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Guaranteed Rental Property | Housing: How the market has failed

Guaranteed Rental Property | Housing: How the market has failed

Being a property management company specialising in guaranteed rent that the biggest drawback of owning a rental property is void periods in between tenants. A buy-to-let property is no good as an investment if it isn’t making any money. This is why we offer a great guaranteed rent solution.

Five million people in Britain – two million households – are desperate for decent, affordable housing.
Liverpool council worker Dave Walsh explains the origins of the housing crisis and puts forward a socialist alternative.
When strikes and protests won reforms
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In the 1980s Tory Prime Minister Thatcher claimed to want action to encourage home ownership. However Britain’s owner-occupation rates were then at their highest point yet and had been increasing since the end of World War One (WW1).

Britain’s population had doubled during the 19th century, and overcrowded slums became the norm for working class families.

Workers flooding into cities around 1850, looking for work in mills and factories, were housed in properties attached at the back and sides.Guaranteed Rental Property

Whole families were crammed into cellars with little light or ventilation and Friedrich Engels, the close collaborator of Karl Marx, called Manchester’s housing for the poor “cattle sheds for humans”.

Cholera outbreaks throughout the century (from which the rich were not immune), led to the 1872 and 1875 Public Health Acts, the basis of future advances such as running water, drainage and refuse collection.

The Housing of the Working Classes Act 1890 led many local authorities to clear slums. However they did not replace the houses they demolished, which created a housing shortage.

Landlords received handsome compensation for compulsorily purchased properties, the poor saw rents increase.

Then, only 10% of housing was owner-occupied and there was barely any council provision. 90% of housing was provided by private landlords and the law gave them the right to summarily evict tenants for non-payment of rent and to confiscate their possessions in lieu of arrears.

In 1914, 300 tenants in Leeds went on strike against a 6d (2.5p) rent increase. A mass meeting of tenants organised a city-wide protest.

Leeds Trades Council later called a labour conference intending to organise mass rent resistance. A Tenants’ Defence League formed a central committee spreading the campaign city-wide through public meetings and canvassing.
Rent increases

The tenants tried to challenge the rent increases through the courts, arguing that the combination of landlords fixing rents was an illegal conspiracy but the judge ruled against them and their campaign ended in defeat.Guaranteed Rental Property

However the need for municipal housing became a central plank of the Labour Party’s campaign in the 1914 Leeds council elections and in many other British cities.

In the 1915 Glasgow rent strike, tenants gained the backing of the Independent Labour Party. Industrial support came from workers in factories and shipyards where emergency committees threatened a wave of sympathy strikes against rent increases.

When WW1 broke out, a propaganda campaign encouraged men to ‘do their patriotic duty’ and fight for king and country, but tenants used this argument to encourage people to take part in the struggle against landlords who were acting unpatriotically.

The rent strikers, mainly women, as the men were either fighting or working long hours in the factories, refused to pay the increases that the landlords demanded but paid rents at the old rate.

As in Leeds, the landlords turned to the courts and sheriffs (bailiffs) to evict strikers from their homes.

But when they arrived the women used bells, whistles and drumming bin lids to alert the community the sheriff was on his way. They crowded into lobbies and up the stairs stopping them entering the house.

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Industrial militancy and bold political action won many reforms in housing. Such massive protests nationwide forced the government to introduce legislation in 1915 which provided rent control and security of tenure and made it much harder for landlords to evict tenants.
When council housing tipped the balance

In 1917 Lloyd George set up a public inquiry, the Industrial Unrest Commission, which found lack of adequate housing was one of the main causes of ‘unrest’.

A 1918 report radicalised government housing policy amid ruling class fears of Bolshevism and the spreading international revolution! Rent control remained until 1923 when new legislation began the slow process of decontrol.

However, in 1924 the first Labour government introduced a Housing Act encouraging councils to clear slums and build houses.

Although only done sporadically, the two million houses built between the wars, together with rent controls that persisted, ate deeply into landlords’ profits. They began offloading their stock.

Home ownership, accounting for just 10% at the end of WW1, also began rising. More legislation aimed at deregulating rents was introduced but full rent control was reintroduced in World War Two.

Wartime bombings created a severe housing shortage and these regulations remained until 1957. Workers were in no mood to give back to private landlords the freedom to exploit tenants.
Building programme

But it was the massive council house-building programmes and the post-war boom that had the biggest effect on rent and home ownership.

Between 1949 and 1954 almost 1.5 million council houses were built. By 1975 it had risen to 4.3 million and, as living standards improved, a growing number of working people were able to get a mortgage.

During this same period 3.9 million private houses were also built. Private landlords were being squeezed out of the market by housing opportunities which better met people’s needs.

This caused seismic shifts in Britain’s housing. By 1945 the privately rented sector had already fallen to 57%, 10% was now provided by councils and almost a third of homes were owner-occupied.

By 1961 there were more owner-occupied homes than privately rented, by 1981 council housing accounted for almost a third of the market and by 1992 the private rental sector sank to an all-time low of just 9%.

But after 1979 Thatcher’s Tory government offered council tenants a large discount under the ‘right to buy’ scheme.

With repair services greatly reduced by cuts, many council tenants bought their home. At first the effect was a large increase in owner-occupation rates.

This trend continued until 1992 but slowed markedly before reaching its peak of 72.5% in 2001 and started to decline.

In 1988 rent control was abolished leaving arrangements between tenants and landlords purely a matter of contract.

In 1991 Major’s Tory government began removing tax relief on mortgages, a process completed by Blair’s Labour government in 2001.

Throughout this period, the labour market also underwent significant changes; with greater emphasis on flexible working while far fewer workers had secure jobs with pensions.

In 1996 when the first ‘buy to let’ mortgage was introduced many workers saw an opportunity to secure their future with a property portfolio.

From then on, the private rental sector began to recover. Recently it surged, today outstripping all social housing which is now less than 17% of all provision.

London saw the biggest fall (6.3%) in home ownership rates between 2001 and 2006. Meanwhile the private rental sector there doubled in the last decade.
The return of Rigsby plc

The grim figure of Rigsby, the grasping landlord in the 1970s sitcom Rising Damp (though often now Rigsby plc. and not at all funny) again dominates housing.

Evictions by private landlords are up by 17% since the 2007 crash and could now spiral up with further cuts to the housing ‘safety net’.

The National Housing Federation predicts that home ownership will decline from 67% today to 64% in the next decade while rents will rise rapidly. In 2011, rents rose nationally by 6% and by 8% in London.

The Oxford Economics think-tank predict rents will rise by 20% in the next five years. 2008 figures show that 10% of all mortgage applications were for ‘buy to let’.

Savills thinks the UK rental market will grow from £48 billion today to £70 billion by 2016.

The government’s only answer to surging rent rises is the punitive ‘cap’ on housing benefit (HB). From April 2013 this will set a £250 a week limit for a one bedroom property, £290 for a two and £340 for a three bedroom property.

Meanwhile the spare room tax will take £14 off HB for anyone with one empty bedroom and £25 for two.

Benefit limits will only increase each year by the (lower) CPI rate of inflation, so HB will be unable to keep pace where rents rise faster than this.

Tory minister Iain Duncan Smith denied the cap would increase homelessness but leaked government figures predict that it will make an extra 80,000 homeless.

There is ‘social cleansing’ of affluent areas. Changes are making many inner London neighbourhoods unaffordable to people on housing benefit. Advertisements saying ‘benefits claimants need not apply’ are now commonplace.

The three main parties agree on the HB cap. All vilify claimants, portraying them as scroungers while highlighting the very high cost of benefits.

However, according to Inside Housing, 93% of HB claims last year were made from households with at least one working adult.

Also of course, it’s not the claimant who gains from these benefit payments but the landlord.

The latest Rightmove survey shows that one-third of tenants spend more than half their income on rent and in London one in six spends more than 60%.

Most private tenants are not renting by choice; 56% say they would rather buy but can’t get a mortgage.

The cheapest quarter of housing now costs six times the average household income, eight times in London, where owner-occupiers are a minority and predicted to be just 44% by 2021.

London’s housing crisis means that families in desperate need in Waltham Forest, east London, have been made ‘take it or leave it’ offers in the West Midlands, while neighbouring Newham council tried to transfer its waiting list to a housing association in Stoke.

If people receiving these offers refuse, they may be deemed ‘deliberately homeless’ and have their HB for emergency accommodation removed.

The government announced recently it will increase the discount for the right to buy but says it will replace properties sold.

However, these replacement properties will be rented at up to 80% of market value. The government claims such rents are ‘affordable’ but most tenants would disagree!

1.8 million people are on housing waiting lists with five million in desperate need while the overall social housing budget has been cut by 50%.

Moreover housing associations are being given the freedom to float on the stock market.

Inside Housing reported in May 2012 that a consortium of ten housing associations planned to float their 10,000 houses on the London Junior Stock Exchange this year.

This could begin a trend as government subsidies are reduced and housing associations seek funding for refurbishments and repairs.

The private housing market has clearly failed. With house building now at its lowest level since the 1920s, a socialist alternative is urgently needed.

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