The amateur landlord is at risk of dying off, we are repeatedly being told, especially with rumoured increases to capital gains tax (CGT) and other duties in the upcoming Budget.
Should they become extinct, I wonder whether this is particularly bad news?
It’s usually a fair assumption that someone who is a professional at something is probably better than someone who self-defines as an amateur.
For example, if I needed my kitchen rewiring, I’d probably opt for the qualified electrician over a guy who plays with a fusebox for fun at the weekend.
I say this with a little bit of tongue in cheek. So-called amateur landlords, of course, are not amateur in the traditional sense of the word – they’re certainly not engaging in the pursuit unpaid, as the term usually means.
Instead, when we talk about amateur landlords, what we really mean is those for whom being a property investor is somewhat of a side gig.
They probably have another job, or significant pension income, and one or two properties which they rent out as well. Perhaps it’s even the first ever flat they bought which they never sold.
In recent months there has been speculation that these small-time landlords are selling off their portfolios, with professional landlords – those for whom renting out homes for money is a primary source of income – potentially taking their place.
In the last year, research from the Deposit Protection Service (DPS) has found that almost a quarter (24.5 per cent) of landlords with one or two properties plan to sell up, compared with 12.2 per cent of those who have more than 10 properties.
A report from Capital Economics, published in 2022 but unearthed this past week, warns that a rise in CGT could see the number of landlord-owned properties fall by nearly one million in the next ten years.
There is some scepticism among rental campaigners over whether this landlord exodus will come to pass.
Tom Darling of the Renters’ Reform Coalition said that the threat of such a mass exit was something landlord lobby groups had warned of for a decade. “And it’s never happened,” he added, writing on social media.
Assuming CGT does increase, from the perspective of many landlords, it’s clear why this may be bad news. If higher tax charges mean your once profitable investment is no longer providing the financial boost it did, it’s clear why you might be a little upset.
For renters however, the outcome if these landlords exit the market is less clear cut.
Many suggest that so-called amateur landlords offer a personal touch, homely properties, and care for their tenants that professional landlords lack.
While this is undoubtedly correct in some instances, having experienced renting with both professional and “amateur” landlords, the division between the two types is not binary.
Professional landlords offer a straight-down-the-middle option. With obvious occasional exceptions, they generally know the law, benefit from economies of scale, and have in place processes to deal with issues and disputes.
Granted, they don’t always deal with you in a particularly warm way and you’d be unlikely to negotiate down a rent increase if you fell on hard times, but on the other hand, if your boiler breaks in the middle of winter, they will likely have the funds and structures in place to get it fixed.
Alternatively, amateur landlords offer what you might term the “mystery box” option. As a renter for 12 years, I’ve opened that box to both outcomes.
On the one hand there is my current landlord who deals with any issues rapidly and suitably, charges (contextually) relatively reasonable rent and offered up a well-kept home.
But on the other hand, there is the landlord who allowed me to move into a property with dodgy electrics, and most memorably, the one who once visited the house seemingly solely to use the toilet, because he was “in the area” when nature called.
So while the property industry writes the eulogies for the landlords who will allegedly be forced to sell up if Rachel Reeves commits to her so-called tax grab later this month, tenants are unlikely to shed a tear.
This is not to say it will be a celebration. I’m not naïve enough to think landlords are the cause of all renters’ problems, and that their removal will result in some sort of housing utopia.
Among other things we’d probably need an actual increase in housing supply as a start for that, rather than just a slight rejigging of who owns what.
In fact, in the short-term, some renters will be likely to face upheaval if the property they live in changes hands – not that this will be in any way a new experience for anyone who has rented their home in the past few decades.
Ultimately though, it’s hard to threaten a demographic that has been stretched so badly in affordability terms, with the claim that it might get a little worse.
This is in no small part because in the 30 years since the advent of buy-to-let mortgages, it’s hard to argue that the expansion of the private rental sector has coincided with a particularly more functional housing market.
So while some landlord groups use tenants as a human shield to argue against changes to the status quo, perhaps it is worth considering what would happen if they were to sell up.
The properties would go to other landlords, or they would go to buyers. In the first instance, it’s perhaps hard to see what changes long-term, and in the second, the rental supply reduces, but as home ownership increases, the number of renters – or those forced to live with family – also likely goes down.
Would the amateur landlord sell-off really be as bad as we’re led to believe?
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