As The Guardian reports this morning:
The great property sell-off by landlords has continued across Great Britain this year, in particular in Scotland, where the buy-to-let bubble appears to have burst.
As the property website Rightmove reported that new seller asking prices dropped by 1.7% or £6,088 last month to an average of £362,143, Hamptons revealed that landlords were on target to have bought the fewest number of homes since 2010 – once the period of the first Covid lockdown is discounted from the data.
Private landlords, making microeconomic decisions, are deciding that it is time to be out of housing.
That, though, does not mean that the need for housing goes away.
Nor does it actually change the total housing stock in the short term.
What it most likely means is that some are withdrawn from use for the time being. And, maybe some new owner-occupiers might get a chance.
But that's not really why I am writing this post. The reason for that is to highlight that this issue arises from microeconomic concerns. Macroeconomically, and thinking in the long term that this requires, the signal is clear: it is that the time for a strong, collective landlord with access to funds to provide stability in the housing market is required.
For a long time, I have suggested that changes to ISA and pension laws could provide more than £100 billion of funding a year for a Green New Deal and other socially necessary projects. Funding that strong collective landlord would be one such socially necessary project. And who would not want to know that their savings were actually being used for a socially useful purpose rather than being speculated on the stock exchange for the sole purpose of enriching someone in the financial services sector?
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This question of choice is an interesting one.
If I had a choice, I would rather do the following.
Pay rent to a public or social housing landlord than a private one.
Pay my water bill to a public company rather than a private PLC that pollutes and pays generously to those at the top and shareholders.
Pay my gas and electricity bill to a public company rather than a private PLC that still makes massive profits and pays generously to those at the top and shareholders, when those of us at the bottom are having to choose between eating or heating.
I would prefer to have the option of public transport.
I would prefer a well funded NHS so that no one has to pay for treatment (unless they really wanted to go private).
I do not have these choices and neither does anyone. The Tories either took that choice away or dictated to us that only the “free” market offers a choice.
When you think about it, the current way of doing things removes choice for many people when it is quite clear public ownership would be better, or at least a better way of solving problems like the housing crisis. The market will never solve the UK’s housing crisis. Fifty years of failure proves that.
I share many of your choices
The essential premise of pensions is that the investments made during our work life, make life easier for the next generation of workers, such that they can afford to keep us in old age.
This of course includes the provision of quality, affordable housing. It is therefore totally appropriate that pensions invest in this provision.
More broadly, it should be recognised that the pursuit of shareholder value in pension investments, has not served succeeding generations well. Rather it has bequeathed low wages, job insecurity and a planet in jeopardy. That many with private pensions retire in affluence is disgusting, while their children and grandchildren are unable to secure the conditions appropriate for having a family.
I don’t want the State anywhere near my Pension or Isa thanks
You do realise that the state creates both and that this makes your comment most especially crass?
Peter’s reluctance is understandable.
You want the State to have access to the funds so they can direct where they are spent. Perhaps fine if they are spent on “socially necessary” projects. But who would decide what was “socially necessary”? The government of the day would.
Which today would be the Conservative party. You are naive in the extreme because you want to give more and more power to the State without ever asking yourself if you would be happy if that power was in the hands of people whose policies you disagreed with.
How would you feel if the government of the day decided it was “socially necessary” to build prisons to house those who disagreed with them and they used the funds your suggestion had made available to them?
Do you realise that vast amounts of pension fund money is already saved in government bonds?
What is the difference?
“I don’t want the State anywhere near my Pension or Isa thanks”
When Wilko collapsed owing £625 million, their pension fund was £50-million short.
Somehow the family managed to pay themselves £77 million during the past ten years.
Source: https://henrytapper.com/2023/09/30/the-wilko-family-owe-their-pensioners-an-explanation/
Robert Maxwell is alleged to have “borrowed” £426 million from the pension funds of MGN, MCC and the market research group AGB. Source: https://www.mirrorpensioners.co.uk/news/maxwell-the-fallout/
“Philip Green’s Arcadia had £510m pension deficit”. Source: https://www.theguardian.com/business/2021/feb/18/philip-green-arcadia-had-510m-pension-deficit-when-it-collapsed
That this can happen is not a good advertisement for private pension schemes. Other European countries give their pensioners up to double the state pension what we get in the UK. It’s as if the UK public gets such a poor pension in order to encourage them to go private.
The proposal could be set up as an independent public corporation, perhaps by Charter; backed by Government guarantees, and with proper regulatory and audit oversight (that would be a revolution in itself in the finance sector!); and therefore able to offer the low risk, high security, attractive rate of return to the pension investment industry (and most of all provide the pensioner with a low risk investment, and a reasonable return for the security of their investment); and at the same time actually do some good in the world.
As others have pointed out, in the 1990s the most appalling misuse of Corporate Pension funds were allowed to unfold; I need not rehearse them here. The private sector therefore provides a dubious historical exemplar for pensions; ever since neoliberal ideology took hold in business.
If you want some real context here, it is worth remembering the public recently discovered, only through the Truss-BoE debacle that the Private Pensions Industry had been involved in LDIs; and a complete catastrophe was only averted at the cost of an estimated £30Bn of public money: and the responses here seem solely to be worried about the protection that may be offered, by public offers in Pension Investment.
Meanwhile the “market” in Pensions relies on tax advantages only Government can offer; but I note little concern about what the pension market actually offers to pension investors. I will not dwell on the fees being charged by the Pension industry to operate a market already subsidised by the State. It isn’t a free market, and it certainly doesn’t come free. I note the short-termist, free market ideologues destroyed virtually the whole of the great mutual fund pension industry (which is a long-term investment industry), in short order; directing more profit to corporate managers; and turning the industry toward short-termism, notably in marketing, and by implication, short-term thinking. If I am not to assume the responses to the proposal here are just politically motivated, neoliberal ideological spin; or it stems from a Pavlovian, knee-jerk response emerging from naivety or ignorance; then I invite the critics to explain and justify a) the problems I and other have raised here about the private pension sector; and b) a systematic explanation of just how good the private pension industry is at providing a good return to pensioners, and a quantitative analysis of that return to the pensioners, after the returns made by the managers have been identified and extracted.
I believe in evidence. I am persuadable. I despise ideology. So, persuade me.
The state is already ‘all over’ pensions and ISAs – setting limits on contributions, total fund sizes and related taxes as well as withdrawal dates/ages and tax-free amounts etc etc. All of which can be arbitrarily changed, albeit not retrospectively (by convention!) And they determine the tax (or not) of anything passed to descendents by assignment. At the moment there’s a lot of concessions to saving this way, but that’s simply a policy choice, which favours the better off. To say ‘keep your hands off’ to the state is just to say ‘tax is theft’ for a specific form of wealth.
On the original idea: There is great value in linking long term reliable savings with the social benefits of affordable housing.
Thanks
It’s a good idea.
Richard,
As you have pointed out the State provides a risk free banking/saving service generally referred to as ‘The National Debt’
I have also suggested that in effect it is also a way of taking money out of circulation that might otherwise end up causing inflation or getting pit into various unwise or risky ventures.
So why not simply have a couple of ‘retail’ products ranging from the ability to buy some extra state pension, to short term savings accounts that I might use to save for next years holiday and not ‘link’ it to anything just make them solid good value products that meet peoples needs and that they can trust. If Kia did savings……….
But why only go half way?
I’m lucky that I live in social housing having come into it 13 years ago. It’s made life more affordable. My two eldest cannot afford a place as it means renting privately, so they’re still with me. My youngest has a well paying job, but still has problems saving for a house even though he lives with his girlfriend.
The only way to get more housing stock, it would seem, is to build more social housing, and your idea would provide a good deal of the funding.
It may seem simplistic, but the post-war boom of the 50s and 60s was made possible in part by plentiful & cheap social housing. Unless I have misunderstood the economics of the time. It certainly made it easier for my mother to be a housewife for several years while I and my brothers were very young.
Median household disposable income in this country is £32,300.
And average house prices are said to be £362,000.
A return of 5% on that figure would be £18,100 or about £1500 a month. Leaving people with £1191 a month for everything else. Tough but doable especially if rents are fixed and not allowed to keep increasing year on year.
Politely, do not be ridiculous
I am a landlord, a small one with one property and I’m sick of people misunderstanding the situation. I do not have the luxury of a copper bottomed incredibly expensive civil service pension. The stock market is too volatile and over reliance on USA stock will sooner or later cause big losses in fund returns, just look at the previous history with Japan. My income is supplemented by my BTL, or it would be if last year maintenance costs hadn’t wiped out any profit,before the legislative costs get added on and Osbourne’s insanity of treating mortgage interest debt as income. So here is a couple of things to think about: why are the family I rent to less deserving of a home than a FTB? My tenant could not afford the maintenance costs and blinkered journalists ignore the fact that to a tenant the Rent is the highest amount they contribute to the property whereas to the landlord the mortgage is the minimum, the starting point. Also, landlords are NOT taking property from purchasers, because the landlord will not overpay a price, unlike the buying public. Let’s then look at property without bathroom or kitchen deemed uninhabitable…you can’t get a mortgage and it can’t be rented out, so it takes the landlord investor to risk own money to bring a property back to market creating another roof over someone’s head…without which the property would remain uninhabitable. Give a thought to why I’m trying to supplement my pension and provide a home for a family instead of seeing me as the enemy, despite how easy it is for lazy journalists to push that agenda.
Did anyone ask you to do this?
I am n0t sure why you are bleating
I have been a landlord for over twenty five years. I have always rented to vulnerable / “non ideal” tenants at below market rents. This end of the market is not all easy profits and an easy life for landlords. Almost all of my working tenants would rather buy than rent, but for many different reasons, they cannot. Driving private landlords out of the market, which seems to be a common goal of all political parties and the local authorities where I live, will not help my tenants, whether working or not. There is huge scope for individuals with accumulated pensions/savings to become ethical landlords. This is not an easy task to take on, but it can be rewarding, both financially and personally. Tenants do not always pay their rent, (sometimes even when they can), they do not always treat each other or their neighbours well, they do not always look after their homes, they sometimes enlarge their families before finding homes which are large enough, and as a landlord you will be vilified by all ( probably not by your own tenants though, if you are a decent landlord ).
Most tenants are good honest people, who want to get on in life, but have struggled in some way. They need help from individuals with means and experience, who are prepared to take a risk with them. Property is a stable investment over the long term so the chance of losing your money is small. Most corporate landlords will not consider them, and social housing is no longer working. Despite what politicians say, my hands on experience tells me that there is a desperate shortage of rented housing.
In my opinion, those who believe that the situation for renters ought to be better, should if they can, consider providing homes for those in need.
It is no good, hoping that this is done with somebody else’s money.
With respect, scially owned housing is the answer that everyone wants, escept private landlords