At this stage, it’s basically a given that the housing crisis is a big deal and that everybody's pissed off about it. But spare a thought for the people unable to join in outraged discussions about sky high rents in undesirable areas: Britain's landlords – the people collecting that rent and probably having a pretty nice time doing so.
Rather than sitting around hoping that all the pennies I'm saving by sneaking tepid tins of blackout cider into pubs will eventually amount to enough for a deposit, I decided to be pro-active and head to the Property Investor Show at London's Excel Centre. As the name suggests, it’s a show for property investors, where they all congregate in a big hall and explain the benefits of letting out poky, one-bed flats in Croydon to weird povvos who can't get on the housing ladder.
I wanted to get a better insight into why property is so pricey that our city centres are becoming playgrounds for while the poor are taking up arms and setting up burning barricades to stop bailiffs kicking them out of their homes.
This is the scene that greeted me when I walked in; people in well-tailored suits drinking bottled water and having what looked like very important conversations next to little tables. It was then that I heard my first mantra of the day – "When the market is greedy, be fearful; when the market is fearful, be greedy". It made me realise that maybe I too could become a property tycoon one day, sweeping in to snatch cash from the shaking hands of my fearful, cowering tenants.
Imagine an aircraft hangar full of people who failed to make it through the application process of The Apprentice because they didn't tick enough of the malleable/entertaining/narcissistic boxes and you'll get some sense of the situation I had walked into.
There was nothing particularly sinister about the event – no grand announcement about gentrification being an Illuminati plot – but no one seemed particularly keen to have their photos taken (which is why the photos in this article are taken on a smartphone).
This guy turned out to be an event organiser though, so he was free to snap away willy nilly. As usual, it’s one rule for the people who organise the events and another for those who go along with an ulterior motive. Typical.
I wanted to immerse myself completely in the exciting world of property investment, so I figured I'd approach the eager sales-people as if I were a genuine investor. And one after the other, they believed that I – a man who balks at the cost of ready salted crisps in Pret – had a spare £100,000 that I was looking to invest in a housing development in Margate.
The assorted developers had various ways of trying to secure people’s money. Mostly it was just information boards with soberly worded assurances about the quality of the investment, but some companies went in for slightly more subtle methods of seduction: "Imagine becoming so rich that every time you felt like drinking champagne with a supermodel or swapping fedoras with Bruce Willis you could just invest in another Thai spa-hotel development and fly them all out there on the business acount."
Companies were also holding prize draws in order to convince people to part with their money. But to be fair, who wouldn’t want their living room to look just like the Surbiton branch of Foxtons?
At last: a Scottish property company presenting me with an offer I was interested in.
But I'm not sure that this whisky bottle for infants quite warranted the all-caps signage. Or the fact that I had to spend ten minutes pretending to be interested in buy-to-let properties in Glasgow and days clearing my inbox of follow-up emails. It also seemed like a slightly misguided business move – awarding people with a miniature tincture of alcohol does little to convince you that there's much money in the Scottish property market.
Of course, property is a global business now, and there were plenty of companies compelling me to invest my imaginary pounds abroad. Presumably this picture of a smiling family dragging a child through some grass depicts the life of a property magnate skipping gaily to the bank after cashing in on the US housing bubble. Because it would be weird to advertise with one tearfully roasting their hands over a burning bin after losing their home in a foreclosure due to the sub-prime mortgage crisis.
It’s a similar story in Dublin, as Ian Lawlor, co-founder of Horizon Capital Group, told me. Basically, property is relatively cheap right now, but buying a house is still out of reach to the average Dubliner, struck by poverty since the entire world’s economy committed harakiri. So if you buy houses in Dublin at the moment you can charge people high rents to live there because they can’t afford to buy their way out of renting.
Personally, I can’t see any reason at all for the Irish to resent the idea of rich English people buying up their property and renting it back to them at inflated prices.
It soon dawned on me that, in property shows in different parts of the globe, foreign millionaires are considering buying up a small piece of Britain. Meaning that if I ever want to buy a house I’ll be competing not only with my neighbours, but also some sheikhs and a bunch of guys who spend the majority of their time necking Bollinger in business class while jetting between various global property shows.
Sure enough, when I got home I found this screen shot of a swanky new South London apartment block being advertised in Singapore. Any speculation that Singaporeans are about to emigrate en-masse to Elephant and Castle was quickly put to bed by the managing director of Lend Lease, who gave the game away when he declared that: “The foundations of the Central London residential market are robust with a continued shortage of stock available and high levels of demand.”
The poor man’s housing crisis is the moneyed wheeler-dealer’s “robust” market.
When I got a salesman to give me the lowdown on property in the UK, he confirmed that a lot of foreign investors had been buying up whatever they could over here. He said Chinese, Russian and Indian money had been pouring into Manchester, where you can buy a flat for £85,000 now and sell it on for £100,000 five years later, creaming off a six percent rental income in the meantime.
He told me that the housing shortage is so acute that even some property investors are crying out for new homes to be built. If loads of new houses are built and flood the market, I asked, could this lower rent, damaging incomes for prospective landlords such as myself? Not to worry, he told me, the shortage is so bad that it would take ages before that ever happened. Phew.
Then I went to a presentation by Mike Frisby, who touts himself as an expert in housing benefit. He told a packed room how he used to work for Unilever but didn’t think he was really “having an impact”. So, he “ran as fast as [he] could from the corporate world” into the much less slimy world of being a private landlord who rents to housing benefit recipients and “structures their claims” to make sure he extracts as much money as possible from the taxpayer.
Mike's slideshow displayed an Express front-page reporting that the housing bill doubled to £21 billion under the last Labour government. Rather than cursing the benefit-scrounging free-loaders like many of the readers presumably did, he noticed a golden opportunity to cash-in.
He explained that the Local Housing Allowance (LHA), which is used to calculate how much housing benefit people are entitled to, is supposed to be enough to pay for the cheapest 30 percent of properties in any given area. That means that if you can find the very cheapest properties in the area, you can rent them out to housing benefit claimants and get them to claim as much rent as if the place was at the top of that 30 percent.
He then showed us an example of how, using this technique, he charged a pair of single LHA renters (via the taxpayer) £1,090 a month for a two bedroom property that he could only rent out at £625 per month to a professional couple.
He also pointed out that you can get more money from four individually-paying single LHA tenants than a family of four. That way he managed to get £2,860 per month for a property where the market rent would have been £1,300 if a family was living there.
Benefit is calculated on the people claiming it, he continued, not the property they’re living in, so if you can convince a family who would be entitled to three bedrooms to live in a house with two bedrooms, you can get them to claim as much as a three bedroom property and put the whole lot into your big wallet.
His final wheeze was his new service that he dubbed “Lease 2 Let”, where you offer to apply these techniques for landlords who can’t be bothered to do it themselves, guarantee them the market rent and take the mark up for yourself.
None of this is even vaguely illegal. But with the government’s recent rhetoric about the cost of housing benefit, it makes you wonder who the real scroungers are – the people who claim because otherwise they can't afford anywhere to live, or the people who make the most out of that benefit for private profit at the expense of the taxpayer.
With a housing benefit cap at £500 per week for couples and £350 for singles being ushered in, more private landlords are beginning to reject any tenants who claim benefit because they simply won't be able to afford to pay enough rent any more. This will probably force Mike to alter his business model somewhat, but it's hard to see him as the victim, what with the substantial rise in homelessness over the past few years.
In fact, according to the Institute for Public Public Policy Research, for every pound it spends on building houses, the government is spending £19 on subsidising rent. So things are seemingly still geared towards propping up landlords rather than making sure there are enough homes.
I left the property show and went to one of the Excel Centre’s many eateries. The price of the congealed mass masquerading as pasta made me feel pretty baller, but as I leafed through Property Investor News magazine, something told me I wasn’t cut out for this world, even though the profit charts climb ever upwards. I think it might be that I don't have several hundred thousand pounds in start-up money.
I drank my tiny bottle of whisky. It was pleasant, but there wasn’t nearly enough of it to help me overcome my disappointment that I wouldn’t be lording it in a Phuket spa-hotel with Bruce Willis any time soon. And it's kind of a shame, because with so many MPs being private landlords, I'm sure life will be pretty sweet for Britain's rent-exploiting property barons for some time to come.
Follow Simon on Twitter: @SimonChilds13
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