I have already discussed the potential economic implications of coronavirus this morning. The purpose of this blog is to summarise the underlying economic logic of what I have said.
We will have an economic crisis in 2020 as a result of coronavirus. There can now be no doubt of that; the likelihood that this epidemic can now be contained seems to be very low indeed. The evidence from China is that the impact on productivity and the economy at large is enormous. Whether we can survive the impact of this epidemic without major economic consequences arising is largely dependent upon the effectiveness of the planning that the government undertakes now. What is apparent is that at present there are a few signs that this planning is taking place. We can hope for it in the forthcoming budget, but the signs are, so far, not good.
The key issue that the government has to decide upon is who will bear the economic consequences of what is to happen. I have already indicated in my first post on this issue that I think that the consequences of this epidemic will fall upon three clearly identifiable groups, which are individuals, businesses and government. However, when appraising who will bear the cost the criteria are slightly different.
It is unacceptable that individuals bear the cost of this crisis. There is simply too little economic resilience within the population as a whole for that to be the case. Far too many people have too few savings to survive major periods of economic inactivity without massive prejudice to their short-term and long-term well-being.
In addition, it is unacceptable that many businesses should fail through no fault of their own but that is what will happen unless the government steps in to prevent the major economic downturn that might happen this year. Cash flow issues will cripple many companies.
In that case it would seem that consequences of what might happen will fall, in the first instance, on the government.
As I explained in my previous post, the government can afford to bear a substantial cost from this epidemic precisely because it alone in the economy can suffer a cash flow crisis without risk arising. That is because the government of a country like the UK which has its own central bank and its own currency always has the means to create as much cash as their economy needs. This is, if ever there was a time to do so, the moment to appreciate that fact and use that ability.
But that is not to say that there are no costs to an epidemic: clearly there are. In that case the question has to be asked as to who should bear that cost. There are three groups who should.
Firstly, landlords should. I have already suggested that should the epidemic spread then as a matter of statutory right any tenant should be provided with a minimum three-month rent-free period to ease the stress upon them whilst this crisis last. I would suggest that the grant of that extension should be automatic to anyone who does not make a due payment of rent on the required date during the period of the epidemic. They should be automatically granted this extension by the landlord without having to make any further application or to complete any additional paperwork.
I stress that the cost of this will fall directly upon the landlords in question. I am quite deliberately suggesting that they should bear the heaviest burden of dealing with the epidemic. The reason is simple and is that whatever happens they will still have an asset at the end of this period, and no other sector can guarantee that at present. As a consequence they have the greatest capacity to bear this cost. And, if it so happens that some landlords do fail as a consequence, the assets that they have owned will still exist after this failure and so the economy can manage the consequences of this.
Second, I suggest that the costs of this crisis fall upon the finance sector. This is because, as I have also noted in my previous post, I think that anyone who has a mortgage or loan (including a lease) that they cannot afford to meet during the course of the epidemic period should be granted an automatic three-month extension to their loan period, which period might again be extended if the epidemic lasts longer than is expected. Once more I suggest that there should be no need to apply for this extension: simple default should be enough to trigger it. I am not in this case suggesting that the interest owing not be due though: it could be settled at the end of the loan. What I am saying is that cash flow must be eased.
What these two, straightforward, recommendations suggest is that it is those with wealth, and not those with low incomes or tight cash flows who should bear the burden of this crisis. That meets any definition of justice that I know of. But in both cases I am also being realistic: the value of financial assets of banks and other lenders is being preserved by this recommendation when if loan waivers were not in place it is likely that they would be prejudiced, whilst the value of land assets is not in any way diminished as a result of there being a rent-free period imposed for an external reason. To be blunt, given the risk that both the financial and rental sectors face as a result of an epidemic the proposed automatic waivers leave them in a better position than they would be in without them.
And what of government, which is the third party to suffer a loss? Its risk can be covered by coronavirus quantitative easing.
A plan of this sort is urgently needed, and now.
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“Firstly, landlords should. I have already suggested that should the epidemic spread then as a matter of statutory right any tenant should be provided with a minimum three-month rent-free period to ease the stress upon them whilst this crisis last”..Pensioners often live off rental income so this would just move the problem from one area to another..
So, they will take a hit
And anyone who as a pensioner lives solely off rental income has been poorly advised and will need to sell an asset
And so the burden will be transferred from the productive economy to wealth extractors (i.e. those who do not create any value in return for their income)
This would allow the productive economy to survive the shock, recover quickly and keep paying the dividends that most pensioners rely on.
This is actually a plan that will save the incomes of most pensioners
Precisely
Ir should be noted that the Treasury has already supported the banks and big business with a massive Interest drop. 9 As Gordon Brown did in his crisis.
One policy for the rich …
What if it means Landlord cannot pay the mortgage on the property and it is repossessed, everybody loses. Tenant is responsible to pay the rent just as Landlord is responsible for mortgage , upkeep of property etc. Not all landlords are rich and making lots of money.
So the landlord defers to the bank – but I stress, defers
Next issue?
And please don’t ask me for a great deal of landlord sympathy
You are just another scuzzy Marxist. Have you renewed your Moment(sc)um membership yet? University studenrs should get a rebate of 3 months fees and a rebate from the lazy striking “academics”. Academics should take a 3 month haircut…Some “academucs” with their less than salubrious habits are likely to succumb to CoVid19 more easily
Interesting claims
I am not a Marxist, and know more than enough about Marx to say that
And I have never been a member of Momentum
I also cease in academic employment in July, having been only one day a week this year.
I did not strike as I am no longer in UCU.
And as for my habits – heaven knows!
One thing I can say is academics do their research. You clearly don’t.
Why have they been badly advised.Seems perfectly good advice to me.This blog is becoming very eccentric to say the least.No wonder the Tories have an 80 majority.
Wow – planning for an economic crisis is eccentric
That’s an interesting idea
Given that most landlords have debt to fund their properties, does the loan exemption apply to them too? In which case it is the lenders taking the hit in all cases?
You will notice that banks only take a deferral, not a hit
I get where you’re coming from but, under no circumstances, can I see a Tory government doing this. Most of the people you suggest are Tory voters or backers or donors. It would also require empathy which I fear is also lacking.
Suggesting things no one will do is wat I am about
Most get done in the end
If the government can simply step in with CQE, why do you insist landlords should suffer ? If the government can cover people’s short term rental requirements, you look as if you are just targeting landlords for no other reason than spite ? What other reason could you give to this suggestion, unless of course you are simply trying to hijack another crisis to act as a means of wealth redistribution ? Even for you that would be a low point.
What is the delivery mechanism of CQE to the tenant?
For your argument to be rationale, Government should pay housing costs..thats either rent to a landlord or mortgage payments to the bank..otherwise you are penalising those who buy their home (as the mortgage interest is only deferred) whereas those who rent escape from ever paying the rent.
Also once you start putting law in place to give tenants rent free periods it would instantly signal a draconian move against landlords, the housing market would feel it is “the thin end of the wedge” which would definitely trigger a fall in house prices. Wouldn’t be good when the GDP would already be taking a substantial hit.
I concur with an earlier poster who suggested you are using an international crisis to further your political ideology.
Your comment is, very politely, crass
I am suggesting an emergency measure to tackle what will be a massive crisis, in my opinion. My logic is laid out and clear: the group with the broadest asset base must take the hit. In the UK that is landlords
Is this intended as an attack on landlords? No: it is an attempt to keep people solvent
Of course you may want people insolvent. That’s really going to help you collect rents, isn’t it
And for the record, house prices do not directly get reflected in GDP
I am sorry – but to be very kind, tour opinion is deeply ill-informed and proposes action profoundly harmful to landlords, which is the exact opposite of what I am doing
Peter Lorimer says:
“If the government can simply step in with CQE, why do you insist landlords should suffer ”
As I see it , assuming this economic stress is what is coming our way, only government spending will get us through the turmoil. The interesting thing will be be to see whether the government response follows the pattern we are accustomed to from the past decade experience.
If the government priority is to save the finance industry by direct intervention (top-end helicopter rescue again) the rest of the lower echelons of the social, and business, strata will take the brunt of the hit.
If government intervenes with cash support at the bottom of the heap where the need is greatest the rest of the structure will be supported, including the precious landlords who will get their rent, and then duly be able to pay their obligations up the chain. The rescue will save finance and banking, but it will take a little longer to take effect for the knock-on benefit of keeping the whole teetering edifice standing in the short to medium term.
We will soon see very clearly what the priorities of this government are.
Government spending will have to get us through this
But capital will have to take the strain too
What must not are already stressed people and productive businesses that we cannot do without
Hence the impeccable logic of my proposals that also happen to mean bait banks and landlords are protected from the worst of their risks as well – however much they refuse to see it
Christ the number of people losing their minds over a 3 month rent free period on here is mad. How is this any different from a period of tenant transition?
If as a landlord you do not have enough cash on deposit to cover at least 3 months rent then I’m inclined to agree with Richard.
Really, on a whim you decide you want to make a random group suffer, for the reason that thinking of a distribution mechanism is a bit difficult ? Sometimes the masks slips to reveal the inner tyrant doesn’t it Richard ?
Absolutely shameful
Hang on, so Ona. Whim you’d like the most vulnerable to suffer, and that’s OK?
I suggest you stop your abuse, in every sene of that word
I’m suggesting the government cover vulnerable people’s rent, and in your mind I’m trying to make vulnerable people suffer? The only person wishing suffering on anybody here is you I’m afraid. As I said, shameful
20% of people will be off work
There will be no time for forms, long application processes or anything else
we will be in national meltdown: a warlike situation
And I think those withy assets need to shoulder the burden, and landlords first of all
And if you don’t like that, tough. To argue otherwise is like saying there should be rationing, except for the wealthy
You say a minimum 3 month period. Surely you mean a maximum period?
A minimum period suggests they automatically get 3 months even if they recover quicker than that.
Is there a maximum? An open ended right is surely too much for any landlord to bear, especially smaller ones. We are not charities.
I think a minimum three month period is entirely reasonable – there is going to be mayhem
I can see it being extended
But that’s for the government to decide
And since a landlord’s only real cost is funding plus small amounts on repairs given that I have covered the funding angle with regard to the rest, you’re a risk taker: this is the cost of your risk
Why not extend it to other supplier of essentials – food, utilities etc? And down to their supply chains?
It’s a business risk for anyone, which (like landlords) will need to be priced in.
Why are landlords and banks a special case?
And why just this illness – why not extend it to cancer? Or stroke victims?
I have been absolutely clear why other supplies cannot be impacted: this is about keeping real businesses rather than asset owners going
If you can’t see that you really need help
Is this blog for real ? Richard Murphy claims to know something about economics ?
When he writes “The reason is simple and is that whatever happens they will still have an asset at the end of this period, and no other sector can guarantee that at present” he clearly fails to understand the difference between assets and liquidity. He also clearly fails to have a clue about who landlords actually are.
Obviously we are all dragons who magicked up properties from nowhere, didn’t have to invest any of our own money or time or effort into the business, and who sit rubbing our hands in glee like some modern day Scrooge counting our piles of gold. That’s a popular image for certain people to project so that they can demonise people who could be just like themselves.
I dare say you won’t be in the least interested in trying to understand that the majority of landlords are nothing like that. After all, it can be hard explaining something to someone who’s reason for existence depends on not understanding it.
Yes, I’m a landlord. No I’m not an “accidental” landlord, I’m not an “amateur” landlord. I’m a professional landlord who two other jobs in order to pay the bills.
To be a landlord, I have over the years foregone many things – such as expensive holidays that many take for granted, and many other things I could have spent my limited income on. Unlike the other common stereotypes people like to tar us with, I’m not some Rigsby-esque person renting derelict mouldy damp hovels for silly money. During the last void in the flat, my wife and I spent several weeks of our time, and around 6 months worth of rent in cash terms, on decorating and other maintenance so that it could be presented to the new tenant in first class condition – it wasn’t in a state we’d have been happy living in it, so we did what was necessary to make it so. New appliances, smoke/CO/heat detectors well in excess of what’s mandated, electrics all up to date and “certified”, etc – and this time round, new windows as the old ones were past their best, serviceable, but not what we’d want to be living with.
Then someone pops up and suggests that our reward should be to have no rent for 3 months. If we don’t have the rent for 3 months, then we can’t pay our bills – so does that mean we should get 3 months free of council tax, 3 months free of car insurance, 3 months free of food bills, etc, etc, etc, so that we can keep a roof over our own heads ?
Then you talk down the impact of having to sell the rental property – almost as if it’s like taking a few bits and pieces round to a car boot sale. If there’s a serious situation that triggers this 3 months free rent, then the housing market will be down the crapper – selling it will not happen unless you are prepared to let it go for a fraction of it’s real worth. In the meantime, the tenant will be homeless for the simple reason that a vacant property is worth a lot more than one with a sitting tenant – especially once the latest round of “landlord abuse” legislation comes into force.
So now it’s escalated from a simple “landlord has lost 3 months rent” to “tenant is homeless, landlord has lost *at least* 6 months rent and 10s of thousands of pounds off the value of the asset he’s forced to sell”. That is the reality Mr Murphy is careful to ignore.
I think it’s clear to see where the proposal comes from – just an excuse to redistribute **perceived** wealth – the communist mantra of “what’s yours is now mine”.
And you aren’t even self consistent within your own blog.
You write that “It is unacceptable that individuals bear the cost of this crisis. … Far too many people have too few savings to survive major periods of economic inactivity without massive prejudice to their short-term and long-term well-being”. Yet you go on to suggest a policy to deliberately target a group of individuals to bear not only their own fair share of the costs – but also someone else’s share as well. My wife and I and individuals too !
You also write that “In addition, it is unacceptable that many businesses should fail through no fault of their own … Cash flow issues will cripple many companies”
Apart from your incorrect equating of “business == company”, you are saying that small businesses should not be failing through standing their share of the costs – but at the same time saying that a group of businesses (yes, renting out property is a business) should stand more than their fair share and if they then fail, well too bad. “…if it so happens that some landlords do fail as a consequence, the assets that they have owned will still exist after this failure” is being disingenuous in the way many people are when wanting to take someone else’s property. If any business fails, the assets still exist – any cars they had will still exist, any machinery they had will still exist, the premises they occupy will still exist, any money they used to have will still exist.
So yes, I call bull manure on this. And I call you out as a charlatan, happy to spout forth as if you have a clue, but in reality you are only interested in redistribution of wealth – in your direction !
The last thing I’ll comment on is his followup comment that “And anyone who as a pensioner lives solely off rental income has been poorly advised and will need to sell an asset”. Priceless, absolutely priceless !
I don’t think the suggestion was that the pensioners are living solely off rental income, but are using it as a supplementary income over and above the state pension – and for the record, that is my forward plan since the state pension isn’t going to support a reasonable lifestyle. So I an planning ahead – you know, thinking beyond today and for example deciding that instead of just blowing what money I have on (say) a holiday, I might invest it so as to have a reasonable chance of a comfortable retirement.
It’s called “planning”. Presumably Mr Murphy would criticise someone for doing nothing at all in advance, but then complaining that the state isn’t supporting the lifestyle they’ve got used to ? But here he is criticising someone for having done that advance planning so that they aren’t sat there complaining that the state isn’t giving them what they think they should be entitled to.
An article so full of holes it doesn’t even need references outside of the blog post to show how inconsistent it is.
First, as a practising chartered accountant who has seen the accounts a=of many landlords over many years I know exactly how rent works
And I know exactly why want I have suggested is very pro-landlord
And yes, I know landlords are people, and very privileged ones at that
And so I have deliberately suggested that those who are asset rich should bear the cost of this crisis
What you are saying is your wealth should be preserved come what may, without even realising that what I am suggesting is the best hope you have for that happening
Your self-interest and conceit blinds you to anything else but your own concern
I feel quite sorry for you
And will happily ignore the ill-informed commentary you have provided
Simon,
I with you 100% on this, I sniff a whiff of politics of envy in some of those comments agreeing with Richard. I couldn’t believe what I was reading in his blog.
Like you, I have sacrificed holidays (haven’t had one for 3 years), social life, new cars, other luxuries and so much time in order to turn dilapidated properties that were sniffed at by first time buyers into beautiful homes which I then rented out. Yes, I did it partly for the capital growth which could be released during my retirement, but also I wanted to make a difference and help young people, like my sons, who couldn’t afford to buy. I keep my rents low so they are affordable, so make next to nothing each month on them, therefore any idea that I should also let the tenants live rent free for 3 months is just crazy – I am not a charity! Even the so-called homeless charities don’t pay their tenants’ rent. It’s fools like Richard that are making things so difficult for us PRS landlords that we are leaving the sector in droves. It’s the tenants that will lose out in the end
My heart is bleeding…
I am not posting any more of this self centred gibberish
Come on Simon,
as a small landlord myself I do agree that it is not a pot of gold as some imagine, but if as you say it is a well planned business three months rent free is small beer, especially if as Richard says you can also defer your loan to the banks for the same time period. It also has to be a better bet than possibly risking loosing your tenant with all the costs that implies, and in any case the increase in the value of your property probably dwarfs the three months rent.
Desp
Thanks
You get it
I don’t pretend it’s great
But better than it could be
Simon.
I’m guessing that, with Richard’s proposal, Landlords who have buy-to-let mortgages will be able to defer their mortgage payments as well as homeowners.
Landlords who own their properties outright will take a hit on income but not run the risk of their properties being repossed.
Relying solely on rental payments for ones income is a risky strategy.
(Not to mention the moral question of living off someone else’s labour by levying what is in effect a private tax on individuals just because the landlord is in a privileged position to own property and the tenant is not)
Another option would be for the government to create the money and pay everyone’s mortgage and or rent. All sounds far to “socialist” for this government though, I think.
Replying to Mr Murphy at 4:59 :
> And I know exactly why want I have suggested is very pro-landlord
“Think” is not the same as “know”. You **THINK** it is, but really it is not – it’s a proposal to mandate that one group of people pay for the misfortunes of others, regardless of circumstances of either party. It is a proposal to punish one group based on perceived wealth, to benefit another group based on perceived lack of wealth who may or may not actually need that help.
> And yes, I know landlords are people, and very privileged ones at that
Privileged ? You know no such thing. You may have had some “privileged” landlords as clients, but don’t tar us all with the same brush. I can add up our net worth, and while we are definitely into middle class territory, I can assure you that I know people with more wealth tied up in their own homes. Note what I mentioned earlier about having foregone benefits of (a meager) income over the years in order to reach our current state. We could have been on nicer holidays, we could have invested in a nicer home of our own, we could have driven around in nicer cars, but because we chose to invest in putting a roof over someone’s head then we are “privileged”.
> And so I have deliberately suggested that those who are asset rich should bear the cost of this crisis
OK, so you will be happy to sell your own home for “the greater good” then ? If you own your own home, then you are privileged and asset rich – by your own logic you should be helping out. If you rent, then it’s clear to see why you’d like someone else to pay for your problems.
> What you are saying is your wealth should be preserved come what may, without even realising that what I am suggesting is the best hope you have for that happening
No and no. No I don’t expect my wealth to be preserved come what may, but equally I don’t expect to have it “stolen”. And no, your idea is very much not the best way of preserving it anyway.
> Your self-interest and conceit blinds you to anything else but your own concern
Absolutely not. If a tenant has a problem, then I’d discuss it with them and see if we can come to an arrangement that both of us can cope with. FWIW I have forgone income in the past, overlooked repeated late payments, and various other problems – to help a vulnerable tenant.
> And will happily ignore the ill-informed commentary you have provided
LMFTFY: Will happily ignore anything that doesn’t agree with your economic bigotry.
In reply to Desparate at 9:18:
> but if as you say it is a well planned business three months rent free is small beer
If it’s a significant part of your personal income, then no it’s not “small beer”. I agree, there are probably a large number of landlords who could weather it, but also a lot that could not – or could not without hardship. The proposal is that because one group might face hardship, then another group should face it instead – regardless of circumstances.
And also, if the premise is that the tenant can’t pay rent because of this assumed mass temporary unemployment, what’s to say that I (and/or my wife) won’t be earning from my day job for the same reason. Should that happen then we’d be much more in need of that rental income than I am currently.
> especially if as Richard says you can also defer your loan to the banks for the same time period
IF, there’s an IF there. The banks may or may not agree to it, may or may not make a charge for it, and it may or may not make sense – especially since it would push back the end date for the mortgage, which for some will have been set to finish about the same time they stop earning from their full time job. We have a mortgage with an end date set for a very specific point in time. And either the interest still needs to be paid, or the loan amount will quickly compound up – meaning that the landlord ends up paying interest on the free rent. There are many permutations, not all will cope in practice. There’s also the issue that asking for a payment holiday will place an adverse mark in our credit files – which I’m sure will be waved away with some glib “the banks will all understand” sort of argument.
> It also has to be a better bet than possibly risking loosing your tenant with all the costs that implies
True. But as I said above, I would not lose a tenant without having weighed the options first. I’ve been there before. But that’s a far cry from automatically going without 3 months rent (and note that the proposal was for 3 months MINIMUM) – even if the tenant is fully capable of paying it.
> in any case the increase in the value of your property probably dwarfs the three months rent
Which is relevant how ? In the same way that an owner-occupier’s house isn’t liquid capital and can’t be used to pay (say) the council tax, the increase in value of the rental property can’t be used to pay the bills.
But there may be no increase anyway. Should a policy be applied, it would immediately depress the market – fewer buyers, more sellers == costs reducing. I have heard that Mr Murphy doesn’t believe in markets, but that is how things work in the real world. If, as is the justification for the idea of a”3 months free rent”, the argument is that tenants won’t be able to afford the rent – then they won’t be able to afford a mortgage either. Hit landlords en-mass and some of them will sell up (Mr Murphy has admitted as such, and apparently sees this as a good thing), and for the same reason that they are selling, others won’t be buying. The one who will be buying (at a discount) will be the ones with a large pile of gold coins they guard with their sharp claws and fiery breath – so further helping those Mr Murphy appears to despise a further advantage.
In reply to John Vinnie Adams at 9:53 :
> Relying solely on rental payments for ones income is a risky strategy
And not one I’ve been suggesting, nor something we do. But the income from the rental is a vital part of our total joint incomes.
> Not to mention the moral question of living off someone else’s labour by levying what is in effect a private tax on individuals just because the landlord is in a privileged position to own property and the tenant is not
That applies to just about any business – and also makes invalid assumptions. Firstly, the base assumption is false – I have a tenant who chooses not to own a property, but they could if they so wished. It suits them to have someone else take care of (e.g.) getting the boiler fixed, and all those building maintenance issues owners have to deal with. Some rent because it gives them the flexibility to up sticks and move with little hassle or cost when it suits them – we’ve had a few of those over the years.
But if it’s immoral, then why is running a bus service not also immoral – it’s a tax on people who can’t afford to run a car. How about a food takeway – is that an immoral tax on people who can’t cook, or don’t have time to cook ? Running a garage is a tax on people who can’t fix their own car ? Perhaps running a hotel is immoral because it’s a tax on those who don’t own their own holiday cottage ?
What is immoral is making wild assumptions and generalisations, then applying the results to claim some group is not what it is.
And finally in reply to Richard Murphy at 10:14 :
> When there is a crisis being too discriminating is not possible
Ah, the old “something has to be done now, this is something, we have to do it” argument. When there is a crisis, that is exactly when taking care rather than applying ill thought out knee jerk reactions is needed.
> Right may be correct term
I’ll respectfully disagree with that !
And leave it at that.
If I am honest I have not read much if this self interest justifying rant. I have published it just to show how rather unattractive some opinion is
As I have noted in other comment, I have done a rational analysis
The key to this crisis will be cash flow management, and ensuring as many as possible make it to the other side as physically and economically unharmed as can be
All normal assumptions need to be laid aside
We will be on a war footing
To suggest prejudice or political bias here is absurd: what I am seeking is to maintain solvency fir as many as possible, with massive state support a way of helping achieve that but with banks and landlords being expected to take short term hits to preserve their long term viability by ensuring they will still have customers
The intention is not to create political change, but survival if an economic system we might recognise
And as was the case in Ww2 there are those who will seek to abuse that because they believe their interests more important
I am really not interested in such selfishness
I’m with you Richard,
People with capital have to suffer AS WELL AS those without.
In my view QE will enable those with capital to further distance themselves from those without, through asset “inflation”, When we enter the deflationary cycle this will be relative asset inflation.
Why not go the whole hog and have the government pay everyone’s rent/mortgage and throw in spending money as well, they do have magic money trees they can shake.
Because there is absolutely no reason to do that
Could you see the banks helping with interest-free loans to SME’s or something to that effect? Would that be beneficial at all?
I think the government would have to underwrite that – and do not rule it out
For now, loan extensions would work for banking, I think, but everything will have to be kept under review
Little bit confused – I often am.
Are you suggesting that all tenants get at least 3 months rent free, or that they can delay paying their rent until sometime in the future?
I am saying that tenants can have three months rent free – and that vetting will not be required
I am saying anyone can defer mortgage and other loan repayments as well
And I am saying that this is very pro landlord and pro bank
If you can’t see that you really cannot work out the wood from the trees
Nor work out priorities
Thank you for your reply.
To be honest I’m not convinced that all Housing Associations will be able to survive without any income for at least 3 months.
The Bank of England appears to be arranging special facilities today
So a tenant would not even have to prove inability to pay, nor would they even have to suffering from the virus…they would automatically get 3 months rent-free, no questions asked?
You are absolutely crackers, Richard.
When there is a crisis being too discriminating is not possible
I am not crackers
Right may be correct term
I have big problems with the human rights issues involved in this idea. It is always tempting to reach for the stick, but walk through all the consequences first. Surely the simple problem is the lack of finance during illness which COULD be solved through the modification of existing mechanisms providing the will is there.
In the time available?
With 20% of people not working?
Have you thought about this as a gigantic systems failure?
If not, why not?
[…] The types of policy I have proposed will follow next. […]
Included among landlords are councils, housing associations, charities and the like. All with staff to pay. Many with obligations outside of the costs of maintaining their housing stock. Councils in particular.
How do you envisage them coping with the rent loss?
Some tenants are extremely wealthy paying thousands and in some instances tens of thousands of pounds a week in rent. There are properties with eye-watering rents as much as £250k a month in London. I’m sure they will be delighted to not pay rent for a minimum of 3 months on a (as far as I can tell) self-certified basis.
Is helping the mega-rich part of your plan?
You know all these can, and most do, receive state subsidy?
Have you noticed the BoE is planning special arrangements now?
You think this could nit be provided for social landlords ?
Why?
Wow!
When you wrote this Richard I believe that you had a big grin on your face and were relishing the response to come.
FWIW I agree.
Look folks, all Richard is carrying out is a thought exercise based on the logic of the 2008 credit crunch bailout, the May Government’s bung to the DUP and High Cost 2 – Sorry High Speed 2 – going ahead. The Government had the money right? And printed it.
Instead of bonus greedy tossers in the banking sector, unprincipled Irish politicians and the real estate lobby benefiting from Government cash (because HS2 just use railways as a developmental Trojan horse), all Richard is suggesting is that workers/voters get the cash this time.
This also makes sense in that private debt is two-thirds higher than the supposed Government debt we are lied to about, so helping real people out with flooding and Coronavirus issues will benefit debtors and lenders alike won’t it?
Too many of you detractors have your heads up your bottoms. Pull them out – not only will you find things more fragrant, but you’ll also have a broader view.
Actually, I wasn’t grinning
I was being rational
The issue is cash flow management with the least likely impact on long term well being
I think 8 came up with the best, and most rational, answer
And one that happens to also protect banks and landlords the most – by keeping their customers afloat
[…] Richard Murphy on tax, accounting and political economy – Read on http://www.taxresearch.org.uk/Blog/2020/03/04/banks-and-landlords-have-to-pick-up-the-costs-of-the-epidemic… […]
[…] wrote yesterday about the changes that I thought necessary within our economy to ensure that as many […]
Richard, good trolling. Sensationalist to attract attention – and it worked. Clearly giving 3 months free rent is a completely unreasonable, irrational, unworkable idea. If someone gets flu they don’t need 3 months off, let alone without paying rent. And how do you make sure people don’t just claim their 3 months regardless? Of course, you can’t. And of course, your supposition that landlords are rich and can afford 3 months without rent is a lie perpetuated by uneducated people like you. Most have a single property because the government has destroyed their pensions. They are not rich. They have a mortgage and don’t make any money for much of the 30 years it takes to pay it off – it is their pension. They can’t afford 3 months without rent anymore than you can afford 3 months without attention.
Not trolling at all
Just what the collective effort to beat the massive crisis we are about to face will require when with 20% of the workforce off at any time there will be no one to do the vetting on who can and cannot get a rent free period
And yes, those with second properties are rich, by definition, for the record
Some of the comments on this thread remind me of the guy on Question Time who was adamant that, on his £80,000 salary he was not in the top 5% of earners!!! He didn’t think that he was even in the to 50%!!!!!
Some people don’t know how lucky they are.
(Mind you, we all probably suffer from a bit of that and we are all about to get a lesson!!!)
Agreed
Individuals should not bear the cost. But an individual landlord should.
There’s a bit of a paradox there.
You claim that the landlord will still have an asset that is saleable. Not when the mortgage company has repossessed it, because the landlord couldn’t keep up the mortgage repayments.
There are so many words to describe you and your ill-thought out view. None of them are publishable.
I presume you are being stupid, deliberately
First, I specifically allow for deferral of the mortgage obligation to match the rent holiday
Second, a mass of rental voids as people are bankrupted would have the same result and I am also seeking to avoid that
But candidly, you’re too stupid to notice that
I use the word advisedly
And it’s not going to be easy to evict tenants who fall behind on their rent. If they have coconavirus then they are supposed to be in isolation. Who’s going to go round and chuck them out? I’m assuming 20% of bailiffs will be off sick as well. Could easily take 3 months to evict people anyway.
What’s wrong with grinning whilst being heterodox Richard? C’mon now – you’re putting forward ideas that help people. Worth grin or two?
The reaction from the more orthodox readers though was predictable.
🙂
You are making generalisations.
For example, that tenants are “stressed people” – you have no way of knowing this. Some might be, but if they are you don’t know that it’s related to being a tenant.
Or that “those with wealth, and not those with low incomes or tight cash flows” should bear the financial costs of the coronavirus outbreak. You are making an assumption that landlords are wealthy and that tenants have low incomes and tight cash flows.
I am a landlord with a low income and tight cash flow. I have a long-term chronic illness that has left me unable to work for 3 years, and will probably affect me for the rest of my life. I cannot afford to rent my own property, but my tenant, who earns a very high salary, is financially very comfortable with a high disposable income. If he doesn’t pay my rent for 3 months, I will starve and my sick cat will die because I can’t afford the vet bill.
Landlords are selling up and switching to short lets because they are already being penalised on multiple fronts and seeing their income drop, which is in turn adversely affecting the PRS. Landlords are people too, who should not have to lose income through something that is no fault of their own, and they are as liable to catch coronavirus as their tenants.
You suggest finance companies should defer landlords’ mortgage payments, by which you are assuming that landlords can afford to shoulder the debt of the deferred mortgage, without receiving their rent to pay it with. Also, what about their residential mortgage payments if they become too sick to work and don’t have income from their rental property(ies). Should they recover their health only to lose their home and find themselves with a big and unpayable debt on their rental?
Renting out a property provides a source of income that people budget and live to, just as anybody else does with a salary. You cannot assume that landlords are wealthy people who can afford to lose income in this way. A mortgage is not the only cost associated with renting out property. There are insurances, service charges, maintenance costs etc. to be paid too. Yes, a landlord will still have an asset after the coronavirus crisis passes, but you can’t eat bricks and mortar.
You need to think this through a bit more, stop generalising, stop making assumptions and get off the landlord-bashing bandwagon. Without the PRS, or even with a much smaller one, the situation for tenants would be far worse than it is now.
With respect, your situation is exceptional, and you remain a wealthy person, more than able unlike the vast majority in society to weather this
Your pleading is pure self interest
As for comparing being a landlord with being in work, I only hope you know how absurd that comparison is
Quick question: Do you think that ‘excluded’ tenants (lodgers) should, also, be allowed to not pay their rent for whatever period is deemed appropriate; giving that they are arguably the group most vulnerable to eviction – but, also, bearing in mind that their rent covers much more than a ‘normal’ tenant’s?
I think that an exceptional case
I would have to consider it
Simon 11.14
Your house won’t be reposessed if you own it outright but you may lose income.
On the moral aspect:
Housing is a basic human need. It should not be a business. The system is archaic. Back in feudal times, it was the Church and Nobility who ran the show, living off other people’s labour. Today others are also able to jump on the gravey train.
You provide nothing above and beyond that which could be provided by a not-for-profit housing association/co-operative, yet they can undercut you on price (rent) to the benefit of tenants ( and the wider economy as they would have more disposable income to spend elsewhere.)
I’m all for a publicly owned not-for-profit bus service. Again, it should be a service not a business. Transport needs to be affordable to meet our climate targets.
I also believe that everyone should have access to 2,000 calories a day as a basic need. I don’t think kids should go hungry. How people cook that food is up to them.
Your comment on hotels is just plain crass. Staying in hotels is not a basic human need.
We all sell our skills to eachother. I’m happy to pay for someone to fix my car. I then fix their computer. It’s called society. Private rent is a parasitic activity just like usury. Living off other people’s labour.
Thank you
“With respect, your situation is exceptional, and you remain a wealthy person, more than able unlike the vast majority in society to weather this”
This comment captures your motive in a nutshell..why have the random focus on landlords? Why not have an emergency wealth tax on anyone with assets? Also why stop as measure to counter the coronavirus why not counter equally (if not more important) issues such as climate change? After all the wealthy consume more why not hit them with an emergency tax to tackle this issue. What could be more important than saving the world?
I was seeking to address a crisis
Is that so hard to understand?
I have explained precisely why in that circumstance I have targetted the groups I have: just read what I have written
I have read what you have written and i read your replies to other posters..i conclude you seem quite bitter and see an epidemic as an opportunity to advance your own political agenda..thankfully no one is really taking much notice
You are….
As are others
I’d worry if I was you because I’m a remarkably clear-headed accountant and economist with an eye for cash flow management….
You have me so wrong
The victimisation of landlords in your blog makes absolutely no logical sense and only serves to highlight your personal bias.
I ‘technically’ rent my car – I pay a company X amount a month to use it for a set period of time. They don’t provide me with any other services, and I don’t own it at the end of it. Should I get 3 months free payment for this too? Technically, travelling by car will ensure I don’t come into contact with people on public transportation systems so would also be in the public interests.
How is this different to the ‘service’ provided by a landlord?
By the way, the services landlord provide are to renovate, maintain a house for tenants to live in, ensure they comply with all safety requirements, regular checkups, insurance and answer any issues they may have 24 / 7- so yes they very much are a service industry. If you believe that landlords sit idly by counting their millions (sarcasm) whilst tenants never break appliances / fences fall down / burn holes in carpets etc then you simply don’t have enough credible knowledge on the topic to make such sweeping statements.
I am not victimising landlords
I am working out how to make sure you might still have tenants who can afford to pay you when we have a massive crisis
And for the record, if you had bothered to read what I had written you will see that I am proposing that you can defer care lease payments for three months
So shall we stop the silly ad hominem attacks and realise that in a crisis you are not the priority, which is why I have suggested what I have?
As a landlord of over 20 properties and an active participator in landlords communities, I can confidently state that there are many many landlords that rely on 100% of the net rental income for their personal consumption. Recent tax changes, you are very aware of, have actually put some landlords into negative profitability. There are landlords that live in less salubrious situations than there tenants as they fight to build their portfolios to a point which provides sufficient income. One myth that perhaps fuels the dislike of landlords is that the activity is far from passive. With the pressures on the sector imposed by wave after wave of regulation and tax changes, maintaining a portfolio that supports a living is a full time job. The landlords may have a wealth advantage over a tenant, but in many cases has an income and cashflow disadvantage comparatively.
Your throw away line that the asset will remain even if the landlord fails, exposes a disdain for enterprise, which I find not only alarming, but inexplicably common amongst many intelligent people. As an economist you should not only understand, but deeply respect, the role of the microbusiness and sme in an economy.
That said, I partially agree with you. There is room for a mortgage interest holiday, with an equivalent amount being contributed by the landlord towards the rent bill. The addition of that interest holiday to the loan balance is a further option which could be argued dependant upon your stance. Ultimately, this would be a wealth tax when it boils down to it. It could cause some negative equity issues, depending on how the next few years play out.
The difficulty comes with the differences in debt across landlords in the sector. At one end they are unencumbered, at the other end they are leveraged to well over 100%. In the Durham villages the market hasn’t recovered from the self cert mortgage days and I have seen examples of properties with £80k mortgages being valued recently around £30k.
The simplest way to address this with the minimum pain is to let the government print the cash required to deal with the wages deficit and then impose taxes to refill the coffers in the better times ahead.
If government act now with VAT holidays, NI and PAYE holidays, most businesses would be able to get through this crisis. The government could increase SSP to full wages and allow recovery. This would simply mean changing parameters in an existing system. You will be very aware of the cost of implementing new systems, particularly in the midst of a crisis.
I fully understand the economics of renting
And that they are nothing like the economics of a micro business or SME
One pursues profit
The other pursues rent
Maybe you don’t know the difference: I do
And since I have covered the concerns of the indebted landlord what you are saying simply shows you have not read what I have said
In other words, there is no reason to note anything else you say as being credible, because it is not
It’;s just all about ‘me, me, me’
You really do not help your cause
Reading the various comments, it’s clear that there are three camps entrenched here.
Mr Murphy, pretty well on his own in one camp. The argument seems to be :
1) One class of people will be in trouble, are cash and asset poor, and need help
2) Another class of people are wealthy and can mostly afford to forego income from their businesses
3) Some of (2) will fail, but tough – it’ll be good for tenants
(1) is false. By the statistic he uses to justify his proposal, a SUBSET of unknown size (with an upper bound of 20%) of that class may be affected. Not all of the 20% will be unable to afford the rent, because anyone who does actually know much about the rental market knows that not all tenants are cash poor – hence the subset needing the help is some unknown group comprising less than 20% of those to be given the benefit.
(2) is also false. Being “charitable” to My Murphy, I suspect that the clients he claims to have advised as an accountant have been a self-selected subset who are of above average wealth/cash flow/asset status – a lot of us don’t pay an accountant to count the beans for us, and I would conjecture that there’s a significant correlation between size of rental business and those who have their books done by an accountant.
(3) is only partly true, some businesses probably would fail, but that would not be good news for tenants.
So because a small subset of one group might need help (and there’s an implicit assumption that their landlord would automatically do the worst thing for both landlord and tenant), all of that group should benefit at the expense of another group (not all of whom could stand that loss). So three false assumptions used to support the argument.
I note that Mr Murphy widely uses the “appeal to authority” technique. I also note that his “authority” as as a practicing accountant, not economist. An accountant understands (hopefully !) how to count beans and keep the tax man happy. An economist knows how economies work. I note also the use of the hasty generalisation technique as well.
There’s another camp that seem to support the idea of landlord bashing in general. But I don’t think they really do understand the implications of Mr Murphy’s proposal. If they truly did, they would not, in my opinion, be supportive of it – they’d recognise that any benefit it created would be outweighed by the damage done.
And then there’s the group of us who actually understand the economics of running a business 😉 Needless to say, anything we say is dismissed using the ad hominem technique of attacking the person presenting the case rather than actually addressing the case itself.
What is most notable is the number of questions Mr Murphy has “forgotten” to answer – I suspect because to answer them would undermine his case.
Perhaps he would care to explain why he believes that anyone with more than one property is “by definition” wealthy – other than due to an envy issue on his part. Note that he does not apply any conditions to that, merely that “by definition” anyone with more than one property is “wealthy”. Classic use of the hasty generalisation technique to make an ad hominem attack.
Note that I have not denied that I have a certain level of wealth, but I deny that it’s what My Murphy attempts to imply by saying that I am “by definition” wealthy. Others have pointed out that all owner-occupiers are “wealthy”, but it is all relative – add up all our assets and I can assure you that we (my wife and I) are not what most rational people would call wealthy.
And perhaps he would care to address the other question regarding his own wealth and why he feels he should not be subject to arbitrary forfeiture of wealth (as he is happy to propose against others) in support of the common good ?
Or perhaps, he’ll carry on with his appeals to authority, invalid generalisations, and ad hominem attacks to avoid actually addressing the valid points raised ?
Case is clear, unambiguous and logical if 20% of the UK workforce are off and facing cash flow crises as a result
It is premised on that quite extraordinary circumstance
You appear utterly unable to appreciate that
In which case I really see no pout but debating with any of your false arguments about me, or anything else
Please don’t call again: you are offensive
As a landlord I can see some logic in your thinking but it does seem flawed in many ways and it’s a shame you aren’t addressing some of Simon’s points as they are valid. Owning a 2nd or more property does not necessarily mean you are wealthy, if that property has significant lending against it then really the bank are the asset rich party.
When it comes to free rent, I’d suck it up… IF my tenant was truly ill/unable to work due to the illness, even though ultimately I think landlords should be able to claim compensation from the government. This is after all why we pay our taxes and their handling of the outbreak has thus far been absolutely shocking and so I would resent me losing out because of their mismanagement but that’s another topic. I can also see the logic that people shouldn’t need to complete forms in an emergency, but that doesn’t mean that down the line they shouldn’t need to provide proof that they were unable to work for that period at a later date, whether that be providing bank statements, letter from their employer or a doctors letter. If they were able to work or were not truly ill then they should be immediately in arrears. This blanket statement that everyone who rents immediately gets 3 months free, regardless of their financial situation, no conditions attached, no proof needed is frankly ludicrous and unnecessary.
Some of your responses do truly show disdain for landlords even if some of their responses to you have been unkind to say the least, that’s a shame because it does tarnish your objectivity credentials.
I am showing disdain for idiots: most of whom have followed up with some quite vile abuse
And regrettably, no one has made a good point, you included.
When you have an asset that will not diminish in value as a result of this proposal and you are wealthy, by definition (and please do not insult our intelligence or your own credibility by claiming otherwise) and I have covered the loan scenario (which you have clearly not bothered to read) whilst also wanting compensation that you do not seem to want for anyone else – come on please – you really are being quite ridiculous. And you want me to take you seriously?
Try a sensible comment in that case.
“I am showing disdain for idiots: most of whom have followed up with some quite vile abuse”
Which you seem to now be shelling out. Stones, glass houses?
“When you have an asset that will not diminish in value as a result of this proposal and you are wealthy, by definition (and please do not insult our intelligence or your own credibility by claiming otherwise) and I have covered the loan scenario (which you have clearly not bothered to read) whilst also wanting compensation that you do not seem to want for anyone else — come on please — you really are being quite ridiculous. And you want me to take you seriously?”
Wealthy: having a great deal of money, resources, or assets; rich. That is the definition of wealthy and my point is that by having significant loans against a property a person is not asset rich. The bank in real terms owns that asset. Miss payments and it is theirs, a significant risk from your proposal. I read your comment on lending and my point was an entirely different one, perhaps you should start reading comments more closely yourself? To defer loan payments is fine – great, but that doesn’t change the simple fact that to own a house on paper does not make you asset rich if the vast majority of that money is borrowed.
With regards to you taking me seriously? I honestly couldn’t give a damn, you not addressing reasonable questions shows quite clearly you don’t deserve to be taken seriously either. You yet again don’t address quite reasonable questions such as why providing proof, post event, that the person was unable to work at that time is not a rational compromise to your one size fits all, free rent for all, no government funding solution. Perhaps because as others stated there is an agenda behind your proposals. That in itself is fine of course, I actually truly believe in and support wealth distribution, but in a healthy and reasonable way, ie. increase taxes, increase spending in poorer areas, provide free education etc.
Have you actually heard that we are facing a crisis with coronavirus?
It would appear not
And you wonder why I might be a little disparaging?
If you catch coronavirus the world would be a better place.
The best I can say of that is at least you were short and to the point
Even honest
Unlike most of your friends
Scotty E.
That’s a bit harsh! You might not agree with the opinion, but wishing that on someone goes a bit far.
If you don’t like what you read, then don’t read it. Find a blog that tells you what you want to hear or alternatively, start your own.
Wow,
The most polarised thread I’ve seen on this blog!
If that analogy can cope with three poles!
Logic has upset the self interest of some rather petty people
Hey ho
I am interested in the greater good
It will be a very foolish government that ignores it
They will ignore the petty pleading of those more than able to survive the crisis
What an idiotic idea! How many tenants would suddenly develop symptoms of the coronavirus if it meant they automatically got 3 months free rent, I’m thinking quite a lot! UK would suddenly have more cases than China I’d bet! Most working people that legitimately get ill would be eligible for sick pay from their employer so should still be able to afford their rent. But if they couldn’t, they have 2 months before a landlord can serve a section 21 notice anyway for non payment of rent. By simply targeting landlords who have already had numerous new tax hits and costs imposed is ridiculous. This “plan” has no regard for landlords personal circumstances. Let’s victimise landlords for a pandemic! Good one…
You do realise that maybe 60% of the country will get cornavirus?
And that there will be no resources to work out who meets need or not?
And that having mass personal insolvency will not help any landlord?
Or, come to that the economy?
And that of all people in the country landlords are the ones with most chance that their assets will survive the crisis?
And yet you think they should not bear a cost?
Why?
I think traffic wardens should bear the cost… I dislike them as much as you seem to dislike landlords…
It’s a ludicrous idea and has no real thought to the implications other than the perceived “greater good” but in reality would have so many terrible repercussions. A blanket free rent policy with no checks would mean everyone would claim it, symptoms or not! I know I would!
Plus, if you do get coronavirus you won’t be going out much as you’ll be at home ill… so should have more disposable income plus employers sick pay
You’re a real charmer, aren’t you?
Nick.
Whether tenants get a rent amnesty or not, landlords are going to take a hit. People are just NOT going to be able to meet their rents if they are out of work. And it’s not just the people who have contracted the virus that will be jobless. Whole sectors of the economy will shrink because 20% of the population won’t be able to go out of their houses. As I’ve already said. Hospitality sector will take a big hit. Will stuatory sick pay cover people’s rent? (Not to mention those who won’t qualify for it)
And like I have also mentioned, who’s going to go round and evict the tenants who can’t pay? It could take 3 months to evict someone anyway. Landlords need to prepare themselves for the loss of income/rent. It seems inevitable.
I’m guessing you think that the government should compensate landlords for the losses they will incure? But most people in the country are going to be out of pocket as well. Who is most worthy?
Don’t shoot the messenger, just because he is pointing out an uncomfortable truth.
Thanks John
A positive idea.
An Ely business landlord is offering a “Shares-for-Rent” deal to some of his tenants, To cover the down-turn. Getting something and not losing an otherwise good tenant
That needs more explanation
Two points. More could be made. First many, indeed most, tenants who get the virus will feel almost no or only minor effects. Why should they be given a rent-free period? How is that fair? The landlord may get the virus and his tenant be unaffected. What about compensating the landlord for the stress he suffers.
Second, has Professor Murphy not heard of moral hazard? He writes “the extension should be automatic to anyone who does not make a due payment of rent on the required date during the period of the epidemic. They should be automatically granted this extension by the landlord without having to make any further application or to complete any additional paperwork.”
So the tenant doesn’t even need to show he has the virus or that it has made him ill or that he has been off work? He doesn’t need to produce a sick note or make a solemn declaration that he has the virus. All he has to do is fail to pay his rent “on the required date” and he is to be given the rent-free, according to Murphy. What of the tenant who does not catch the virus but just says to himself “If I fail to pay this month’s rent, I get an automatic three month rent-free period. What’s the downside for me?”
Some landlords will indeed bear a cost. Their tenants may be adversely affected by the virus and fail to pay the rent. The landlord then may have a bad debt.
Thankfully, it is unlikely this Government will introduce this hare-brained nonsense.
It would seem that you, like so many other small-minded landlords who have posted here, have not the slightest comprehension of the risk that this virus poses.
The government has noted that at any time up to 20% of the population may be off work.
If that is true, then very large numbers of people will be off work for other reasons: there will simply be no demand for them to be present at work because in very many sectors their livelihoods will be at risk, and they will be laid off.
The result is that we are going to face a massive downturn inactivity, Whether people are ill, or not.
If you, as landlords, continue to demand payment from your tenants, then they will not be able to pay: Nor will we have any resource available to determine those who can, or cannot.
So, we have to go into emergency mode, Determining who is, and is not, most able to withstand the cost of this crisis, and let me assure you I chose landlords with good reason: you are wealthy, With an asset that will keep its value if (and I stress the point) your tenants are not bankrupted by this crisis, which is exactly what I’m seeking to avoid, on your behalf
Rather than being rude,I suggest you should all be extremely grateful to me: nothing could be better for you than the proposal that I’ve made, but you were too small-minded to see it. My fear is that a small minded government might agree with you.
You have not addressed the moral hazard point at all. Granting the landlord an extension to the loan period also involves moral hazard. Could a landlord whose tenants are paying the rent receive the extension? As you say: “there should be no need to apply for this extension: simple default should be enough to trigger it.” So the banking system is to be put on hold and instead of getting a stern demand from the lender, the landlord gets a letter:
“Dear Landlord, we have not received your monthly interest payment. Congratulations. You do not need to pay interest for the next two months. We have extended your loan repayment period by three months. If the coronavirus epidemic lasts and you default again, we’ll be extending your loan repayments again. Have a nice day! Love and kisses Your Bank”
Calling me small-minded does not answer my points.
If you think the moral hazard risk of a landlord having a three-month void, with a matching deferral of mortgage obligation, is the crisis that we face this year then small minded seems the appropriate term, to be candid.
If you cannot see that, I’d suggest may case is proven
And yes – I reckon what I have suggested is the most amazing deal for landlords – who will otherwise have non-paid rent and mortgages to pay
But apparently you can’t see that. Wait until it hits I say, then you’ll be begging for it
He runs office blocks that have several small and start-up businesses. For the businesses he is selecting, he uses the share price in the last funding round and offers to accept (new) shares in lieu of rent.
( This has not resulted in any deals, yet )
“And please don’t ask me for a great deal of landlord sympathy“
quoting Richard Murphy above.
So Richard, assuming your lack of sympathy for landlords predates your article and no doubt influenced its content, thus exposing it to bias from prejudice, could you please rationalise (without calling me names, or suggesting I am a lesser person than you, stupid, ignorant or any other adjective designed to weaken my credibility) why you do not have sympathy for landlords?
Lets break it down to make it easier on the reader:
Consider accidental landlords (I prefer the term incidental) landlords with one or maximum two properties rented to tenants.
then consider professional landlords whose own livelihoods rely on the investment income their “business” receives from rent, net of costs and therefore the “Business profit” thereof.
(perhaps whilst at it you can explain why you dont consider this net rent as business profit?)
I really do not care which landlords we are talking about: I am not showing a bias against landlords, I am showing a bias towards the vulnerable. And with the very greatest of respect an ‘accidental landlord’ with a property or two in addition to the one that they live in, is not vulnerable, and nor can they on any scale be the people who need support in the massive crisis coming our way.
And for the record, letting is not a business. If you are not aware of that, go and find out why.
You are clearly seeing the distinction of trading income to investment income as the difference between a business and an investment.
This is flawed on so many levels I could write a book on it.
The classification by HMRC of the revenue is not a basis to determine what is and isnt a business
Write the book
You’d still be wrong
And HMRC do very clearly see the distinction or the rules would not differ
So what’s your next wrong point?
I asked you to rationalise why you do not have sympathy for landlords, a statement you wrote in the past 24 hours.
You are now stating you do not have a bias against landlords which is arguable but not relevant.
Your response ignores the question completely. So please explain, in rational terms, why you dont have sympathy for landlords?
I have answered the question many times
Why not read what I have said?
I do not have sympathy with landlords IN THIS CRISIS as they have a durable asset that will survive it but their tenants do not have incomes that will necessarily prevent their insolvency – and that threat is very widespread
In that case landlords who want their incomes to survive should want solvent tenants – and that’s what my plan delivers
Right now all my sympathy is with tenants, but that happens ti be the best favour I can also offer landlords IN THIS CRISIS – in case you miss the point, again
Perhaps I should draw your attention to the Ramsay case when determining what is and is not a business. Or is that outside the field of expertise if a chartered accountant?
I am talking as an economist
Rent seeking is not a business activity
It does not generate economic profit
Professor, come off it. You are saying that if I cannot see your point and agree with you then your case is proven. That if I do not agree with you, you must be right and I must be wrong. Well I suppose, in your own mind, you win every argument because anyone disagreeing with you must ipso facto be wrong.
That is not what I said
I pointed to the reasons why I had made my proposals
You ignored them
Generally speaking universal benefits are the cheapest to administer – and so I have to agree that a three month rent free/mortgage free scheme could work as you suggest. It will alleviate hardship and get more money into the rest of the economy.
I do have some sympathy for many private residential landlords – the ones I meet are simply trying to secure something for their retirement – they don’t have public sector or good employer pensions. They are alos now being hit with restrictions to mortgage interest relief (the sole purpose of which seemed to be to encourage larger company landlords of the like that convert office into ‘homes’). Most private landlords I speak to would welcome registration with local authorities so that all abide by minimum standards – something the govt seems to be against. I do think on balance that private landlords can be part of the solution in a well regulated environment.
The purpose of the restriction was actually to create a level playing field with owner buyers
There was no reason why owner buyers should have no tax relief and landlords did
But the mortgage interest restriction doesn’t apply to corporates – (my heart doesn’t bleed for individual landlords)
Agreed…and it should
An owner occupier has the use of the property for his or her family. They can take in a lodger under the rent a room scheme and earn £7500 tax free (which is far more than most landlords make in profit on a single house). They don’t pay CGT when they sell the property and they don’t have to provide fire alarms, fire doors and door closers and carry out gas safety and other inspections. (For the record I have no objection to safety requirements, though some are over-kill.)
With the restriction of mortgage interest relief, some landlords will pay in excess of 100% tax on their profit. They can even be taxed on a deemed profit when they make a loss, e.g. because of a rental void or a bad debt. Landlords don’t have the use of the property, all rent is taxable income and they pay tax on gains. Restricting tax relief is nothing to do with a level playing field.
Sell up then
It really is that easy
Methinks you do protest too much
No one asked you to do this
“When you have an asset that will not diminish in value as a result of this proposal”
So if the Government adopted your proposal do you think the house prices would be unaffected? Well if there is a rent amnesty for Coronavirus then there is a good chance there will be for other national emergencies further down the line. It it would be seen as a targeted attack (as indeed it is) and house prices would definitely fall…so your statement is clearly wrong.
I think my proposals provide the best possible chance that house prices will be maintained
Anything else and I think there will be a crash
I very much hope that some of the people who provide your funding can see your behavior on this thread. You really are a deeply unpleasant man, but the saddest thing is, you are completely unaware of the fact.
You honestly think using the term Rachman isn’t profoundly offensive?
And you wonder why I take offence?
And I am unpleasant for pointing this out?
I have to say that landlords really have not covered themselves in glory here
Mine is a very simple question, Richard Murphy have you been taking drugs? or are you just an idiot?
Actually Accountancy Personality of the Year
And Acopcuntancy Social Media Influencer of the Yera
An FCA
And honorary FAIA
And a prof at three universities right now
And no drugs involved
Just deeply rational economic analysis
Lots of landlords getting their knickers in a twist here.
What Richard is saying is quite simple.
Banks will need to give people a break from paying mortgages (including landlords with buy-to-let mortgages) If they don’t, the danger is that if enough people default on their mortgages the banks will collapse (see 2008)
Landlords will also need to give tenants a break from paying rent or the tenants may be pushed into bankruptcy which will then have the potential to take down the landlords as well. Landlords are in the position of having the value in the property to fall back on as a worse case scenario.
I don’t see the contravercy in saying any of this?
Nor do I
But the comments not posted are pretty nasty and some of those I have put up are pretty vile
So, sure I react
And I also find it irritating to be accused of saying things I haven’t to suit people’s right-wing agendas when all I am looking at is the best way to manage a crisis
That said, I admit I do not suffer fools gladly, but I am not sure why I should when people turn up to prove how foolish they are
Private rental sector and bank usury are both parasitic activities.
Some people don’t like this pointing out to them.
Like you say, if being a private landlord is such a headache they can always sell up.
Funny how those who champion free market capitalism, look for State bail outs when the free market bites them in the arse.
“Write the book
You’d still be wrong
And HMRC do very clearly see the distinction or the rules would not differ
So what’s your next wrong point?“
“ And for the record, letting is not a business. If you are not aware of that, go and find out why”
“ I am talking as an economist
Rent seeking is not a business activity”
All above quotes from Richard Murphy:
My response below:
Niall Ferguson is also an economist and recognises the rule of law as an essential element in developing economies as talked about in the Reith lectures.
You can say lettings is not a business as an economist, an accountant, a bigot, a troll, or a sanctimonious fool with an overinflated ego and a void of social skills – but you would still be wrong. The law determines that the activity is a business and that is fact.
So what is YOUR. next wrong point?
And I am suggesting a change in the law
Your next point is?
So much arrogance from a so called “highly intellectual” person who lives in an ivory tower with no idea or common sense about the realities of life. Such a huge ego its unbelievable. Bet this comment won’t be shown.
Sure I will show it
Have you read my CV?
You think that indicates no knowledge of life?
I’d suggest that it indicates an ability to forecast the consequences of crises that you don’t seem to share
Your CV shows that you are obviously an intellectual but shows nothing of your experiences with “real” life or business experience, just a part of an elitist club/mutual admiration society. The Inland Revenue accepts my property business as a business rather than an “investment” and I am not a parasite. I look after my tenants and all are happy, never had a complaint or bad tenant. Who would house them if I didn’t? If help was needed because of this virus I would be sympathetic towards them. I also have another business with 1000’s of satisfied customers, is that wrong in your eyes, am I capitalist pig. Is it wrong that I invest/risk my own money to purchase run down houses and restore them to a high standard in order to provide decent homes that the Government can’t. I really just don’t get where you’re coming from, nothing of what you say makes any sense to me. I’ve worked hard for what I’ve got, always paid my taxes, always done my best when required, what is wrong with that? Why is it so hard for you to accept that I have done good and nothing bad all my life?
I’m no intellectual but educated to Post Graduate Level with other qualifications and all financed from my own resources. I await your belittling reply with interest.
I don’t wish to belittle you, but I am utterly baffled as to why you wish to be so completely rude to me, or make up so many blatant lies about me, and my attitudes.
I am a chartered accountant who has, by chance or otherwise, become a professor of political economy, and other subjects.
But, along the way I was senior partner of the firm of chartered accountants in 15 years, which obviously provided me with no experience whatsoever of real-life or business.
I’ve also, as a company director employed many hundreds, if not thousands of people. Again, has given me no insight whatsoever into the business world.
And I have not called landlords parasites.
Nor do I think your capitalist pig.
In fact, my politics are intensely pro-market, but are based on an understanding of fairness which, I admit, many of those call themselves capitalists clearly have no comprehension of.
I am not saying you should not invest your money as you wish.
I will have to take your word for it that you done nothing bad in your life: you must be almost the only person who was ever lived who has not dome so
But that apart, quite literally, you have written the biggest pile of nonsense about me that can be imagined and all because all that I have done is say that in the event of the most massive economic downturn that we might ever have experienced, which I believe the coronavirus is going to create, landlords should to take a three month rental holiday because they have the greatest ability of any sector in the economy to survive this episode, almost unharmed, and most especially so if my proposals are adopted
So what am I meant to interpret from your comment?I guess the only reasonable assumption is that you are willing to make up any old nonsense to defend yourself interest against all others in society. How terribly Thatcherite of you.
I understand your thinking,
So in parallel, Banks should forgo their mortgage interest payments and at the same time pay no interest payments on any investment accounts, estate agents can work for free, accountants can take 75% of their fees, insurance companies can not charge for those months, pension holders should forgo any growth or interest on their investments……
That way no one gains from any investment, a good idea
If you wish to be crass would you mind doing it elsewhere?
All said and done, 130+ comments for just one article. Is that a record?
No, but it’s unusual
There is not a crisis now and there may not be one but simply allowing tenants and borrowers to default without adverse consequences will mean they will be incentivised to default. Why should the healthy tenant whose job is secure keep paying rent if his healthy neighbour or colleague in a secure job stops paying his rent?
You may bring on the very crisis you say you are trying to avoid. If several million tenants get their 3 months rent-free and several hundred thousand landlords get their three month interest holiday, what happens to the lenders whose cash flow drops suddenly? They may have borrowed on the money markets and will have to pay interest on the nail. With what? Please explain how your idea will not bring about the collapse of several banks and a panic in the market.
For heaven’s sake…I am making suggestions for a likelihood
That’s the definition of responsibility
Does any landlord here have the slightest sense of macroeconomic responsibility?
Ian.
So what is your solution to the scenario Richard has envisaged?
It’s not about “simply allowing tenants and borrowers to default without adverse consequences”, it’s about trying to stop people from going bankrupt or having their houses repossessed, so they don’t bring down the whole economy with them.
How are you going to “means test” who is worthy and who is not and get the money to where it is needed in time to prevent the above?
Come on. What’s your big idea?? Post it and give us the opportunity to shoot it down in flames.
Richard the fact you are baffled why people are rude to you illustrates the issue here and it is definitely with you. If you are unable to see your true character in the comments you make above, how disrespectful you are to people who make educated arguments, how you attack the individual and not the argument, how arrogantly dismissive you are being. I am, no doubt amongst others in this thread who rarely stray from making a point for the benefit of the debate and give freedom to others to state their own case. Only in the most extreme cases of utter disrespect do I let down my guard and respond like for like. If you wish to see an example, please re read the first comment I made on this thread and your response, which is belittling and designed to discredit me. You go on to do this with almost everyone who takes a counter stance to you. You are selective in what you publish and clearly only publish the comments that you have conceived a snide response to. You have chosen not to publish one of my comments, perhaps because you dont have an answer to it that sufficiently feeds your ego. Whatever your badge or history is , the issue definitely lies with your present!
With respect, I have so far not had an intelligent comment from a landlord commenting here
All I have read is self interested defence of personal well being at cost to society at large
And yes, for the record, I do find that particularly unsavoury given the crisis we are facing
If you don’t like that – tough. You’re one of those acting in that way.
This whole dialogue shows a simple diving line:
Opinion 1 – Landlords have worked to build up capital to buy a property, pay for the upkeep of the property, earn profit on their investment and pay taxes on their profit.
Opinion 2 – Landlord are rentiers who feed off the less fortunate and their activities offer no economic value to society.
Most posters on here have opinion 1, Richard has opinion 2. They are ideologically polarised hence the incessant arguing. I think it is best to accept that opinions are exactly just that and just move on.
That is utterly untrue
Why not consider the fact that I am discussing Coronavirus instead of making what are, quite literally, stupid comments?
Discussing coronavirus in the context of making one section of the economy, landlords, bear a significant financial burden – this is the crux of why you have so many responses on this post!!
And as the discussion unfolds it it absolutely clear there is an ideological divide – you even want the law to change to align to your ideological bent.
So as someone try’s to draw a line under this and move on you dismiss their comment as “stupid”.. it seems you purposefully inflame and antagonise as if you enjoy it.. quite bizarre behaviour
What you have clearly ignored us every single comment that I have actually written
I have noted that whole economy will have a crushing burden, landlords included without such actions
I will explain again in the morning
What you might like to do us explain why you all feel like victims who have an entitlement to never lose. Why is that? What makes you so special?
[…] will also be apparent, there have been many comments from landlords on here, which are without exception deeply antagonistic to that suggestion. The ones published are the […]