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> The Comprehensive Spending Review could spell trouble
for landlords |
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The
stereotype of a businessperson landlord would say they
favour low taxes, smaller government spending and minimal
interference from the state and we have some sympathy
with that caricature. With the recent Comprehensive
Spending Review (CSR), we have seen the biggest reduction
in government expenditure since the Second World War
and it pays to be at least a little circumspect about
such dramatic changes. Landlords don’t exist in
a vacuum and anything that affects your tenants will
also by extension have an impact on you.
Benefit
cuts mean families with less money
The bulk of the spending cuts will be coming from the
welfare budget and we’re talking total cuts of
£18bn a year by 2014 with an overall decrease
of £81bn. This includes previously announced cuts
in Housing Benefit and Local Housing Allowance as well
as significant cuts to other benefits and tax credits.
That’s going to mean a good deal less money sloshing
around amongst people on lower incomes. Unless you are
only renting high-end properties, and that’s generally
quite unusual, then it’s likely that the people
you are letting to will have less ready cash. That could
spell trouble on rent levels and also with arrears.
Cuts
will slow down Councils and Courts even more
We’ve looked at the economy in general. But start
thinking about how these cuts might affect how you run
your affairs as a landlord. Do you ever have any dealings
with your local authority? If you let HMOs, you certainly
will and there are plenty of situations that see a landlord
interacting with their local Town Hall. Councils are
notoriously slow in dealing with paperwork and decisions
already. The CSR cuts the grants to local authorities
and requires greater efficiency and job cuts. I can’t
see how that’s going to improve the service landlords
get from their local council.
One
other government department that has promised to find
savings is the Ministry of Justice that administers
the courts system. Whether we’re talking squatters,
rent arrears or anti-social tenants, getting the relevant
Court Orders can take as long as six months: action
needs to be taken in weeks not months. But it seems
that these Ministry of Justice cuts will extend rather
reduce the time that landlords have to wait for proper
legal protection for their properties. That’s
going to cost landlords a lot of money.
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Unemployment
hurts everyone
The Chancellor’s “best guess”
regarding job losses is that these changes will
add nearly half a million unemployed to the
dole queue, predominantly amongst public sector
workers. These job losses are already filtering
through with many quango employees already receiving
redundancy notices. Job losses, and even fear
of unemployment, make people more fearful of
making changes. It’s easy to argue that’s
good for landlords as many people will stick
to renting or move back to it until the dust
settles. But in any case uncertainty in the
employment market is bad news.
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Do you let a student house?
Thinking more laterally, we can see that even less
obvious changes in today’s announcement will
likely have an impact. The Higher Education budget
will be slashed by 40% and the recommendations of
the Browne Report implemented for university funding
and tuition fees. The doom-mongers are saying that
these moves will see a drop in student numbers. Any
such decrease will doubtless have an impact on landlords
renting to students in university towns and cities.
There
may be trouble ahead
Whilst we can see the logic in some of the Comprehensive
Spending Review cuts, we certainly take no pleasure
in them. Such is the magnitude of George Osbourne’s
plan, that they must be considered carefully. We don’t
have the full picture yet and the devil is always
in the detail. So whether you think they are right
or wrong, every landlord must agree that they’ll
have a significant impact on the residential lettings
market all over the country. And we believe that for
many landlords the impact will not be good news.
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