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Some might argue that it is fair to say that we landlords are not a publicly popular cast. Despite our cohorts being filled with, for the most part, people seeking to better their lives and the lives of their families, we do suffer a public image problem. In part, this is due to an extremely small subsection of our industry, but for the most part, it is a result of a general misunderstanding by the media and the British public.
The private rental sector is an important element of the British economy and society. The provision of both short and long term rental properties is a prerequisite of a properly functioning economy and society. However, it is easy to forget how important the societal role of renting is. For many it is easy to cast aside any understanding of the benefits of having a private rental sector, choosing instead to discount its role to merely housing of last resort, provided by self-interested capitalizing landlords. Unfortunately, it is this point of view that explains part of the industry’s negative public image.
Anecdotally, the diminishment of the benefit of renting is something I encounter regularly. Friends, colleagues, and counterparts can find it bemusing that I, a financially secure landlord, choose to reside in a rented property (and have done so multiple times before). I do not lack the necessary savings to put down as a deposit, nor is my income and credit rating insufficient to acquire a mortgage. So why would I opt to rent rather than follow the time old wisdom of purchasing my own home to make my own? In short, flexibility. A word at the crux of why the private rental sector is so important to the British economy. Sometimes, it is worth reminding ourselves as landlords and as tenants just how beneficial renting can be.
The Economic Benefit of Moving
The quintessential middle-class notion is that of a family in a secure suburb, backed by a stable long-term job. It’s part of the reason why the saying ‘laying down roots’ is so common. However, for younger people, this is a less realistic prospect. Many industries are concentrated in specific locations, in and around city center hubs. People who want to venture into the unknown and pursue different careers do so knowing that they may have to move to get the role of their dreams or to further their career. Being able to live in different locations is a valuable requirement of the modern, dynamic economy.
Unfortunately, the ability to move to new locations doesn’t reconcile well with traditional home ownership. The average cost of moving home in the UK is £11,777. For many, this is a prohibitive sum. The cost of moving can deter many from choosing the right job and location for their goals. It makes people become stagnant, both at a cost to wider society and at a cost of their own economic wellbeing.
Thankfully, the private rental sector provides people with the opportunity to rent properties throughout the country. Young professionals and aspirational families can move to the location which offers them the best quality of life, without the risk of accruing a five figure debt in the process. People can ‘test drive’ a new job and a new location without fearing the risk of it not working out and requiring an additional £10,000 or more to move back to where they previously lived.
It is landlords and the private rental sector that provide professionals and families with the opportunity to make leaps of faith. The inherent flexibility of renting and the lower movement costs allow people to move where they wish. The result is that people face less risk when pursuing advancement or the job and life of their dreams. In doing so, they unlock their economic benefit to society, for the betterment of all, not just themselves. A nation where people are free to do the jobs that they are best suited to, irrespective of their location, is a more economically efficient and wealthy state.
The Flexibility of Timing
It is a fantasy to believe that everyone is in a position to purchase their own home. Not explicitly in the financial sense, but in the sense of their own lives and situations. Many who opt to rent, do so as they know that their future is uncertain, at least in the short term, and renting will provide them with a temporary solution to their own uncertainty. Not everyone is in the position to tie themselves to a home and a mortgage, whether it is single people looking to further their careers, today’s youth venturing away from the family nest for the first time, or growing families, etc.
Take the case of a relatively new couple. The time may be right to move in with one another, but they may want to use renting to trial cohabitation before financially committing to one another, in the form of a joint mortgage and home.
Another example would be the case of a child moving out for the first time, still forging a career and determining what their life may hold. Even if they had the necessary funds and income to buy a house, is it the right decision to do this straight after moving out?
Or perhaps a family, seeking to grow. Rented properties can afford them with the ability to scale their accommodation to suit the size of their family at the time that suits them, rather than being beholden to a fixed location and fixed mortgage.
Again, it is landlords that facilitate all of this. By renting out properties, across the spectrum of UK housing stock, landlords provide people with the flexibility to have their own home, without being tied to it for years. People can make decisions that suit their own situation, rather than having their relationships and life choices influenced by the realities of being locked into a specific house, location, or liability.
Decoupling Homes from Investments
Let us be frank, it is a myth that your home is the best investment you will ever make. Whilst house prices have risen over the decades, this is merely an average. Not all houses rise in price. Equally, whilst many may rise in price, the true returns may only be made in the long run. For people operating on 3-5 year horizons, owning a home may not in fact be the right decision. As the warning goes, ‘past performance is not indicative of future returns’.
The average house price may rise over time, but this systemic appreciation disguises the realities of house price idiosyncrasies. Many newbuild flats bought in the run up to the 2008 financial crisis are yet to surpass their sale price. Thousands of households have spent the last decade ensnared by the blight of negative equity, unable to refinance their variable rates or move house until their mortgages have been paid down. Other locations have seen stagnant or nominally decreasing house prices year-on-year. It must be said that if your house price fails to keep up with inflation, you are losing money unless the inflation degrades your debt more than your equity.
At the time of writing, is it a smart decision to purchase a home? The answer to that certainly requires its post. Likewise, the best property and location for you as an individual to live in may not, in reality, make for the best financial investment. It is unlikely that the property and location which minimizes your commute to work is also the one that will see the greatest uplift in valuations.
The private rental sector allows people to decouple the concept of investing in a property from the need to reside in a home. In volatile markets, tenants can detach themselves from the risk of a house price crash. Forestalling the purchase of their own home until they are more confident of it being the right decision. Equally, for people seeking to minimize their commute, they can choose the property which best suits their current situation, rather than speculating that it is the best use of their life savings. Yet again, landlords facilitate the ability for people to make the right decisions for them.
A Lifeline to Those Who Need It
Even if the timing may be right, it is naïve to think that all people are in the financial position to purchase their own home. Renting provides people with the opportunity to put a roof over their heads relatively quickly, without outlaying huge sums of money. This service that the private rental sector provides so well, can quite literally be a lifeline to large chunks of our society.
The unfortunate truth is that it is all too easy to find your life derailed by poor financial decisions and a healthy dose of bad luck. There are plenty of anecdotal examples of people who have accrued CCJs (county court judgements) for missing a parking fine or due to their personal family circumstances. In such cases mortgages become all but inaccessible, in terms of rate and time. Whilst landlords may opt not to let to those who have CCJs, there are many in the private rental sector who take a far more considered approach to people’s circumstances than a bank’s lending criteria would.
Whether it is divorcees, people with a lack of savings or those whose desire for a home does not reconcile with the average time of 115 days that it took for house purchases to complete in 2021, not everyone is in a position to buy. Renting provides a quick and relatively affordable escape, that does not entail paying £70 per night for a hotel room or setting up shop on a friend’s sofa. It is not unreasonable to imagine the social damage that might occur were the private rental sector to not exist. How many young adults would feel trapped and restricted by their family homes? How many people would lack the sanctitude of their own space? For every rogue landlord, there are a hundred good landlords and a hundred tenants who benefit from the lifeline that renting may provide.
Improving the UK Housing Stock
All of the above focuses on the obvious societal benefit of renting as a whole. It is without a doubt that the private rental sector is of huge importance, both economically and socially. But this should not deflect from the vital role of individual landlords. It is landlords themselves, who make the decisions that define the private rental sector. Despite the click-bait headlines the uninitiated may stumble across, many landlords are far from passive. Especially in the case of landlords seeking to maximize their returns.
The majority of landlords seek to make sound investment decisions. They choose to purchase homes in locations that benefit from sufficient demand from tenants. They choose to funnel investment across the country, into locations that naturally need more housing stock. Going beyond this, many landlords have the capital and knowledge needed to refurbish and improve properties. Adding additional rooms and bringing properties back to life and, in doing so, improving the UK’s housing stock.
For years, it has been private landlords that have plugged the gaps in university accommodation. It has been landlords who have spotted underdeveloped opportunities in prime locations. It has been landlords who have invested in and provided furnished accommodation in city center locations, beyond the financial capacities of all but the most fortunate homeowners. All of this has been done by investing their own time and putting their own capital at risk.
Flying The Flag for Landlords
Perhaps, it is time that we counter the misconceived perceptions of being a landlord and draw people’s attention to all the good that the private rental sector brings about. Without landlords and the private rental sector that they support, economically the UK would be less well off, and societally we would be less free to move around.
Disclaimer: This Landlord Vision blog post is produced for general guidance only, and professional advice should be sought before any decision is made. Nothing in this post should be construed as the giving of advice. Individual circumstances can vary and therefore no responsibility can be accepted by the contributors or the publisher, Landlord Vision Ltd, for any action taken, or any decision made to refrain from action, by any readers of this post. The opinions reflected in this post are not necessarily opinions held by Landlord Vision. All rights reserved. No part of this post may be reproduced or transmitted in any form or by any means. To the fullest extent permitted by law, the contributors and Landlord Vision do not accept liability for any direct, indirect, special, consequential or other losses or damages of whatsoever kind arising from using this post.
