Thursday, 23 July 2015

Stop moaning and give us all your money, you peasants.

From yesterday's City AM:

By Paul Stanworth, managing director of Legal & General Capital, founded in 2013 to help actively invest Legal & General's Group balance sheet.

Renting may be becoming the norm for large swathes of the UK’s population, certainly the under-40s, but a fundamental mindset change still needs to take place away from ingrained assumptions owning a home is preferable to renting it.

For many the idea of lifelong renting is something to strive away from at all costs. But renting should be seen as a positive lifestyle choice rather than a social or economic curse. I believe that the change in attitude will come as the range and standard of rental options available evolve.

Where it was previously a smaller segment of the market serviced by private landlords with sub-scale operations, the significant increase in demand coupled with public sector austerity has meant there is now a need for long term investors to fill the gap.

The good news is that the upswing in renting is coinciding with the development of a professional Build to Rent sector, with institutions looking to provide a new class of large scale, purpose-built rental stock. The strategic case for the sector is compelling. You need only to look at international examples, such as the US multi-family sector, or Dutch or German models, to see that where good quality large volume options exist there has been an overwhelming shift in attitudes towards renting.

Enhancing economic productivity through greater geographical flexibility, as well as providing affordability for those that are unable or choose not to join the owner occupation sector, this is about delivering higher quality, customised space, together with a more professional and flexible standard of tenant service that truly satisfies elective renters needs. It's also about accommodating all age groups and demographics, from retirees and families to time poor young professionals.

I believe there's a real opportunity to deliver well-designed homes in accessible, well-connected urban locations across the UK of a sufficient scale that they can be cost efficient and rental levels can be set at affordable levels.

In other words: this is essentially an opportunity to redefine what renting means in this county. A 24-hour concierge, onsite car-sharing clubs, state-of-the-art cycle facilities, gyms and integrated click-and-collect services are all potential features that we might expect to see carefully incorporated from the earliest design stages.

For us this is about using long term institutional money to support the future looking needs of the UK and working with forward thinking local authorities and best in-class partners to deliver this vision.


Rich Tee said...

Personally, as a tenant, I don't have a problem with large companies getting into the private rented sector. It it were Legal & General, for example, I can buy shares in Legal & General. And if large companies get involved we might see some improvement in tenancy law. These companies will not always be looking to throw their tenants out so that they can make a quick buck by selling the property. They would want long term stability and would lobby the government for it. It seems to work in Germany (so we are always being told anyway).

Lola said...

There are two things going on here. One, the ever upward increase in land prices which makes owner occupation less easy to achieve and two, L&G entry into the market as a developer/financier of homes to rent. Point one is bad. YPP policies would go a long way to sorting that. But L&G's proposal is, I think, bang on the money whatever regime runs us. In theory (and one would hope in practice) it is likely to be a much more professional landlord than all the small BtL'ers. And that ought to be a good thing.

Mark Wadsworth said...

RT and L, yes, when it comes to blocks of flats, it would probably be far more efficient for one organisation to own it and to let everything out on short medium term lets.

But just because that is "less bad" than having each flat with an individual owner, some living there and some renting out, does not make it "good"..

And that wasn't the point, what galls is the sneering tone "Oh, what would you want to own a home for? We'll own the homes and you can pay us rent for the rest of your lives."

Pure Home-Owner-Ism.

James Higham said...

I believe there's a real opportunity to deliver well-designed homes in accessible, well-connected urban locations across the UK

Do you live in one, Mark, as I do? :)

Random said...

Anti-smokers on top form

Random said...

"Several of those questions hinge on one key moment: when state trooper Brian Encinia asks Bland to put out her cigarette. Bland refuses, and suddenly what had been a warning for a traffic violation escalates into a forcible arrest.

Marquez Claxton, a retired NYPD detective and the director of the Black Law Enforcement Alliance, called the footage “beyond disturbing”, and said the escalation over the cigarette is the key point."

Bayard said...

As I've said many times in the past, most of the desire to be an owner occupier is the desire to make unearned capital gains on land. This "owner-occupier good, tenancy bad" meme only dates from the middle of the C20th and was not universal , even in the '80s. Given some sort of reasonable tenancy arrangements and falling land prices, how many of the "must own my house at any price" brigade would be happy as tenants.

Without capital gains on land, owning your house is a liability, a liability that many would be happy to offload onto a landlord. The result of introducing LVT could well be a fall in owner-occupation, not a rise.

Woodsy42 said...

No Bayard, house ownership for many people isn't the desire to make unearned capital gains on land. It may be for some people but that's a relatively recent situation driven by shortage. I have a house, and struggled through the process of gradually moving 'up' the ownership ladder, because I needed a home for the family. Not just a generic house (however well maintained) but a long-term secure home that we could fit out our way, allocate the rooms to our preferences, design the interior to suit our lifestyle, decorate it as we wanted and being keen gardeners arrange the garden in a manner that fitted our needs and preferences.
These freedoms and possibilities are not available in a rental and we would have tried to buy even if buying were more expensive and had no capital gains. In reality gains in house prices are very little use if you need the house to live in, the beneficiaries of price rises are people who have investment properties or beneficiaries of owner's wills, not owner occupiers living in their homes.

Mark Wadsworth said...

JH, I live in a "badly-designed home in an accessible, well-connected urban locations in outer London".

R, the American police appear to have gone completely mental.

B, I don't agree. I have been tenant and owner, and owning is just much nicer. People would still want to own if prices were low and stable. Even if prices were falling, very few people would sell up and become tenants again in the hope of buying back cheaper.

W42, the key question is, do you support replacing taxes on earnings with LVT or not. I think you have made it quite clear that you oppose LVT quite vehemently, ergo, at the back of your mind, the capital gain is quite important to you, even though you pretend it's not.

DBC Reed said...

Odds are against this happening: it would be, by definition, the end of homeownerism,as we know it, particularly the true blue original Tory variety. Also the attractions of public sector provision AKA council housing would become more apparent, leading to a readjustment of traditional (nasty) social class attitudes in GB, well England, with the new aspirant middle class making out that people renting privately are better than mere council tenants, but having the grave doubts that would make them unstable politically.The public sector would quite likely up its game to provide all the fanciful add-ons suggested in the original piece and would be able to trump everything by providing a "national tenancy" which with a computerised national vacancy website would make it possible for people to up sticks and move in a fortnight. It is one of the great successes of the homeownerist establishment under Thicky Thatcher that they were able to purge local authority housing out of the system, just when the growth of home computers was poised to sort out the accommodation problem in a modern manner.

Steven_L said...

Odds are against this happening: it would be, by definition, the end of homeownerism,as we know it

Maybe they'll come up with some kind of structured deal, like when you get a lump sum at the end of your life insurance for not dying, but to help you 'buy' (or 'buy for life' kind of like an annuity) a retirement flat.

Think about it, the possibilities for insurance cross-selling are enormous!

Woodsy42 said...

" clear that you oppose LVT quite vehemently"

Not entirely Mark. Believe it or not I can see LVT as a perfectly valid alternative - although it would create untold upset and a new mindset. But I can understand it would solve many problems (but introduce different ones).
What bothers me is not the theory or the idea but that I don't trust any UK government to implement it properly or fairly. In every case where taxation is changed we - the public- are inevitably short changed because the old system is never removed and ultimately we end up with an unholy mixture of both systems of taxation.
Example: I am old enough to remember Tory promises to remove vehicle road tax and put the charge on fuel. Of course the fuel duty was significantly increased first. Then a change of government came in and didn't like that plan so they hiked road tax - without of course removing the added fuel duty - because motorists cost the NHS. About then the added a levy to insurance (yep- that too was originally justified on the back of NHS costs). Result, we now have multiple taxes on the same activity, combining to be some of the highest road taxes in Europe and even the 'pretend' removal of road tax discs so we look more like France (but still pay the additional tax).
I don't believe they wouldn't do the same with LVT.

The Stigler said...


For most people, owning a house makes sense.

There's a lot of things in this world that I'd much rather rent and which make sense as a rented thing. Most power tools, holiday homes, fish kettles. Things you don't use much, so sharing them is more sensible.

And for people who are not going to be in a place for long, renting makes sense rather than paying for a load of Estate Agents. But if you plan to be somewhere for a while, buying makes sense. A landlord is just a parasite.

Bayard said...

W42, Mark, TS, how would you feel about buying a house but renting the land it stood on. There used to be lots of houses like that round here. You could do what you like with the house, it's yours, but you would be paying a ground rent for the land.

Before the war, people who could well afford to buy a house chose to rent instead. Without the present land price speculation mania/bubble and different tenancy/leasehold arrangements, it is perfectly possible that renting could no longer be the hardship option that it is now.

Mark Wadsworth said...

W42, if something is worth doing, it is better to do it badly than not at all.

The negative impact of the current system is inherent in the system, however intelligently it is legislated for and administered (and it is not). A perfect system of VAT and NIC is still infinitely worse than a cack handed kind of LVT like Business Rates.

B, it wouldn't particularly bother me, but i'd rather pay £1 in LVT on a freehold than £1 in ground rent on a weird kind of long leasehold.

Bayard said...

It's odd that, given that the arrangement I proposed was prevalent in the past, no-one has suggested it as a solution to the problem of "affordable housing", with the Local Authority as the landowner.

Mark Wadsworth said...

B, they sort of have, it's called "shared ownership".

Suffice to say, the Homeys would fast forward to the "Right to buy" stage "to enable millions of hard working tenants to realise the dream of home ownership" etc.

Besides, how are the poor old banks supposed to earn their meagre crust under your system?

Bayard said...

At least, in this case, it could easily be demonstrated that the "hard-working tenants" already owned their own home and the "dream of home-ownership" would be exposed for what it so often is, the dream to be entitled to unearned gains.

"Besides, how are the poor old banks supposed to earn their meagre crust under your system?"

Quite, that is why it will never be allowed to happen, but it doesn't explain why no-one has proposed it.

BTW, I've just read an interview with Douglas Carswell in Moneyweek, where he was attacking the evils of housing benefit - the first time I've come across a pol doing that. No doubt someone will be having a word with him, or perhaps TPTB think he's irrelevant.