Friday, 6 January 2017

Can we blame Aylesbury landlords for the housing crisis in the town?

Many of these landlords are also known as the ‘Baby Boomer Generation’. These Aylesbury people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.

Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments. They have emerged as a successful and prosperous generation. 

Yet some have suggested these Aylesbury baby boomers have (and are) making too much money to the detriment of others, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while others are forced to pay massive rents or pay large mortgages.

Between 2001 and today, average earnings rose by 65%,
but average Aylesbury house prices rose by 123.6% 

The issue of housing is particularly acute for the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 year olds, moulded by the computer and internet revolution, are finding as they enter adult life, that it is very hard to buy a property. These ‘greedy’ landlords are buying up all the property to rent back out to them at exorbitant rents ... it’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen as greedy, immoral, wicked people cashing in on a social despair.

Like all things in life, we must look to the past, to appreciate where we are now.
The three biggest influencing factors on the Aylesbury (and UK) property market in the latter half of the 20th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell many of those Council Houses in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today in Aylesbury.
 
In 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria as there was pressure on these banks to grant mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) any working class person should be able to buy a home.  Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages. 

We can observe today those very same banks (that lent 125% with a just note from your Mum and a couple of breakfast cereal tokens), reciting the Bank of England hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s bank statements, asking if they are spending too much on socialising and holidays ... no wonder these Millennials are reluctant to ask for a mortgage (as more often than not after all that – the answer is negative). 

Conversely, you have unregulated Buy To Let mortgages. As long as you have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a reasonable job, the banks will throw money at you ... I mean Virgin Money are offering 2.99% fixed for 3 years – so cheap!
In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay that rose to 69% by 2001. Homeownership was here to stay as for many it’s very much a cultural thing here in Britain to own your own home. 

Many of these same baby boomers started to jump on the band wagon of Aylesbury buy to let properties as an investment. Aylesbury first time buyers were in competition with Aylesbury landlords to buy these smaller starter homes … pushing house prices up in the 2000’s beyond the reach of many first time buyers. Alas, it is not as simple as that. Other factors come into play, such as economics, the banks and government policy. But are Aylesbury landlords really fanning the flames of the Aylesbury housing crisis? 

The landlords of the 4,701 Aylesbury rental properties are not exploitive and are in fact, making many positive contributions to Aylesbury and the people of Aylesbury. Aylesbury (and the rest of the UK) isn’t building enough properties to keep up with the demand; with high birth rate, job mobility, growing population and longer life expectancy.
 
According to the Barker Review, for the UK to stand still and meet current demand, the country needs to be building 8.7 new households each year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand. 

It doesn’t sound like a lot of difference, but for Aylesbury to meet its obligation on the building of new homes, Aylesbury would need to build 251 households each year. We are missing that figure by around 105 households a year.

For the Government to buy the land and build those additional 105 households, it would need to spend £40,160,927 a year in Aylesbury alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year.


It is the property developers who are buying the old run-down houses and office blocks and turning them into new attractive homes to be rented privately to Aylesbury families or Aylesbury people who need council housing because the local authority hasn’t got enough properties to go round.  

The bottom line is that, as the population grows, there aren’t enough properties being built for everyone. Rogue landlords need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for tenants, where they can rely on good landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.  

So only you, the reader, can decide if buy to let is immoral, but first let me ask this question - if the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade ... where would these tenants be living now?

If you are a landlord future demand looks secure set against this climate. If you are thinking of becoming a landlord demand is not what should concern you. Buy the right product in the right location at the right price and all will be well. To discuss your plans get in touch ian@mortimersaylesbury.co.uk
 
Nala is happy now it is so cold, makes her feel at home!