7.0%. Rents for new lets have increased by 9.5%, according to Zoopla, and by 36% since the pandemic, placing pressure on renters’ finances.” says Savills, again. Oh what a great model that is for us to be following since the model tenancy has been introduced. ARE THESE PEOPLE DELIBERATELY IGNORING THE DATA?

Scotland has done a better job, right up until the rent caps they were doing very well, and now on the back of that (and lots of other mismanagement outside of housing) they are going to get their bottoms handed to them in the SNP and Green party general election in Scotland. Using the Welsh system is simply an assumption that Labour there have “done the right thing” even though things are going worse for Welsh tenants than any other part of the UK. This dimwittery knows no bounds.

(6) The workable minimum is six months. There should be no maximum.”

At least they recognise the workable minimum is 6 months. No other choice really when they are so against short lets, of course. 

The worst bit is over. But the next section will have you similarly poised at the end of your seat, or will make the hairs on the back of the neck stand up. Here comes the phrase you will come to know, because this one is here to stay – Rent Stabilization. Back to the line-by-line for this one:

“Rent stabilization. (Just for a start, the pedant in me wants to point out that this is Britain. It should be stabilisation with an “s”. It made me wonder whether they have copied and pasted it from the USA, for a start). The first generation of rent controls seek to impose a control on existing rent levels. They are typically called “hard rent controls” or “rent freezes” (We know these don’t work, and even this paper accepts that). The second generation seeks to govern rent increases both within and between tenancies. They are a development of first-generation measures and seek to allow landlords to account for some cost increases in the management of the property (These are also recognised as counterproductive and not workable to preserve PRS stock). The third generation refers to measures that restrict the increase of rent within tenancies but not between them (This is understandable, and I think, palatable. A compromise. Most landlords never liked to raise rents intra-tenancy ANYWAY, so there isn’t much to fear here I don’t think). This form of measure implies that rents set at the start of the tenancy are at ‘market’ rates, with subsequent increases governed by the set-out regulations.”

Just to confirm the thoughts of the group on these in more detail:

“The overwhelming consensus among economists is that first generation controls, especially rent freezes and cuts, do not work and are harmful. Labour’s Front Bench has already stated that these will not be measures that a new Labour government will seek to adopt. That is a good decision. Similarly, the weight of the evidence is that second generation controls, i.e. between as well as within tenancies, do not work.”

Even these lunatics don’t think that that sort of rent control is a good idea. Onto the detail of stabilisation now though:

“The following rent stabilization model within tenancies is therefore recommended: 

(1) Annual increases only. (OK)

(2) Four months’ notice of increase. (Without real merit, but, OK) 

(3) No rent review clauses. (Ah, so you don’t want it to be contractual – but you want lots more corporate landlords. Let me know how that works out for you). 

(4) Increases limited to local wage growth or CPI, whichever is the lower. (I see limited reasoning in “the lower” but if there is institutional support on it, the PRS may need to roll over on that one. OK).

(5) There should be one system for England and Wales. (Because we are so good we will win in Wales and England – let’s see if you are, comrades). 

I almost chortled at the next point.

“The rent stabilization model recommended above may increase short-term pressures on the supply of PRS lets. (MAY? MAY? The Pope MAY be a Catholic, next, I suppose?) However other fiscal and economic factors have also played a role so many were most likely going to leave anyway. (Or at least we can blame that, and we will – so, hang the consequences for the tenants in the now – it will be better in the long run, promise. Trust us. REALLY? That’s the argument?) Many small landlords are highly leveraged and have been exposed to higher mortgage rates since 2022.” (And the evidence for this is? Nowhere. As above many are not encumbered, the majority in fact, and indeed if you follow the UK finance data the debt is heaviest in the 40-50 category, nowhere else. This point had all the sophistication of “nar nar ne nar nar.”)

“A way forward is to encourage and incentivise institutional investors and the emerging Build to Rent (BtR) sector to increase the supply of long-term lets through new development, replacing lost Buy to Let stock and contributing to the country’s overall housing supply. This will not be straightforward for the reasons explained in Chapter 8 of the Full Report.”

Well, chapter 8 will have to have a deep dive at some point too. I haven’t read it yet. I concentrated on the Communist Manifesto parts and then the rent stabilisation parts. But I’ll tell you what I already know. BTR has been incredibly slow to get going. It’s tiny, a pebble in the pond of the sector, at the moment. It’s growing “fast” (the average unit is 7 years from concept to completion, so that’s how “fast” it is). This really DOESN’T sound very communist manifesto though – it sounds very “jobs for the boys”. In fact, it might have been cut and pasted from a George Osborne briefing note. 

There is NO concept of how long this might take, no concept of how the transition will be managed which is DECADES long, this is a disaster waiting to happen adopting this attitude.

There’s a sentence that comes up next that will have a few knickers in twists, but I think it depends on how you interpret it.

“The Labour government should discourage PRS landlords from entering the short-term and holiday let market or the more profitable nightly-paid temporary accommodation and supported housing sector. (IBID). This should be by regulation and equalising the tax treatment for all forms of private letting.” (Is this section 24 being applied across all – I don’t think so, from the footnotes. It is the suggestion of a tourist tax or similar to discourage SA-style units. 

“However, the Commission recognises that certain special circumstances may give rise for a need to freeze or cut PRS rents. This should only be considered as an emergency measure and that power should only rest with the Secretary of State. The powers contained within Section 31 of the Landlord and Tenant Act 1985 would be helpful in these circumstances.” Given that the word “emergency” is used with the same liberalism as the word “crisis” these days, you would be wise to be cautious about that point. The wording is already spread all over the Shelter website.

Are you still here? Still reading and listening? Well done. The good news has been limited, as you will have noticed. The next bit isn’t great either: “Annually updated PRS Decent Homes Standard 

Demonstrating compliance with an annually updated Decent Homes Standard should be a requirement of the information PRS landlords must register each year on the NLR. The PRS Decent Homes Standard should include: 

• A guarantee that the landlord or managing agent has undertaken the most recent training course and passed a test which demonstrates they understand their Decent Homes Standard, public health and other obligations

• Up to date gas, electrical, fire safety and other certificates that guarantee the safety of a home

• Meeting an agreed EPC rating 

• Meeting an affordable warmth standard 

• Meeting a ventilation standard 

• Meeting a standard for internet connectivity 

• Meeting an accessibility standard which fully complies with Article 19 of the UN Convention on the Rights of Persons with Disabilities”

Oh OK, so now we are responsible for mobile phone and fibre connectivity. Seems reasonable given we are responsible for everything else. “Affordable warmth” – shall we be responsible for the OFGEM price cap too? Fantastic. Great timing on this after energy prices have done what they’ve done over the past 36 months. Horses, stable doors and bolting, anyone? How bloody ridiculous. A ventilation standard – let’s hear it. The black mould problems we have over the past 12 months have included:

Heating not being turned on – too expensive

Windows not being opened – heating too expensive, “I like it warm”

Unplugged PIV system (many hundreds of £££ to install)

Can’t wait to be solving all those under the new system! Super idea. 

The next bit shows how well this report was snagged before release:

“The Labour Party has committed to ambitious plans to decarbonise Britain and grow the UK economy by becoming a clean energy superpower. Decarbonising homes in what is currently the second biggest housing sector is essential to that mission. The PRS Decent Homes Standard should be a mechanism for targeting high decarbonisation standards in homes. If backed by low interest loans to NLR registered landlords, it will make an important difference.”

Well, it sort of has, hasn’t it. Kier’s kind of backed out of that bit – or half of it – for the moment, hasn’t he. And landlords are going to pay, not use grant money? Sure, that stacks up. After all, they’ve got so much margin left, haven’t they, to service loans? Blithering morons. 

There’s more, as well, you know. Tenants’ rights to have pets (not absolute and unlimited). However, the report suggests it is all on the Landlord to prove that the pet is savage or dangerous, will alarm or unreasonably disturb other tenants or the general public, or that pet insurance isn’t obtainable at a reasonable cost. What a joke.

The next bit might put off more landlords than ANYTHING else. Remember – there’s a large segment of tenants, contractors AND landlords that hate agents. They think they do nothing, they think they are provide poor value, they think a lot of things that are frankly tropes and quite clueless. But that’s what they think. So check this out:

“All landlords not employing professionally accredited agents to manage their property must undertake regular training. They must pass an independently verified test as a prerequisite for registration on the NLR.” Wonder what that will look like, and how many Landlords of more senior years will just say “sod that for a game of soldiers”.

The dying embers of the exec summary cover the want to share enforcement duties between Local Authorities, the CPS and the Police, the new PRS Housing Ombudsman, and Tribunals and Courts. Sounds OK – if they do it. There’s several mentions of the Protection from Eviction Act 1977, which suggests the authors believe it is currently underutilised – but there’s no evidence of this suggested, given, or available.

They do make one further interesting technical point about intermediate landlords – not being responsible for rent repayment orders. The point being that you could insert an intermediate landlord – which you also control – and not have to pay back rents to the tenant in a rent repayment situation. I wouldn’t be overly worried though, because a “false” intermediate landlord would lead to all sorts of other potential charges, and I’d expect a precedent case for anyone trying to do that to have a different outcome to Rakusen v Jepson.

The “sort the courts out” bit that delayed a lot of the RRB in its current form – the answer proposed? “Reforms of the court and tribunal system lie outside this Commission’s terms of reference but a general review should quickly be instigated in government. A review of legal aid is also urgently needed. The inadequacy of legal aid is a key reason why tenants who are threatened with or subjected to illegal eviction are unable to pursue a civil claim. Thus people who are actually entitled to very large amounts in damages have no practical remedy.”

So, a quick review will sort it. There we go. That plus Angela Rayner’s motormouth about s21 means that there are now a couple of months for a record number of 21s to be served, and then enforced. We will only find out after the event how many that is, and it will be a tragedy. Anyway – my attempt now to put a frilly bow on this parcel of excrement and solidify communications that NEED to be pushed back on this report and the suggestions/conclusions.

  1. PRIVATE PROPERTY RIGHTS CANNOT UNDER ANY CIRCUMSTANCES BE COMPROMISED. This would be a massive step backwards and is, in fact, a disincentive for property ownership. It reduces flexibility and increases transactions – which I suppose the Government likes, because it picks up taxes in such situations – however, it also dislikes because it foots the bill of a PRS 10% or 20% smaller than it is today, FAST and in volume. USE THE SCOTTISH SYSTEM THAT’S ALREADY WORKING, IS FAIR, AND WAS ESTABLISHED BY THE LEFT!

  2. BE CAUTIOUS BEFORE TINKERING WITH COMPULSORY PURCHASE. We live in a Western democracy, and prefer (as a nation) libertarianism to authoritarianism. We are BRITISH. If you do tinker, be very cautious indeed.

  3. THINK ABOUT THE TENANT BEFORE YOU SPEND THEIR RENT MONEY. Margins are – look at all the data – historically low right now and they will be until interest rates come back down. A couple of years yet, most likely. THIS TIME IN TRANSITION IS FRAGILE AND CAN DAMAGE GENERATIONS. THERE ARE NO QUICK FIXES HERE.


  5. THINK CAREFULLY BEFORE STOPPING PEOPLE REPURPOSING PROPERTIES FOR TEMPORARY ACCOMMODATION. It isn’t clear to me that the needs of those in temporary housing are less than those in buy-to-let term properties, not clear at all. If anything I’d think it was the other way around.

  6. PLEASE PLEASE PLEASE use proper data sources, do the work yourselves, standardise and explain, and THEN come back with a proper, coherent and researched argument. Until then, your “data-based” conclusions are weak or wrong, and your other conclusions simply ideological. SORT IT OUT – this is too important for your blinkers to be on and for party politics to get in the way of important outcomes and peoples’ lives, for goodness sakes.

I hope you enjoyed – thanks for sticking with it – concerning stuff, even for “the unflappable” – but I tell you what – if they enact that crackers bulldust about not being able to recover possession – you’d be forgiven for thinking that today, I’d be out of there myself. Oh no. No no no. Buying at 40-50p in the £ on market value of 62.5p, and simply playing the waiting game? I’ve no issue with that. One of the great opportunities of modern times. Whatever the system does, I’ll be ready, pivoting, tweaking, and working to make it work for all. Stick with it, and stick with the Supplement.

Well done as always for getting to the end – remember the Early Bird tickets for the next Property Business Workshop on Thursday 4th July –

There’s only one way to deal with all of this continual noise, of course – Keep Calm, ALWAYS read or listen to the Supplement, and Carry On!