* This piece is written jointly by Richard Rowntree (Managing Director, Paragon Bank) and Ben Beadle (Chief Executive of the National Residential Landlords Association) *
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Landlords and their role in the economy - and society more broadly - are often misunderstood, underestimated and certainly under-appreciated.
They are unloved, unrecognised and unfashionable.
Yet, consider the important role they play and the service they provide.
Landlords are the second biggest housing provider in the UK, with one in five households calling the private rented sector home in England alone. And they are a significant provider to the public purse, the labour market and the broader economy.
Along with the NRLA, we recently commissioned professional services firm PwC to investigate the economic contribution of small-to-medium sized landlords, those with up to 15 properties, to understand more about the value creation of this group.
The findings reveal that SME landlords in England and Wales contribute an estimated £45 billion per year to the UK economy. That is roughly the size of the economic contribution of Kent and twice the size of the gross value added (GVA - the measure of economic contribution) of the advertising and marketing sector.
Regionally, across England and Wales, small and medium landlords in the PRS contribute approximately 2% of each region’s GVA.
That £45 billion figure does not include those landlords with 15 or more properties, nor does it fully capture the build-to-rent sector. Put simply, the PRS and the landlords who serve it are a significant sector of the economy as a whole.
The PwC report also highlights that small to medium-sized landlords support up to 390,000 jobs directly or through the supply chain that serves the sector, such as managing agents and maintenance workers.
It showed that for every person employed directly within the sector itself, small and medium landlords support two further jobs across the supply chain and wider economy.
Breaking that down, that’s 39,000 jobs in construction, 28,000 jobs in building maintenance and landscaping, 19,000 roles in public administration and 11,000 jobs in my own sector, financial services.
This doesn’t include the labour fluidity and mobility more broadly facilitated by the PRS. The rental sector is the tenure of the working population, with Government data showing three-quarters of tenants are working, considerably more than in the owner-occupation tenure.
Given its economic importance, is enough being done in terms of progressive policy – both regulatory and fiscal - to encourage investment into the PRS? Clearly not.
The cloud of the Renters Reform Bill, currently stalled in Parliament, hangs over the sector. The removal of mortgage interest relief and, particularly, the introduction of a 3% Stamp Duty surcharge has slowed new investment.
The number of house purchases with a buy-to-let mortgage last year was 55% lower than in 2015, the year before the surcharge was introduced, with southern regions of the country disproportionately impacted.
PwC’s analysis of various scenarios reveals the potential scale of the impact of a contraction in the size of the PRS on landlords, tenants, and those whose jobs depend on a flourishing market.
According to the report’s findings, a 10% reduction in the size of the sector could deprive the UK economy of £4.5bn of GVA. Moreover, a market contraction on this scale would mean that 39,000 jobs would need to be supported by alternative sources to prevent a rise in unemployment.
It would also mean fewer homes to rent.
Given population growth estimates of 10% over the next 10 years and expected societal changes leading to greater demand for rental property, that should be a worrying prospect for any future Government.
Conversely, an expansion of the sector, alongside policies that encourage increased housing supply, would result in a stronger economy, more jobs and further homes to rent. It’s time to stop demonising landlords, recognise the importance of the sector and implement policy that encourages its growth.
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The primary rental sector aim of the Government appears to have been to end the businesses of SME (small to medium sized landlords) by punitive rental legislation and punitive taxation.
They are achieving that aim very well. There is only a small minority of landlord who will let their properties in a way which enables tenants to gain security of tenure, and the terms of that security are likely to become absolute under Labour who are out of touch with the reality of the private rental sector and only focused on redistribution of wealth.
Most landlords are not only concerned with rental income, but the capital value of their property which will plummet with sitting tenants, so the notion that rents won't be controlled is immaterial.
We have had no representation at all during the rental reform process, and that is quite extraordinary. The NRLA recently has even failed to mention the amendment being proposed in the House of Lords which would allow fixed term tenancies.
A pretty good summary, although I would disagree that house prices will plummet with sitting tenants. Yes, there is a court process that will likely be lengthy, but section 8 has enough mandatory grounds to enable a landlord to gain possession, should they require it.
Just my view, but I see substantial capital growth over the next 10 years. Dependent on world events of course, but there is good reason for big corporate players moving into property ownership via build to rent.
I'm expanding my portfolio over the next couple of years for sure. Time will tell whether that's a wise move or not!
I see you are an agent John.
The Labour commissioned Cowan report has just recommended the ending of "back-door evictions" whereby landlords can get their properties back if they wish to sell or to move back in - or move a family member in.
I can't see any point in looking at the Section 8 provisions of the current Renters Reform Bill when Labour has said that it is only the starting point for their reforms.
I wish you luck with expanding your portfolio, and it could possibly be a good business move, but without any legal certainty regarding letting models it is very difficult to plan anything, even the student ground for possession will be under review and could well be ended after a year.
Also driving out Private Landlords is the best way of creating homelessness, making housing unaffordable and Collapsing the Economy so think on go to the top of the Class.
It is also the best the way to lose both the landlord and tenant vote - a huge number of people harmed by landlords' getting their properties back because of the legislative situation.
I see that the latest YouGov poll for the Times has Labour on 48% and the Tories on 18%. Reform is on 13%.
Reform is unlikely to gain any seats in the next election unless their support goes above 20%.
But just 2.5% decrease in Tory support and 2.5% increase in Reform support would see the two parties neck and neck.
I dont hear this defence of landlords in NRLA press releases though...
I agree. The NRLA is controlled opposition
You won’t either Matthew, I only have a month to go before my exit of the NRLA. It is for this very reason I have cancelled my membership
I do not care about being "loved" or "liked". I do however, expect to be treated fairly and with a modicum of respect (as l treat others).
I DO however, want to be left the Hell alone and not have constant Government interference in the Sector whereby they constantly undermine property rights.
Equally, l do not know any other group or demographic in Society for whom it is not only acceptable, but "fashionable", to vilify and harrass as it is for Landlords: THAT l would like to see an end to.
Well said
Also as sure as night follows day, miserly rent controls are heading our way.
And let's not forget that in the past rents could be reduced dramatically as well as increased.
I'm border line on the small/large divide. 14 BTLs personally owned and 2 via a limited company.
At that size tax (Section 24) is a huge problem but also the attitude of mortgage lenders towards anyone with more than 10 mortgages or a limited company doesn't help. With the higher interest rates we are subjected to it is incredibly hard to make anything stack. I would buy more if it was viable. There are specific people who are currently being evicted (because their landlord is selling) who I would happily buy something for, maybe even the house they are currently living in. I just can't do it with the current interest rates or tax rate and rent it at a suitable market rent.
While I think Richard Rowntree talks a lot of sense and I like dealing with Paragon as a lender, their rates are often somewhat higher than several other companies and some of their product fees are imaginative to put it mildly.
The Labour government will find out very soon what a disaster zone the rental market is, and how they are about to make it worse.
Well said Simon.
The PRS was booming and no shortage of housing until interfered with by Councils who can’t run Social Housing but see fit to destroy us by Regular & Licensing for a soft money grab for themselves, just add THE RENTERS REFORM BILL by Gove and his cronies and the picture is complete, did someone say there’s a housing crisis I wonder why ?.
4 down 2 to go can’t wait, let the incumbent Government pick up the pieces,
Currently sitting under a palm tree thinking about investing in property outside the EU.
Good Luck everybody, we all know what’s coming down the track
I notice Labour keeping very quiet about housing at the moment. They don’t want to scare more landlords into serving Section 21’s and selling up. Once in power they will trap us in with sitting tenants on low rents. It will be too hard to sell then.
Today's Mail:
A Labour government could introduce rent controls in areas of high housing demand, the Shadow Chancellor suggested yesterday.
In an apparent split with party policy, Rachel Reeves said there 'may be a case' for rent caps in some parts following steep rises in bills faced by tenants.
I thought that, too, Margaret.
And the introduction of rent controls doesn't surprise me either, AL.
They will make sure that landlords can't get their properties back by raising the rents.
Well we call all see what is coming with Labour. This doesn’t surprise me at all! And worse to come I daresay. How they will handle the shortage of property will be interesting. The Corporates will have a monopoly and won’t stand for rent control.
The Corporates will be exempt from rent controls.
Alas you won’t see this article being picked up and flashed across the front pages. Only ‘No fault’ evictions make the news, where the word ‘landlord’ has apparently come to mean ‘heartless money grabber’ according to pressure groups and ‘endless source of gold to mine’ by politicians. Under-appreciated is an understatement and I for one am also Under starters orders…and we’re off!!
Absolutely ruined the PRS, we are selling 33% of our stock this year, and the same for the next two years. If Labour get silly we will leave sooner and take the CGT hit, let Labour deal with the tenants.
Big 2 day Auction coming up hundreds of properties, 30 extra ones added at a late stage. The Auction Houses tell us wrongly the Market is improving using this data, when in fact it’s the demise of PRS with landlords getting out.
Just been looking at the Auction House East Anglia June auction, full of landlord properties many with tenants in, many very silly guide prices, will be interesting to see what does sell and for how much
A very good Whitewash Job you nearly had me with your buttering up. I didn’t have continuous internet signal, still a good attempt at covering up the failure of supporting in recent vital years.
How did everyone miss the biggest fish. I had to read the Article again but it no it’s not there the Removal of Section 21 the very Foundation of all before which there was no PRS I know I was there fighting our corner those guys don’t seem to know the difference no more than Mrs May who was hoodwinked into putting it into the manifesto, yet not a murmur in the Article or responses for that matter how could that happen. It’s a very broad stroke of to whitewash brush, facts are facts and deliberately left out it would appear. I don’t believe the figures either its a lot more than £45b, all the buying/ selling, C/gains, Solicitor’s, endless Compliance Costs etc, OK why also did the Article leave out the second biggest cause of your 55% supply reduction that you mentioned since 2015, namely The Rampant Expansion of the Stitch-up Licensing Schemes costing us billions putting us at grave risk of Penalties for any minor breach of the spurious terms & conditions attached even a Criminal Record. Anyway there a a lot more to this with the Big new Boys favoured for the takeover even with their multi storey Shipping Containers Flats in the Sky from China like Hanger Gyratrory for example.
As Jimmy Cricket used to say there’s more a lot more, now I see houses that should have been licensed years ago that weren’t but have now decided to comply when the going is getting too hot for them. I see 9 houses recently up dated + Shower & handbasin in most rooms with no sitting room, in one small area.
Some are similar houses to ones I have that have been licensed since 2006, let for between £1600.00 and £2000.00 pm.
Just wait a minute how much are they renting theirs for where they have just done the Compliance £1’000.00 per Room I kid you not £5’000.00 pm for each house.
Mr Michael Gove, Shelter, Generation Rent etc congratulations the Renters must be spitting bullets.
The NRLA ( No Resistance Landlords Association) with 100,000 members has bent over and kissed government backsides for years now. It's there to sell courses and make money rather than look after LLs interests. Well they are turkeys voting for Xmas. No LLs..No need for NRLA.
Certainly no need for an Association like the NRLA. It's time for a new approach with an alternative Association . One with a voice whose sole purpose is to represent us at every level,We are now in a strong position as demand continues to outstrip demand.
Sarah Fox Moore, well said and 21 responders liked your comments, that’s a big number and also I can’t get that number out of my head.
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