Politics and Economics, Uncategorized

It’s my Pension!

I was talking with a friend recently about his buy to let in the South West and got the not uncommon repsonse that it was his pension. He had nothing to look forward to other than the state pension and so, to improve his situation, had bought a modest house to let in order to give him some income. There is a lot to be read into that situation, not least that he didn’t expect the state pension to suffice, despite him being a relatively modest and frugally living person. That, however, is for another day. The issue that I found interesting that day was that, my friend, a decent person, was happy to consider living off of someone else’s hard work.

In the UK today, the average renter pays 50% of their take home pay on rent (considerably more if they live in the south east). So all day monday, all day tuesday and half of wednesday the tenant is working for their landlord. That, you may think,is fair enough; they have to stay somewhere. But is 50% of their income really fair? What, after all, is the landlord giving them in return? Not very much really; the house or flat remains the property of the landlord, who can, and usually does, dictate the decor; they often insist that their furnishings remain and that nothing can be hung on the walls thereby keeping it just a roof over their head and preventing the tenant from making it their home. Despite paying an average of £900 per month, many tenants will attest that landlords grumble and complain when they have to spend money on maintenance or repairs to their property. For the most part, it would seem, they want to take and take and give nothing. On top of all this, of course, they have, in the property, a growing asset.

The tenant on the contrary gets little in return for devoting half of their working life to the landlord, usually on Short Assured Tenancies, they have no little or no security. They have all sorts of restrictive clauses foisted on them, at the landlord’s will, forbidding pets, children, smoking or whatever the landlord fancies really. They live in fear of losing their jobs because housing benefit is rarely enough to cover these excessive rents. It doesn’t appear to be what one might call a win win situation; there is only one winner in these transactions. It really doesn’t seem fair.

And things are becoming less fair. Home ownership is falling in the UK. More and more people are being priced out by the buy to letters and with no low cost or social housing to speak of, they have no option but to rent from a private landlord, someone who just happens to be lucky enough to have the capital or the creditworthiness behind them to buy the property. Can it be fair that the tenant has no option but to hand over at least half of their hard earned wages to ensure that someone already better off than them has a very comfortable retirement indeed?

My friend, that day, was quick to tell me that he hadn’t really thought of it in these terms and I’m sure he hadn’t. He had just thought that he was charging a “market” rent so that must be fair and, of course, “lots of other people are doing it”. I doubt that he will give up being a landlord but I do hope that he has come to understand that the property is not funding his retirement, his tenant’s labour is.