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The Story of the Landlord and the First-time Buyers

In September 2006 I was employed as an estate agent. This was my first post-university job and it wasn't the most natural career choice for a music and theology student! But, I needed a way to pay off a large student loan.

I was out of place in this industry and I soon left to join the charity sector. But, before leaving, I was able to experience a fascinating ‘behind the scenes’ look at the UK’s (broken) housing market and here I'll share a story from those days.

This is the story of the landlord and the first-time buyers. It was more than a decade ago, but it remains disappointingly relevant today.

It was autumn 2006 and a nice new Porsche pulled up outside our office in Hemel Hempstead and parked on the double yellow lines outside (you can park where you like in one of those!). A man got out and swaggered in like he wanted everyone to notice him. He greeted my boss with mutual alpha male respect and immediately started 'talking business'. This man was a serial property investor who owned some of the rental properties that we managed. He was a successful businessman - so successful that he was able to spend several months of the year living a holiday lifestyle abroad.

On this particular day, this investor was inquiring about new property prospects to add to his portfolio. Typically, he would buy at the cheaper end of the market (e.g. flats and starter homes) and he was interested in one that had recently come on for sale.

At this point, I need to share a parallel story….

A young couple desperate to escape crippling rent had been looking to purchase their first home. There wasn’t much available that they could afford, but they had found one flat that they were clearly excited about buying. However, they were negotiating the sale slowly, partly due to some trouble securing a mortgage offer and partly because buying a first home is a big decision.

Meanwhile the property investor was looking at purchasing the same flat as this young couple and, without too much thought, he made a cash offer to buy it. So, two offers were received for this flat: one from the young couple and one from the investor.

The investor’s offer was actually lower than the couple’s, but he was offering cash and he had a reputation as a good buyer. Also, the sale to the investor was favoured by us, the estate agent, because even though we would receive a lower rate of commission on the sale we were likely to manage the property as a rental, meaning an ongoing monthly income on top of the sale fee. So, the investor won the deal and the couple missed out.

Now, this isn’t an unusual story so far and there are lots of similar first-time buyer stories out there. But, here’s the twist and the reason the story has stuck with me…. This property investor was also the couple’s current landlord.

The investor/landlord had done nothing legally wrong here, so shouldn’t be condemned – he was just playing real-life Monopoly and playing it well. Also, I don’t believe that he knew he was competing against his tenants for this sale. But, the fact that this game is allowed to be played so freely in a country with housing shortages is, quite simply, destroying lives and communities. It is preventing young couples from starting families; it’s forcing parents to return to work shortly after having children in order to pay the bills; it’s causing relationship breakdown due to financial pressures (and therefore a need for more housing as couples split); it’s forcing families to live in cramped conditions; and in recent years the single biggest cause of homelessness in England is the ending of a tenancy in the private rented sector.

Data from the ONS shows that the private rented sector continues to grow and so too does the number of families living in temporary accommodation, 'sofa surfers' and rough sleepers. Is this a coincidence?

The UK is now rife with properties that are not lived in by the owners. While this is not necessarily a problem in and of itself, it seems morally unacceptable when properties are rented out at cripplingly high rates and/or left empty when there are major affordable housing shortages.

Having a home is among the most basic of human needs and a 'home' is not necessarily the same thing as a house or property. Home is, by definition, somewhere offering a long-term or permanent residence - i.e. a place with a sense of security - and, as referenced above, the private rented sector is frequently guilty of not offering that much-needed security.

Without homes, societies suffer awful consequences. One striking example to highlight this point is this: the words 'of no fixed address' frequently appear next to the description of the people responsible for terrible crimes (try this link to see my point). I've spent several years working in the homelessness sector and I've seen the desperation caused by homelessness which, in turn, often leads to crime.

So, what’s the solution? Before attempting to answer that, here are some stark and contrasting figures:

I may be accused of over-simplification by contrasting these statistics, but my point is this: the problem does not seem to be an obvious lack of properties, but a problem with distribution. What is to say that building more properties and new estates will not just result in a more unfair distribution of wealth and more problems for society? What is there to stop landlords from preventing their tenants from purchasing their own home (as in my example story above)?

I'm not saying that ‘build more’ is not a valid argument, nor am I saying that the UK does not need more homes; but I am saying that building more homes will not solve the UK's housing crisis (and the broken communities crisis for that matter) while property ownership remains so attractive to investors.

There have been some tax and policy changes in recent years that have attempted to curb the property investment, but it remains to be seen whether they have made any significant difference. Surely more can be done and, I wonder, have we seen any desperate measures in these desperate times?

I'll take a risk and propose some potentially unpopular solutions here. I'd love to hear why these will or will not work and alternative ideas (please click to expand the thoughts):

  1. In times of real crisis, the UK government has in the past intervened in the market, for example rationing after WW2. Likewise, the government occasionally places limits/caps on things - two different examples being that individuals are only allowed one cash ISA for savings per year at present and, in marriage, individuals are only to have one spouse. Caps exist for the good of society, so why not consider this for something as important as housing?

    There are some who have a good argument for requiring two places of residence in the UK (and many politicians have more than one which probably makes this proposed policy change extremely unlikely). Others will argue that their second property is their retirement fund when they no longer have an income. Also, the UK does need a rental market and property developers also play an important role in improving the housing stock, so owning a second home is not necessarily a terrible thing.

    Currently the data on multiple home ownership is very patchy, but it is estimated that there are around 2.5m landlords owning 5m rental properties, in addition to their owner-occupied homes. This means that, on average, landlords own at least three properties. But, does anyone really need more than two?

    Or perhaps a cap or a ban on foreign-owned properties is the way forward, as New Zealand are trying. The government introduced a small rise in stamp duty for multiple home ownership in 2016 and it will be interesting to see what affect this has had in deterring people from residential property investment, if any. Interestingly, that rise in tax doesn't increase further for third, fourth and fifith (etc.) properties - it's just one rate for a 'second home'. Is a more radical approach needed?

  2. Investors frequently buy residential properties through limited companies, to avoid tax and increase their profit and almost 100,000 properties in the UK are now owned by overseas companies, most of which are tax havens. It is not yet known how many of these are then left empty, but it is expected to be significant. Regardless, how is this a good thing for a society with so much homelessness?

    Post-publication note: One of the UK's leading tax specialists kindly sent me some helpful comments after reading my blog. In relation to this section he commented: Since 2013 the UK has been making strenuous attempts to toughen the tax regime for residential landlords, some of whom would pay income tax at an effective rate of more than 100% if they retained the property. This is forcing private landlords out of the market. Simultaneously, the government introduced an additional tax charge on limited companies owning residential properties. In addition, UK capital gains tax and inheritance tax apply to foreign owners of UK property.

  3. Capping property ownership now would do nothing to encourage current investors to sell up. Perhaps a date could be set in the future whereby owners of multiple residential properties are required to reduce their stock to a certain level, which would increase the supply of houses for sale and potentially reduce prices. Such investors could be incentivised through the tax system (e.g. a reduction in capital gains tax if they sell within a certain time frame) to transfer their financial investments into places that are more beneficial for the wider society, such as government bonds or social investment schemes such as this one by Hope into Action.
  4. I think Shelter covers this one well in this paper.
  5. How many people do you know who live in houses with more bedrooms than they need? Probably quite a few. In the case of social housing, tenants have faced the 'bedroom tax', but there is no such tax for those who own their homes. Regardless of whether this is fair or not, there are thousands of properties occupied by retired people whose families have grown up and moved out. How do these family homes return to families? There have been many calls for more housing help for the elderly But how about incentivising people to down-size by reducing/removing stamp duty for people who are downsizing?
  6. Despite recent efforts by the government to decrease the number of empty properties the levels are still extremely high (see above). In a country with such a large homelessness problem this seems, quite frankly, unacceptable. Why not allow compulsory purchases of empty properties by housing associations? Or why not increase tax while the property is empty to a level that actually deters owners from keeping them empty? At present, large areas of expensive land and mansions in London are left empty when people are living on the streets just a short walk away.
    The Bishop's Avenue in London is one such example and the government's efforts to tackle empty properties on this street has had little impact, because the taxes are so small by comparison with the property values.

    Post-publication note: As mentioned previously, the tax expert offered the following comment:I agree with all of these proposals. However, we need to be clear that local authorities already have a huge range of powers to bring empty homes into use. I am strongly of the view that it is not necessary to introduce new laws or regulations: what is required is real pressure on local authorities to use all the many powers that they currently have for the benefit of homeless people.

Thoughts anyone?!

Next up… time for my one-year scan.

Homelessness I: Rough Sleepers - the sign of a failed society?

Homelessness II: (Un)affordable Housing



  1. AwesomeAsian

    ” the problem does not seem to be an obvious lack of properties, but a problem with distribution”

    This is the major problem in this current world we live in.
    There is no shortage if the distribution is fair and if capitalism is taken out of the equation.

    On the extreme end, communism & socialism would solve this distribution problem. But we already know the perils of both … communism will oppress the population & socialism is often taken advantage of by frauds and slackers.

  2. Nicky Bull

    Agreed. The same ‘problem of distribution’ applies to wealth, food, technology and healthcare as well as to housing. And although such inequalities have always existed they are becoming wider, especially in the so-called ‘developed’ world. Evidence suggests that the more equal a society is the more it flourishes in just about every respect (lower levels of crime; higher standards of educational achievement; better overall health etc.), so reducing inequality should be seen as a complete win-win strategy for those in positions of power – sadly that doesn’t seem to have got through to them!

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