The Council of Mortgage Lenders (CML) has published the results of the biggest survey yet of landlords in the UK. The survey was carried out on behalf of the CML by academics at the London School of Economics. It’s interesting because as well as asking 2,500 landlords for facts and figures, it tried to find out what kind of people they are and what plans they have for the future.
Half of the landlords had no mortgage on their properties, so the restrictions on offsetting mortgage interest against rent haven’t affected them. But the top 25% of landlords who have the highest income from rental and, of course, the largest property portfolios, are going to find themselves paying more tax. The survey wanted to find out how this might change their behaviour in the future.
Because the government’s tax increases have been implemented across the board rather than targeted at specific groups of landlords, some landlords will face significant extra burdens while the sector as a whole may not respond in the way the government expects.
Landlords Less Heavily in Debt Than the Government Thinks
The government is correct in thinking that buy-to-let landlords hold larger portfolios of property than those who own their properties outright. The buy-to-let landlords also have more valuable portfolios. However, more than half of the buy-to-let landlords had mortgage debt that was less than 60% of the value of their properties – in other words they were not financially stretched and hadn’t over borrowed.
Only 1% of the buy-to-let landlords had mortgages that were worth more than 90% of the value of their properties.
The ‘Greedy Landlord’ Stereotype: Here are the Actual Facts
Nearly 2/3 of landlords own just one property, which puts the “greedy landlord” accusations into perspective. What’s more, even when you add in people who own more than one property the average buy-to-let portfolio consists of two or three houses (2.7 to be precise).
We’re not talking Duke of Grosvenor here are we? What we’re actually looking at is people who may have inherited a house or gone out and bought one to provide some extra income, often in retirement.
And very far from the idea that buy-to-let landlords are amassing more and more property, the size of landlords’ portfolios has been shrinking significantly.
Landlords are significantly older than they were previously. The survey runs comparisons with 2004 – back then 25% of landlords were aged 55 or older, while today over 60% are. This must tell us that a generation who cannot get any pension income because of low interest rates have bought – typically just one – rental property in order to get some income.
In fact, almost a quarter of them are “accidental landlords” in that they ended up renting out a property because of circumstances. 15% are actually what we might call “benevolent landlords” in that they entered the rental market to provide a home for a friend or relative.
Hardly the rapacious characters that some people make them out to be.
And here’s another staggering fact – only 1 in 20 of the landlords surveyed said they made a full-time living from being a landlord. For most of them, rent provided less than 25% of their income.
What’s more landlords tend to own property that is near to where they live, so they are locals themselves. So, for example, if you have a property in Middleton you are quite likely to be local to the area and to be using a letting agency in Middleton.
A Stable Group of Property Owners
The Chancellor and the Bank of England seem to have wound themselves up into a frenzy, much worried by the idea that buy-to-let and rental property represents some incredibly unstable bubble in the property market that is going to bring the whole thing crashing down. The facts in the survey appear to point in the opposite direction.
Very few of the landlords had plans to either increase or decrease their holdings in the immediate future. If anything, there was what the survey calls a “modest drift” towards letting go of some of their holdings.
It’s useful to have some facts to quote when so much of the debate has been based on ill-informed criticisms of landlords. This is a high-quality, academic study and should be given the attention it deserves, especially by those in government.