Is Buy To Let Immoral? Part 2 of 2

Let's look at how the buy to let market got started. The urge to own our own homes is peculiarly British and sets us apart from our European neighbours where renting is the norm and who owns the house, or the land, isn't nearly as important.

Back in 1971, when Ted Heath was prime minister, around half of householders in Britain owned their own home. As baby boomers moved up the salary scale the proportion of homeowners steadily rose to 69% by 2001 when Tony Blair was prime minister. During the 80s baby boomers would often buy their first home to live in while "doing it up" to sell for a profit and move UP the property ladder. This went out of fashion thanks to TV programmes like "Homes Under the Hammer" which showed baby boomers an alternative way to make money from property and fuelled the buy to let market.

One unfortunate side effect of the trend for baby boomers to become buy to let landlords was to put them in direct competition for the most profitable smaller starter homes. Inevitably prices increased and, as the years rolled into the 21st century, house prices went beyond the reach of most first time buyers. This made it harder for them to get onto the property ladder and they ended up renting. The general economic background, bank lending and government policies all played a role but the general narrative does stack up.

Are Colchester Landlords Part of the Problem or the Solution?

I believe the vast majority of the landlords that own the 10,975 Colchester rental properties are part of the solution. There will always be good and bad landlords just as there are good and bad tenants. Landlords, in general, make a positive contribution to both the people and town of Colchester. One of the themes that runs through my blog posts is the shortage of new properties being built in Colchester, and across the UK in general. Demand in Colchester, for the foreseeable future, is only going to increase because:

• There's a rising birth rate.
• We're living longer.
• More people are moving to Colchester to live, work locally, or commute to London.

According to the Barker Review, for the UK to standstill and meet current demand, we need to be building an extra 8.7 new households every year for each 1,000 households already built. Nationally, we're currently building an extra 5.07 per thousand households, up from 4.1 to 4.3 in the early part of this decade, but not enough.

Those figures don't feel like a housing crisis - or even a huge gap to fill do they? Looking at the changes needed in Colchester to close the gap an additional 436 households would need to be built each year. We're currently missing that target by around 182 households every year. Bear in mind Colchester is a rapidly expanding town we would have to exceed the national target to stand any chance of meeting the demand for housing locally.

In the unlikely event the Government decided to step in and buy the land to make up those 182 households it would need to spend ￡58,322,446 a year in Colchester alone. Add up the totals to make up the shortfalls nationwide and the Government would have to spend an extra ￡23.31bn each year - money we don't have without massive budget and spending changes. Now it feels more like a crisis than a small gap doesn't it?

Against that background it's logical to turn to the private sector and ask what they can do to help make up the shortfall. Property developers are already buying up old run-down houses and office blocks, deemed uninhabitable by the local authority, and turning them into new attractive homes which can either be rented privately to Colchester families or to Colchester people who need council housing because the local authority hasn’t got enough properties to go around. The bottom line remains we're still not building enough properties in Colchester to meet demand.

I would like to see the UK rental market properly regulated to force rogue landlords out of business which would help change the perception of renting as a second-best option. Regulation could also offer better security for tenants and landlords could also be incentivised to maintain and modernise their properties to help revitalise the home improvements sector.

Over the two posts I've covered the background of the buy to let market in Colchester along with the pros and cons from both the tenants and the landlords perspectives. I'll leave you with this final question to ponder before you make your final decision:

If private buy to let landlords had not made up the shortfall over the last decade, where would all the existing tenants be living now?

Thanks for all the comments last week, now it's decision time:

Is Buy To Let Immoral?

Add "Yes" or "No" in the comments below along with any comments and questions you'd like to share, I look forward to reading your views. Alternatively you can email [email protected] or give me ring on 01206 862288 to share your views or discuss any aspect of the Colchester property market.