9 June 2020

The latest rental ‘reprieve’ is another kick in the teeth for landlords

By Rosalind Beck

What would people say if I walked into Tesco tomorrow, filled my trolley with food and drink to the value of £200 and at the checkout said I am not paying for it because the Government has said supermarkets have to provide my groceries for the next five months, whether I pay for them or not?

What if the Government also said that it doesn’t matter whether I can afford to pay for them, or whether I have been affected by Covid-19 – I don’t have to prove any of this; that the supermarket must let me have all the items every week and when I owe them many thousands of pounds at some later unspecified date the supermarket and I can come to an agreement about how I will pay it back?

What if leftwing groups then began lobbying the Government to legislate to ‘cancel’ or ‘forgive’ this debt because food is a necessity and a human right and therefore, in fact, I should not have to pay back what I owe at all?  And what if the Government were able to legislate and in fact bring this about and write off all debts thus incurred to supermarkets?

What if this was then applied to gas, electricity, water bills and so on? Heating, lighting, water are all necessities. Surely the left-wing groups would also demand these be free?

Of course, no one is seriously arguing this in the UK at the moment. Supermarkets and utility companies are not being asked to supply their produce and services for free or even to defer payments. Walking out of the supermarket without paying is still considered theft.

Yet in one sphere and one sphere only landlords now face this exact scenario: private rentals. With its eviction ban, the Government has effectively granted tenants the right to be housed for free.

And the Communities Secretary, Robert Jenrick, has not only announced a two-month extension, but said that it will be extended further if he so chooses, effectively making the eviction ban indefinite. It means renters can remain in their rented properties until August 25, regardless of whether they pay their rent, regardless of their behaviour and irrespective of whether or not they have been affected by Covid-19.

Instead of the left-wing groups rejoicing at the result of their successful lobbying, these people, who bizarrely have the ear of a Conservative Government, immediately called for more radical steps. Some organisations and even Labour MPs are now pushing to ‘scrap’ rent and ‘cancel’ or ‘forgive’ rent arrears.

The average monthly private rent in the UK is £803 when London is excluded; so the average amount they won’t have to pay is similar to the fictional sum for groceries above – which seemed outrageous when it was applied to supermarkets. Without the threat of eviction as leverage thousands of tenants can take full advantage of the ‘reprieve’, building up an average debt of £4,000 by the end of August, although many will have owed a considerable amount prior to this. The arrears of tenants who were already defaulting on the rent prior to the pandemic will invariably increase.

In addition, there are the tenants who ordinarily would pay but now either can’t or won’t; the number of these will go up as unemployment inevitably rises once furlough ends. Unlike the supermarkets, which do not give their produce for free or take the employment status of their customers into account, private landlords will have no recourse when a tenant stops paying. For landlords it will be like they are paying for that shopping trolley of food every week for the tenant. The debts built up will be largely unrecoverable.

As I pointed out in an article on ConservativeHome last week, days before Mr Jenrick’s announcement, the most vulnerable in society will be hit as a direct consequence of damaging confidence in the sector.

The assumption appears to be that landlords are all wealthy, with presumably greater resources than supermarkets. Around half of all landlords, however, own one rental property and saved to put a deposit on it or buy it outright. Many renovated the property in their spare time and finally took the risk of letting out this expensive asset. If the Government had said at the time that a new law would be passed, whereby non-paying tenants could remain in their properties for months if not for a year or more (it will take many months to gain legal possession even after the ban ends), they would never have invested their time and money in this way. What business would?

Although experts and even the leadership of the Labour Party believe it would not be possible for the Government to legislate along these lines, writing off debts, the Government has previous on passing absurd legislation where landlords are concerned.

‘Section 24,’ devised by George Osborne, was described in the Daily Telegraph as an ‘Alice in Wonderland’ tax, whereby finance costs were re-defined as profit. It means that whilst tenants aren’t paying the rent during the ban, landlords could run at a loss yet still have to pay tax on a profit they haven’t made. Even with zero profit, many portfolio landlords face paying thousands in tax, depending on their mortgage liabilities.

The Government completely lost the plot when it passed this law and it lost it again when it decided to ban evictions outright. To extend it is a further kick in the teeth for all the private landlords who, it must be remembered, are not crooks or criminals to be punished, but rather providers of essential housing that the Government itself is unable or unwilling to supply. Councils especially are hugely dependent on private landlords, who house 90% of all homeless.

Not for much longer.

This latest indefinite extension of what was presented as a time-limited eviction moratorium will severely damage trust in investment in the sector, when the goalposts can be shifted so drastically. One has to ask: if the Government can so blithely engage in a process of attrition of private property rights in this way, what will be next?

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Rosalind Beck is a doctor of Criminology and a Conservative Party member in South Wales.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.