I am asking John McDonnell the Labour MP for Hayes and Harlington to remind the Chancellor Rishi Sunak and Prime Minster Boris Johnson to use their persuasive skills to highlight and take a more holistic approach and attitude to the private rented sector and tackle issues which affect a Hayes landlords’ capability and capacity to strategically run an effective buy-to-let business.

For the last thirty years, the Government have passed responsibility of housing the masses from local authorities (i.e. council housing) to the estimated 1.5 million British buy-to-let landlords.

However, since 2015/16, Hayes landlords have faced increasing tax burdens as each year goes by, with the removal of mortgage interest rate relief on income tax (Section 24), the introduction of the 3 percent surcharge on stamp duty, and the reduction of the letting relief on capital gains tax. 

My research has calculated the total income tax contribution by 1,415 Hayes (UB3) private landlords in the tax year 2015/16 was £3,692,146

However, the eradication of higher rate mortgage interest relief (also known as Section 24) announced in 2015 by George Osborne has been estimated to add a further £1.9 billion nationally to landlord’s tax liability. Whilst raising money from landlords is an easy target, and the tax receipts attractive, it does make the landlords financial burden even heavier.

And by 2021/2, when the full extent of the Section 24 relief kicks in, that income tax liability will rise to £5,390,533

for those Hayes (UB3 landlords

This doesn’t even take into account additional liabilities such as Capital Gains Tax, the 3% additional duty on top of the prevailing Stamp Duty Land Tax and VAT.

Ambiguity and a lack of certainty is the foe of all investment, which has been seen with Brexit. Now, just as things are starting to get rosy in Q1 with the pent-up demand released with the ‘Boris Bounce’, the last thing we need as a ‘collective’ property industry is for the Government to see us landlords as a constant cash cow. This new Tory government must acknowledge the value the majority of private landlords offer by housing in excess of 9.45 million people in the country.

Westminster needs to take a balanced approach to the significant issues of possession (especially with the impeding removal of section 21 evictions), taxation and all rental properties needing to be at least an ‘E’ energy efficiency rating, to connect the value the private rented sector offers the country by effectively housing over a fifth of the population and avoid unintentional consequences by making renting a private rented property harder for tenants … because, it’s not financially viable to buy (or retain) a buy-to-let property with the way things are going against the landlord.

Washing Machine Energy Ratings for Houses was the phrase one Hayes landlord told me a few years ago when we were talking about the colour bar chart graphs that every property has had for over 10 years now. Now these weren’t brought in to use the whole palate of ink in people’s printers, but to increase the energy efficiency of the UK’s housing stock.  The vast majority of Hayes landlords are, by now, acquainted with the legislation that came into force on the 1^st of April 2018, that means all new and renewed private tenancy agreements must have an Energy Performance Certificate (EPC) rating of E or above, otherwise it would be illegal to rent the property out (EPC ratings go A to G – A being the best and G the worst).

Yet, from 1^st April 2020, those rules will be extended to also cover existing Hayes tenancies, meaning that under the new legislation, properties with an EPC rating of F or G will be classed as unrentable – meaning it will be illegal to rent the property and the landlord will be liable for a fine of £5,000.

It will be illegal for any landlord to let any Hayes Rental property with an EPC rating of F & G from April 2020

Back in 2018, there was a loophole for Hayes landlords of F & G rated rental homes on new tenancies, where they did not need to upgrade the property for five years if it cost them money (called the ‘no cost to landlord’ exemption rule) – yet back in April 2019 this exemption to improve rental properties was removed – so they too are included in these new rules.

Therefore, this means that Hayes landlords must use their own cash to cover the cost of improving their Hayes property to at least an EPC band E, and we aren’t talking about an insignificant number here….

81 Hayes (UB3) properties will be illegal

to rent out from the 1st April 2020

.. as they have energy ratings of F and G.

Now this requirement to upgrade the property is subject to a spending cap of £3,500 (including VAT) for each rental property, as landlords only need to spend what they need to, to improve their Hayes property to EPC rating E.

In cases where a Hayes landlord is unable to improve their Hayes property to EPC rating E within the £3,500 cap, then they still need to spend their hard earned cash and carry out the most appropriate measures which can be installed up to the £3,500 cap, and then register an exemption (with 3 quotes from 3 contractors) for their property on the basis that all relevant improvements have been installed and the property remains below an E.

Hayes homes such as some G rated flats on Coldharbour Lane or some F rated flats on Angel Lane and Austin Road will all be illegal to rent out by April

If you are a self-managing Hayes landlord or a landlord with another Hayes agent, then feel free to pick up the phone and chat through any concerns with regard to these new regulations, how to read a EPC graph, how to find the EPC rating of your home, in fact anything – call me. The last thing you need is a £5,000 fine on top of the £3,500 improvement bill.

One final thought though – it might be wise for Hayes landlords who have had their rental properties for a while now to get a new EPC carried out on their property (something we can help with irrespective of whether you are a landlord of ours or not) as recent research has also acknowledged that some early EPC’s understated the thermal efficiency of solid walls.  As countless Hayes rental properties are pre 1925, which is when most (not all) new properties were built with cavity walls, the Dept for Business, Energy and Business Strategy have now recalibrated EPC’s to give a truer result. This probably means that some solid wall properties, Victorian and Edwardian terraced houses and converted flats, presently rated F under an EPC will no longer demand any improvement works and certainly less building work may be required in the case of a G rated rental property.

Have the Baby Boomers (people between the ages of 55yo to 75yo) messed things up for the Millennials in terms of getting on the Hayesproperty ladder?They bought their own council houses in the 80’s and 90’s, meaning there areno affordable homes for today’s youngsters, thus driving up the demand for rental homes and the price of homes (making them unaffordable). So, I decided to look at the figures, which donot make for good reading.

In 1980, the average Hayeshousehold income was just under £6,000 per annum and the average Hayeshouse price was £25,564;whilst today, the average Londonhousehold income is £36,348per annum, yet the average household value is £369,700, meaning…

the average value of a Hayeshome was 4.26times more than the average household income in 1980 compared to today, where it is 10.17times a Hayeshousehold income

… it’s no wonder then that Millennials are pointing the finger at Baby Boomers!

And the problems don’t just stop there. Not only do thenewspapers state there is a housing crisis of affordability, but also a crisis of the availabilityof homesfor people to live in. The political parties using housing as a ‘vote getter’ mentioned statssuchas in 1981 there were 5.1 million council houses and today that stands at 1.6 million. Thisis importantbecause,as asubstantialnumber of people will never be able to afford to buy, social housing plays a significant role in homing them.

It all looks rather damning andthe phrase ‘OK Boomer’ looks quite apt.

(The phrase ‘OK Boomer’become fashionable as it started as a way of showing Baby Boomers that things were “easier in the past”, yet now it has become just a way for younger people to discredit the views of older people).

Well, checking the stats, the political parties seemed to forget the number of housing associations homes (which are also social housing) has risen from 0.4m to 2.6mhomes in that time, therefore,whilst there is a drop in social housing, it’s a net figure of2.3mfewer social-rented houses, instead of the 3.5m in the paragraph above.

Baby Boomers simply did the best they could with the circumstances given-it’s not like that these older generations have been conspiring in the food aislesof Waitrose or M&S on how to mess things up for the next generation. There are fundamental underlying problems in British society that means things are difficult for our younger people -it’s everyone’s responsibility to solve those underlying problems -we can’t just blame the Baby Boomers. Millennials aren’t morally superior to Baby Boomers just because they didn’t grow up in the same era of economic growth and house price inflation.

What some people seem to forget is whilst Hayesproperty values were lower, so weresalaries. The true cost of affordability is the mortgage payments. Assuming an average property was purchased in 1980 and again in 2019, using a 95% mortgage at the prevailing mortgage rate of 17.8% in 1980 and the current 1.65%, today in Hayesthe mortgage accounts for 47%of the household income(assuming a single income)compared to 73%in 1980.This has to be one of the main reasons why many families became two wage households in the late 70’s/early 80’s as housing affordability was diminished with these eye watering high interest rates.

Things were much tougher for homeowners in 1980….

Mort

	Mortgage Monthly Payments in That Year’s Prices	Mortgage Monthly Payments in Today’s Prices	% of Monthly Salary
2019	£364.99	£1,794.53	73.00%
£1,427.90	£1,427.90	47.14%

The issue here is something much deeper. Baby Boomers say it is the Millennials’ own fault they can’t afford to buy their own home because they spend all their money on three holidays, avocado on toast, going out down the pub 3 times a week and buying the latest iPhone or suchlike whilst Millennials accuse the Baby Boomer generation for ruining the housing market ‘per se’ by being selfish. Both are right and both are wrong.

In my own involvement with friends and family, many Hayes Baby Boomers are trying their best to help out their now grown up children with a deposit. They are fully aware of current Hayes

house prices compared to when they bought their own homes.

I am not a fan of attaching labels, be it Millennials, Baby Boomer or Gen-X. It’s really a point of attitude and behaviour and circumstance rather than the date of your birth. Every generation has had its fair share of feast and famine and whilst I appreciate the irony of the title of this article, let’s stop labelling people and making assumptions, everyone needs to understand each generation’s issues and be more ungrudging to each other.

I was having a thought-provoking conversation with a Hayes buy-to-let landlord a few weeks ago about everything to do with property, Brexit and how the reported voluntary repatriation of Eastern Europeans had affected the property market in Hayes.  It transpired some of his Hayes tenants, who had been in his property for over 10 years were returning to Poland.  He was particularly disappointed as he told me they were some of the best, if not the best, tenants he had ever had.

In 2004, eight Eastern European countries joined the European Union and by 2015, EU net migration from those Eastern European Accession states (also known as the EU8), there was a net migration of an additional 42,000 EU8 adults per year coming into the UK, which equated for our local area of Hillingdon an additional 300 adults per year coming into the area in 2015 alone.

Yet by 2018, net migration had reversed and that saw 107 more EU8 citizens leave than arrive to live in Hillingdon

… and in the last set of figures released for year up to the Summer of 2019, net EU8 migration for Hillingdon was a net loss of 50 EU8 people for the year.  These are not huge numbers, considering ..

EU8 citizens only make up 2.90% of the

population in Hillingdon

Yes, at the last count there were 7,950 EU8 European citizens living in our local area out of a population of 273,936.

Its fascinating that 35.7% of the EU8 citizens that came across to the UK after 2004 were degree level educated compared to the 3.18% of adult citizens born in the UK, yet of all the EU8 citizens in the country, 65.9% of are in private rented accommodation, 9.6% in social housing and 24.5% are home owners.

It is certain that migration of Eastern Europeans, especially in the early years of 2004 to 2010, made a huge impact on the Hayes rental property market – yet as time has gone on, families have started to put roots down and bring children into the world.  Hayes landlords buying all the rental properties for this new demand meant house prices for homeowners bounced back particular well after the global financial crisis / credit crunch of 2008/9.

Again, looking at the figures, a good proportion of EU8 citizens have become homeowners and even landlords.

Yes, there is small number of Hayes EU8 citizens leaving as they have had the dilemma on whether they should stay or go, and some families, using the wealth that they have built up whilst working in the Country have returned to their home country or other EU member states.  Decisions like that are not easily made and often tainted with dejection and disappointment – yet again, looking at the numbers, this is very much the minority.  As an agent, we are seeing European people (not just EU8 countries) come and European people go, and it was like that before 2016 and to answer the question … we believe we have a case of ‘bad news’ selling newspapers yet again.

Of course if one of your star tenants leaves your Hayes rental property and then you read an article about mass migration in one the red top newspapers or Daily Mail, it is going to worry you (like it did my Hayes landlord friend), yet with the information we shared with him – it has put his mind at rest (and the best part – we were able to find him a new tenant within the week – who ironically also came from Europe to live and work in the UK!).

To conclude, hopefully the end is in sight with Brexit, it would be a huge loss for the Country to see its embedded and settled European community depart as it must be quite melancholic for our fellow Europeans to even have to deliberate such a life changing move.  All I can say is I think we are all eagerly anticipating the ‘B-word’ situation becoming stable again so that all of us, wherever we originate from, can reasonably plan our future in our sceptered isle.

Irrespective of the shenanigans and political goings on in Westminster recently, the housing market (for the time being anyway) shows a striking resilience, fostered by the on-going wide-ranging monetary policy by the Bank of England. With interest rates and unemployment low, UKplc is heading into 2020 in reasonable condition.  Additionally, despite the UK’s new homes industry improving its year on year new build figures (building 173,660 new homes this year to date – notably 8% more new homes than at the same time last year), there has been an unequal increase in demand for housing, especially in the most thriving areas of the Country.

With the discussion on whether the younger generation can afford to buy, it is true the average cost of a UK property in the early 1970’s was 3.8 times the average salary yet, nationally, it now stands at 8.4 times. On the face of it that doesn’t look good in anyone’s books – yet that isn’t the full story because it doesn’t reflect inflation and interest rates when it comes to the cost of borrowing money in relation to a mortgage for property.

The current level of mortgage interest rates has not been seen for many generations, meaning there are whole cohorts of the Hayes home-owning population who have no appreciation of the pandemonium that will eat into their household budgets should we ever return to the average historical cost of borrowing (interest rates jumped to 15% in 1992 – which wasn’t that long ago and between 2003 and 2007 they were on average 4.9%).

Now, once first-time buyers have jumped the hurdle of saving enough for a 5% deposit, which is hard with rents and many carrying loans of personal debt (unsecured loans), first-time buyers are currently spending an average one sixth of their salary on their mortgage, meaning mortgage arrears are at historical lows. However, on the other side of the coin repossessions have started to grow, with 6,180 repossession orders made in the last quarter, a 55% jump from 2017, yet nowhere near the 2009 high of 29,145 in the first quarter of 2009.

Therefore, this week’s discussion on the Hayes property market is – where are we with lending (mortgages and unsecured loans) and how is it affecting the Hayes, and national, property market?

One vital measure of the property market (and economy) is the mortgage market. If all the mortgages were added up, they would total £968.1bn; a lot when you consider the UK’s GDP is only £2,190.1bn. Mortgages are important as uncertainty causes building societies and banks to curtail lending (remember what happened in the Credit Crunch) and that seriously affects property prices. Then we have unsecured personal loans; interestingly the average Brit owes £991.42 in unsecured loans, a total of £36.1bn.

Lending is the lifeblood of our economy. Go back to 2007, and the phrase ‘Credit Crunch’ hadn’t been invented, yet now the term has entered our everyday language. In the autumn of 2007 it took a couple months before the crunch began to affect the Hayes property market, but in early 2008, and for the following year and half, Hayes property values dropped each month like a stone.

Mercifully, after a phase of sluggishness, in 2011 the Hayes property market started to recover slowly as certitude returned to the economy as a whole and property values started to rise as the economy sped upwards. Happily, the Bank of England recognised the start of another boom and bust cycle, so in Spring of 2015, new rules for mortgage lending were introduced and for the following few years we have seen a reappearance to more credible and steady medium-term property price growth.

Hayes Property Values are 68% higher since the Credit Crunch

And what of the other side of the coin in terms of excess lending in Hayes?

Since 1977, the average Bank of England interest rate has been 6.65%, making the current low rate of 0.75% very low indeed. Yet the issue isn’t the amount of lending, as much as the persons ability to pay. Therefore, whether a person’s mortgage is fixed or not is more important than the amount owed.

Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.5% in the autumn of 2012 to the current 70.2%. If you haven’t fixed your mortgage – maybe you should follow the majority?

The total cost of mortgages owed by people in Hayes is £1,638,112,660

(Based on the UB3 and UB4 postcodes)

In my modest opinion, if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), interest rates can only go one way from their current ultra low level of 0.75% ….and that is why I consider it important to highlight this to all the homeowners and landlords of Hayes. Maybe, just maybe, you might want to consider taking some advice from one of the many qualified mortgage advisors in Hayes?

If you are interested in the Hayes Property Market the http://www.HayesPropertyBlog.com is worth a visit.