The damaging effects of buy-to-let
Posted on 25 January 2009 3 comments
Over the past few years there has been a substantial rise in the number of buy-to-let investors and property developers in the UK. These developers and buy-to-let investors have done much to cultivate the damaging idea that property is simply a commodity to be bought and sold as a pure profit-making exercise.
This interest in property as a source of income has also changed the way we speak about housing. Property is often discussed, sometimes exclusively, in terms of maximising its monetary value. When you consider how much our homes contribute to our sense of comfort or well-being, it’s a depressing development to see them measured in purely financial terms.
Buy-to-let investors tend to snap up the types of property sought by first-time buyers: studios, and one or two bedroom flats. You can see this clearly in the property descriptions for these types of flats. Where once a property might have been described as “ideal first time buy”, nowadays, it’s more likely to read “ideal investment opportunity”.
Some buy-to-let investors are keen to build a property portfolio, while others might see their investment as income for their retirement. Back in January 2007, a report from the Greater London Authority found that buy-to-let investors had snapped up more than two-thirds of new build property in London.
The most famous buy-to-let landlords in Britain are probably Fergus and Judith Wilson – two former teachers who have built up a massive buy-to-let empire. As of June 2008, they owned a staggering 875 properties. But what kind of effect does rampant, unchecked growth in the buy-to-let market have on property prices, on the quality of housing and on local communities?
If you search for studio or one bedroom properties on any property website (for sale or rent), you are likely to come across dozens of examples of poorly converted or badly constructed properties of depressingly miniature proportions and sometimes bizarre shapes. It seems no nook or cranny is too small or awkward for use as a living space.
What happens to the sense of community or the general atmosphere in a street when more and more properties are bought by buy-to-let investors? Or when houses for families are turned into flats? Would you feel comfortable buying, say, a terraced or semi-detached house if you knew both your neighbouring properties were occupied by tenants? Would you feel apprehensive about buying a property on a street littered with ‘to let’ signs?
I certainly don’t mean to disparage tenants; the point is more about the absentee landlord. Do they have any interest or concern for the neighbourhood in which they rent out their property? If buy-to-let comes to dominate a neighbourhood, what kind of effect does it have on that neighbourhood? Can you ever build a community around such a neighbourhood?
We need a debate about these important issues, but neither the press or TV have given us one. Last year (2008), the BBC commissioned a study to assesses the health of communities across Britain by looking at how rooted people are in their neighbourhood.
“The study ranks places using a formula based on the proportion of people in an area who are single, those who live alone, the numbers in private rented accommodation and those who have lived there for less than a year.
The higher the proportion of people in those categories, the less rooted the community, according to social scientists. They refer to it as the level of ‘anomie’ or the ‘feeling of not belonging’.”
The use of rental figures as one of the measures for evaluating neighbourhood health is certainly open to debate. In Germany and France, levels of renting are much higher than in Britain. Do people in these countries feel less rooted in their neighbourhoods? In Britain, in the past, we have also been a nation of renters rather than home owners. Why did renting in the past not contribute to a lack of community in contrast to today?
I realise these issues may not have simple answers. However, it’s worth pointing out that both Germany and France have rental laws heavily weighted in favour of the tenant. For example, there are strict rules over rent rises and tenancy termination. Some properties are rented for years by the same occupants. In contrast, tenancy laws in Britain have changed over the years to become more favourable to landlords. Neither France or Germany have experienced the rampant property speculation we’ve seen in Britain over the past few years. Could their tenancy laws have been a contributory factor?
There’s even more to pick apart in a debate like this. The word ‘community’ is often used in relation to neighbourhoods but what exactly constitutes community in a neighbourhood? Do we need to make a distinction between ‘community’ and ‘neighbourliness’? If you only ever exchange brief pleasantries with your neighbours (“good morning”), would that suffice for you? Or would you hope for more than that in your neighbourhood?
I’ll leave the last word to Christopher Alexander who has this to say about renting in his book A Pattern Language:
“…face-to-face rental, with the owners occupying the main structure is the one kind of rental relationship that is reasonably healthy. The landlord is actually there, so he is directly concerned with the well-being of the life around him and with the environment, unlike the absentee landlords who own property only for the money which it makes.”
August 2012 update: another depressing statistic – the London Evening Standard, in an article on investing in buy-to-let (Wed 29 Aug 2012 print edition), reports that
“…buyers are showing a keen interest in new-build, with 50 per cent of all stock going to buy-to-let investors, according to new research.”
(The source of this research is not cited in the article.)
December 2012 update: The Institute for Public Policy Research (IPPR) is a UK think-tank who have recently published a free report titled No place to call home: The social impacts of housing undersupply on young people. A key finding of the report is that home ownership increases a person’s sense of belonging to their neighbourhood. This matches the findings from the BBC-commissioned study which found that renting is one of the factors that makes people feel less rooted in their neighbourhoods.
The director of the IPPR, Nick Pearce, writing about the findings, says:
“We also found evidence of a remarkable connection between home ownership and the cultivation of strong communities. Our analysis found that, controlling for other variables, owning a home significantly increases a person’s sense of belonging to their neighbourhood. Young people who wanted to own, but didn’t yet do so, talked about not really seeing the point of committing to the area in which they lived or getting to know the people they shared a street with. These are the things that make a vital difference to whether we build a common life together, or simply exist in a series of separate worlds.”
I personally believe that the culture of buying and selling a home as a profit-making pursuit (which is rampant in Britain) is simply incompatible with building strong neighbourhoods.
In contrast, Germany (where far more people rent than in Britain) has tenancy laws expressly designed to prevent the loose, unrestricted and horribly damaging effects of a rampant buy-to-let sector. Their laws recognise that housing has a social factor that simply cannot be ignored. Meanwhile, in Britain we measure everything to do with housing in purely financial terms. Our rental laws should be weighted in favour of tenants not landlords. Until they are, we will never be able to curb the rapacious appetite of buy-to-let landlords and propery investors.