At the start of the pandemic some light relief was provided by images of people walking out of the supermarket with a trolly stacked high with loo rolls. Most of us giggled and speculated on what these people thought the future held. But there was an unintended consequence. The price of loo rolls went skyward due to excessive demand and limited supply.
I have no wish to compare the housing sector to the supply of lavatorial products but, I am afraid I must. Not because the sector is going down the pan, quite the opposite. House sales continue to be robust as we regularly see properties selling for 10% over the asking price. The market shows no sign of slowing, despite inflation and rising energy prices. We fully expect to see a 5-6% increase in house prices in Heaton by the end of the year. High demand, limited supply. Sound familiar?
The view from the rental sector is pretty dismal for tenants, and largely for the same reason. Buoyant prices and over-regulation mean many smaller landlords are emptying their properties and selling up. This has resulted in a lack of available rental properties and, as with loo rolls and house sales, the result is high demand, limited supply.
The problem is exacerbated by over regulation. Often enacted with the best of intentions but subject to the law of unintended consequences. The Tenant Fees Act of 2019 banned most letting fees paid by tenants in the private rental sector. This news was welcomed with universal glee by consumer champions and tenant associations.
Letting agents who tried to point out the obvious were ignored as politicians showboated. “The aim of the Act is to reduce the costs that tenants can face at the outset, and throughout, a tenancy,” said the Ministry. I assume the Ministry imagined letting agents’ costs would simply vanish. That office, vehicle, compliance, staff, training and administration costs would melt away like a ghost in sunlight.
Strangely, they did not! Landlords, already on tight margins could not absorb the additional cost so, take a wild guess where those legitimate costs were recouped? Yep, they were simply added to the annual rental calculation resulting in a rent rise that exactly marched the cost benefit of scrapping letting fees.
The latest populist move comes from Scotland which is to impose a rent freeze and a ban on evictions until March 2023 to help ease the costof-living crisis. This has again been welcomed by campaigning groups many of whom have called for the freeze to be extended across the UK.
One Scottish politician has suggested the cost of the freeze will be met by landlords and thus, will cost the Government nothing. That may be the case, but it will surely cost tenants. Smaller landlords fed up with over regulation, shrinking returns and a buoyant housing market will do the obvious. Cash their chips and sail away into the sunset with them.
The housing and rental sectors needs regulation, something I have often advocated in this magazine. But it would be nice if just now and then, rather than grabbing a soundbite on the news feeds, regulators sat down and discussed proposed legislation with professionals. My door is always open, but I shall not clear my diary while I wait for the call.
