What’s the fastest-growing British industry of the last decade? Apps for smartphones perhaps? Web retailing? Payday lending? Actually, it is probably renting out property. The buy-to-let boom has seen a huge growth in the number of landlords, and the number of properties available to rent.
In 1999 private rentals accounted for 9.9pc of households, but that has now almost doubled to 17pc, and it is growing all the time. And yet the words “landlord” and “crackdown” now seem to be irredeemably joined together, like salt ’n’ vinegar. Hardly a week goes by without someone calling for a crackdown on rogue landlords, calls for controls on rents, or campaigns by the Revenue to collect more tax from them. Only this week, the Treasury came up with some new rules to restrict buy-to-let mortgages.
But if you pause for a moment and think of this as an industry, and all those buy-to-let landlords as entrepreneurs, then it is all very odd. For how many other industries does the Treasury specifically try to make it harder for small businesses to raise finance? Which other group of entrepreneurs gets targeted for price controls, or anti-tax avoidance campaigns?
The growth of the private rental industry has been phenomenal by any standards.
In the 1960s and 1970s, it was just about killed off by rent controls. Anyone who wanted somewhere to live in Britain had two choices – they could buy a home, or rent one from the council. The private market was hounded out of existence. But from the 1980s onwards, that all changed. Landlords were given the freedom to set rents and allowed to evict tenants who didn’t pay. It took time, but the market has since flourished.
According to a recent report by the select committee for communities and local government, back in 1999 there were 2m privately rented homes, out of a total of 20m households. Now there are 3.8m, out of 22m homes. There are slightly more owner occupiers – up from 14m to 14.3m – but significantly fewer people renting social housing. In effect, private rentals account for most of the increase in the supply of housing over the past 15 years.
This is a big business. With a current average rent of £723 per month, excluding London where it is more than £1,400 a month, rental income comes to about £33bn a year. It is in the same ball park as the restaurant industry, currently worth about £40bn a year in the UK, and bigger than the fashion industry, currently worth about £26bn.
You might think that would get some kind of support from the Government. But you’d be wrong. The average private landlord is about as popular as a man selling David Moyes scarves at Old Trafford on a Saturday afternoon. Only this week, the Treasury unveiled a move against “accidental” landlords, that is people who rent out a home they have inherited or they have found hard to sell. There will be tougher regulations on their ability to raise finance.
The Government has come up with a raft of new requirements for landlords, including checking that tenants have the right to be in the country, and that their properties are not being used for organised crime. The Revenue has launched a series of campaigns to make sure landlords are paying their tax.
Standard letting agreements have been introduced. Lobby groups have campaigned for rogue landlords to face prosecution, and for compulsory inspection of rental properties. The Labour leader Ed Miliband has promised to stop excessive rent rises, a national register of landlords, and more security for tenants. By comparison, even the cocaine industry gets let off fairly lightly.
Of course, there are some terrible landlords out there. Then again, there are some lawyers who overcharge their clients, and doctors who don’t run proper checks on their patients, and plumbers who insist you need a new boiler when all that is required is a minor repair.
The bad ones are more than likely to go out of business, the same way as anyone offering a poor service to their customers does. Nor is there any reason to think they dodge their taxes – at least any more than, say, plumbers. All of them have invested substantial sums of capital in their properties, which suggests they are financially savvy. By all means take action if they don’t declare their income, but there is little reason to specifically target them.
Worse, is it really necessary to make them check the immigration status of their tenants? No one asks restaurants to check the migration status of their diners? Or garages to make sure those slick tyres aren’t being fitted for a getaway car? Why should landlords be the only small businesses expected to work as part-time – and unpaid - policemen?
No one would deny that Britain has a dysfunctional housing market. Land is too scarce and credit too cheap, and that has made house prices higher than they should be. It may well be the case that the rental sector has boomed because many young people can’t afford to buy their own home. But it is surely unfair to blame that on landlords.
In reality, we don’t know what the right balance is between owner-occupied, private rented and social housing is. Owner occupation has dropped from a high of 70.5pc of homes in 2000 to 65pc now. That may be in part because some people can’t afford to buy. But it may also reflect a rising demand for more flexibility. A Polish scaffolder might be happy to rent so he can save up for a house in Krakow rather than Coventry.
It is certainly not very surprising that a country with very high levels of immigration – such as the UK – has seen a rising demand for rental property. It is completely wrong to assume landlords are squeezing people who would prefer to buy out of the market. In fact, they are providing much-needed housing for a more mobile workforce. They are also, remember, entrepreneurs.
Most are doing it in a small way, and with little more ambition than supplementing their pension. There is nothing wrong with that – people looking after themselves and their families are to be admired. But a few will go to create bigger business. If they were doing anything else – making clothes, or running websites, or opening restaurants - we would be encouraging them. Landlords shouldn’t be treated any worse than any other small business.
The only thing that needs cracking down on is the crackdowns.
