Buy to Let and private renting

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plodder
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Re: Buy to Let and private renting

Post by plodder » Sun Sep 19, 2021 8:52 am

Millennie Al wrote:
Sun Sep 19, 2021 1:55 am
plodder wrote:
Sat Sep 18, 2021 8:05 pm
You're opening your mouth and letting your belly rumble.You are taking the approach that everything is always fine and that policy is pointless. Just because wealthy people want something at the detriment of the poor does not mean that they should automatically have it. There are plenty of homes but the use of homes to provide short term lets has significant impacts to communities especially in tourist areas. The inflation in house prices is clearly down to the availability of credit rather than a lack of long term supply.
While you are presenting the view that poor people should stay poor. Why shouldn't poor people become able to afford to go to tourist areas and get short term rentals? Why should that be reserved for the rich or the very rich?
I assume you can demonstrate that tourist numbers have increased due to short-term lets, and that these short-term lets create more economic benefit than homes.

sheldrake
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Re: Buy to Let and private renting

Post by sheldrake » Sun Sep 19, 2021 11:10 am

You can probably see an increase in some GDP-like number from a more flexible market that provides tourists with more options and people with capital a new way to earn a return on their capital, but a positive feedback loop that makes people with capital drive up residential real estate prices makes people lower down the totem pole feel insecure and excluded from capitalism. They will eventually vote for much harsher and badly thought-out interventions.

I think having more people able to own their own home and hence not hate the whole system so much is a good far-thinking goal to prioritise. I think it would actually be good for capitalism. (those home-owners are also likely to have more disposable income than they otherwise would a few years after buying)

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Re: Buy to Let and private renting

Post by plodder » Sun Sep 19, 2021 12:12 pm

sheldrake wrote:
Sun Sep 19, 2021 11:10 am
You can probably see an increase in some GDP-like number from a more flexible market that provides tourists with more options and people with capital a new way to earn a return on their capital, but a positive feedback loop that makes people with capital drive up residential real estate prices makes people lower down the totem pole feel insecure and excluded from capitalism. They will eventually vote for much harsher and badly thought-out interventions.

I think having more people able to own their own home and hence not hate the whole system so much is a good far-thinking goal to prioritise. I think it would actually be good for capitalism. (those home-owners are also likely to have more disposable income than they otherwise would a few years after buying)
It doesn’t just make people feel excluded, it means that they are forced to sit on a pointless treadmill with no hope of escape, which will also show on GDP like numbers, if anyone could be bothered to work it out. It would be good to have some data rather than blah.

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Re: Buy to Let and private renting

Post by sheldrake » Sun Sep 19, 2021 8:27 pm

plodder wrote:
Sun Sep 19, 2021 12:12 pm
sheldrake wrote:
Sun Sep 19, 2021 11:10 am
You can probably see an increase in some GDP-like number from a more flexible market that provides tourists with more options and people with capital a new way to earn a return on their capital, but a positive feedback loop that makes people with capital drive up residential real estate prices makes people lower down the totem pole feel insecure and excluded from capitalism. They will eventually vote for much harsher and badly thought-out interventions.

I think having more people able to own their own home and hence not hate the whole system so much is a good far-thinking goal to prioritise. I think it would actually be good for capitalism. (those home-owners are also likely to have more disposable income than they otherwise would a few years after buying)
It doesn’t just make people feel excluded, it means that they are forced to sit on a pointless treadmill with no hope of escape, which will also show on GDP like numbers, if anyone could be bothered to work it out. It would be good to have some data rather than blah.
Paying off debt and keeping it paid off is terrible for GDP metrics in the short term. If everybody in the country owned their own home and paid off their mortgage at once it would look like an economic crash in GDP terms.

These figures are from the US but they cite 15-18% of GDP being in the housing sector, a significant chunk being rental payments or mortgage servicing https://www.nahb.org/news-and-economics ... rs'%20fees.

Those people would almost certainly all feel safer to take more entrepreneurial risks and many would likely end up diverting income formerly used in debt service or rent to other investments though. Some kind of orderly transition would be a good idea I think.

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Re: Buy to Let and private renting

Post by Millennie Al » Mon Sep 20, 2021 1:55 am

sheldrake wrote:
Sun Sep 19, 2021 8:27 pm
Paying off debt and keeping it paid off is terrible for GDP metrics in the short term. If everybody in the country owned their own home and paid off their mortgage at once it would look like an economic crash in GDP terms.
How would that work? The income previously being used to pay off debts would pile up in banknotes under the nation's mattresses? Or the people would merely use that money to buy other things, making no difference to GDP?

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Re: Buy to Let and private renting

Post by Millennie Al » Mon Sep 20, 2021 2:00 am

plodder wrote:
Sun Sep 19, 2021 8:52 am
Millennie Al wrote:
Sun Sep 19, 2021 1:55 am
While you are presenting the view that poor people should stay poor. Why shouldn't poor people become able to afford to go to tourist areas and get short term rentals? Why should that be reserved for the rich or the very rich?
I assume you can demonstrate that tourist numbers have increased due to short-term lets, and that these short-term lets create more economic benefit than homes.
We don't need to show these things, because we have a system for taking them into account - free market capitalism. Each person can individually decide for themselves the value of things like buying a home, taking holidays, working shorter hours etc. We don't need to plan the economy to optimise what people want. That is just as well, as it has been tried and doesn't work.

plodder
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Re: Buy to Let and private renting

Post by plodder » Mon Sep 20, 2021 7:26 am

you need to read up on “externalities” and tone down the sixth-former lecturing.

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Re: Buy to Let and private renting

Post by Imrael » Mon Sep 20, 2021 8:10 am

Sheldrake: I think having more people able to own their own home and hence not hate the whole system so much is a good far-thinking goal to prioritise. I think it would actually be good for capitalism. (those home-owners are also likely to have more disposable income than they otherwise would a few years after buying)
Not sure I agree with the basic premise here - or at least not under a mortgage/loan based system. I suspect in the first decade of home ownership (which is often a key period for career establishment if you're so minded) you are more tied to current location, more concerned about keeping up the mortgage, both of which reduce job mobility and risk taking. Additionally you're a prisoner of cyclical house pricing in the form of negative equity, and of interest rate changes.

Later on it does get easier, but that may be too late in people's lives to give the benefits you hope for.

A bit of a side issue, but for many people the transition from rtenting to buying coincides with flat(s) to house, so often the monthly outgoings are about the same because they've traded up.

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Re: Buy to Let and private renting

Post by sheldrake » Mon Sep 20, 2021 10:11 am

You do have a point about early mobility.

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Re: Buy to Let and private renting

Post by sheldrake » Mon Sep 20, 2021 10:31 am

Millennie Al wrote:
Mon Sep 20, 2021 1:55 am
sheldrake wrote:
Sun Sep 19, 2021 8:27 pm
Paying off debt and keeping it paid off is terrible for GDP metrics in the short term. If everybody in the country owned their own home and paid off their mortgage at once it would look like an economic crash in GDP terms.
How would that work? The income previously being used to pay off debts would pile up in banknotes under the nation's mattresses? Or the people would merely use that money to buy other things, making no difference to GDP?
Some of them would spend it on other stuff, some of them would invest it in non-residential capital. Most would do a bit of both.

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Re: Buy to Let and private renting

Post by IvanV » Tue Sep 21, 2021 2:07 pm

Millennie Al wrote:
Mon Sep 13, 2021 2:21 am
nezumi wrote:
Sat Sep 11, 2021 8:30 am
The real answer to the issue is to enable councils to build social housing again! Let them build for rent or sale and reinvest the proceeds into more houses and better services. Obviously. They don't need to build so much it ruins the equity parade, just enough to slow it down to a point where property inflation doesn't outstrip wage inflation.
Find someone who owns and insures a house in England and compare the price of the house to the price the insurance company suggest would cover complete rebuilding if it wer destroyed. There's a huge difference. This is due entirely to rules and regulations which prevent properties being built or greatly slow down building. There is no need for councils to build housing - there are plenty of commercial companies that would be delighted to. All that's needed is to stop putting obstacles in their way.
We could also incentivise removing office blocks and replacing them with cheap single person/couple/small family apartments. It's not like we need loads of office blocks now, is it? I don't know about London, but up here in the grim North there are office blocks that have sat empty for 20 years plus! I haven't seen any new ones going up round here lately though, thankfully.
Again, you don't need to incentivise it. No capitalist will be happy with money tied up in a building that's not making any money. They would be delighted to convert it into residential property. But they're not allowed to as they'd need to get planning permission, which is very slow and can come with conditions which make it unprofitable.
A difficulty is that "what society needs" and "how developers can best make money if they own a piece of property" are not perfectly aligned. Interfering wih the market is usually worse than doing nothing if there is a small issue. But it can be large issue.

We see this all the time with obligations to include some "affordable" properties in a development. They always argue the council down, after the fact, because they don't really want to do it. And because there is money to be made, I wouldn' be surprised if a lot of palm-greasing or other benefits were distributed in return. And then they aren't affordable anyway. And in general, getting people to do things they really don't want to do because they lose money on it is unlikely to be the way to do it best. They won't build those properties to be nice or economical to live in, they'll just minimise their losses by doing it as cheaply as possible. And locate them to minimise the value reduction on the nicer properties.

So I think we do actually need a different model for building lower cost housing, so that it is built to what society needs, and is built to a quality suitable for living for the future.

The best model I can think of is something like a HA owns the land, knows what it wants on it, and employs a construction company to implement it. It doesn't have to be for rent - it can be for sale, though probably present day HAs are not permitted to do that. And in some other countries, like the Netherlands, that kind of model works well. But in this country legacy issues with the construction sector, and the way contracting works, or something, and it doesn't seem to work very well. So probably we need to think of a different way to do it, until the day arrives that we replace our legal system with a sensible one and the construction industry learns to behave like the construction sector of a civilised country.

As I may have mentioned before, I have a friend who is a manager in a large housing association, and he from time to time commissions new houses to be built for the HA. The problem he has is that only a certain type of builder will tender to build the HA's houses. And they are not sophisticated builders, and the output is poor, as he knows, but doesn't know how to fix. He just can't get good builders interested in the business, because there is far more money to be made building higher quality houses for people with much larger budgets.

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Re: Buy to Let and private renting

Post by IvanV » Tue Sep 21, 2021 5:30 pm

What drives house prices (Sept 21), Muellbauer et al
Spotted this when checking out the creds of a paper cited on the decarb thread. Muellbauer is definitely someone to take careful note of.

Tldr: What drives house prices is above all credit conditions, planning rules and public interventions.

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Re: Buy to Let and private renting

Post by Millennie Al » Tue Sep 21, 2021 10:52 pm

IvanV wrote:
Tue Sep 21, 2021 2:07 pm
We see this all the time with obligations to include some "affordable" properties in a development. They always argue the council down, after the fact, because they don't really want to do it. And because there is money to be made, I wouldn' be surprised if a lot of palm-greasing or other benefits were distributed in return. And then they aren't affordable anyway. And in general, getting people to do things they really don't want to do because they lose money on it is unlikely to be the way to do it best. They won't build those properties to be nice or economical to live in, they'll just minimise their losses by doing it as cheaply as possible. And locate them to minimise the value reduction on the nicer properties.
"Affordable" generally means cheap rubbish when the people wanting it to be affordable have no expectation they'll be using the end product.
So I think we do actually need a different model for building lower cost housing, so that it is built to what society needs, and is built to a quality suitable for living for the future.
That's basically wanting to supply something below cost. So the free market cannot do it and it needs to be done by charity or by government. The obvious model is for state provided housing to be rented cheaply to those in need, and sold at a discount to those likely to remain in need in the longer term. Since that's a combination of policy from both left and right, it'll probably never be done.
...
He just can't get good builders interested in the business, because there is far more money to be made building higher quality houses for people with much larger budgets.
Well, obviously he need to pay more, then.

And, to comment on house prices. One of the biggest drivers of house prices is the amount of money people are willing to spend on houses. When the country is generally obsessed with home-owning, so people are willing to pay a large fraction of their income towards housing, we'd expect prices to be high (where high means a large fraction of a person's income).

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Re: Buy to Let and private renting

Post by plodder » Wed Sep 22, 2021 6:26 am

The country is only obsessed with house prices because they’re perceived as the only reliable investment that people can understand. Everyone thinks about slinging on an extension round the back, or putting in a new bathroom.

Please also ditch the rudimentary free market explainers and read what has been presented. Ivan’s linked research was really good as a starter. Otherwise we’re not having a conversation, we’re just listening to your internal monologue.

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Re: Buy to Let and private renting

Post by Bird on a Fire » Wed Sep 22, 2021 10:56 am

Millennie Al wrote:
Tue Sep 21, 2021 10:52 pm
And, to comment on house prices. One of the biggest drivers of house prices is the amount of money people are willing to spend on houses. When the country is generally obsessed with home-owning, so people are willing to pay a large fraction of their income towards housing, we'd expect prices to be high (where high means a large fraction of a person's income).
It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.

Mortgage repayments are considerably cheaper than rents for a similar property, plus you have more security and autonomy. The only issue is you need a large wodge of cash up front - being poor is expensive. (And inheritances are no help - a typical inheritance comes when you're 60 and is worth about £11k).

So I'm not sure it's a question of "willingness" - housing is a necessity, and there aren't cheap options. It's a structural choice made by policymakers to increase the wealth of the wealthy at the expense of workers.
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Re: Buy to Let and private renting

Post by noggins » Wed Sep 22, 2021 2:48 pm

Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am

It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
Rents are high, too high, but those figures are b.llsh.t.

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Re: Buy to Let and private renting

Post by WFJ » Wed Sep 22, 2021 3:00 pm

noggins wrote:
Wed Sep 22, 2021 2:48 pm
Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am

It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
Rents are high, too high, but those figures are b.llsh.t.
The claim in the link is:
... the cost of renting in the capital now accounts for 74.8% of the average salary in London ...
which is a junk sentence that could be interpreted in many possible ways that might be true.

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Re: Buy to Let and private renting

Post by Bird on a Fire » Wed Sep 22, 2021 3:02 pm

noggins wrote:
Wed Sep 22, 2021 2:48 pm
Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am

It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
Rents are high, too high, but those figures are b.llsh.t.
What makes you think that?

They seem plausible based on a quick sense check:

Average salary is about 2 grand a month. https://www.statista.com/statistics/122 ... loyees-uk/

Average rent is about a grand a month https://homelet.co.uk/homelet-rental-index

I'd guess renters tend to the poorer end of the salary distribution, though many will be sharing.

Have you seen other data?
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Re: Buy to Let and private renting

Post by monkey » Wed Sep 22, 2021 3:04 pm

noggins wrote:
Wed Sep 22, 2021 2:48 pm
Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am

It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
Rents are high, too high, but those figures are b.llsh.t.
Misleading, I think. They are using take home income, where usually it uses gross income, which would give a lower percentage.

English Housing Surveys, which should contain that sort of information for England (obvs), can be found here - clicky

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Re: Buy to Let and private renting

Post by Bird on a Fire » Wed Sep 22, 2021 3:07 pm

WFJ wrote:
Wed Sep 22, 2021 3:00 pm
noggins wrote:
Wed Sep 22, 2021 2:48 pm
Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am

It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
Rents are high, too high, but those figures are b.llsh.t.
The claim in the link is:
... the cost of renting in the capital now accounts for 74.8% of the average salary in London ...
which is a junk sentence that could be interpreted in many possible ways that might be true.
It's a confusing piece, looking at it again. It starts by saying "tenants are paying", which made me think they'd asked tenants what they were paying. But later the table looks like they just divided rents by salary without considering multiple occupancy.

Perhaps there are better figures. Having paid almost half my salary for a room in an HMO it seemed reasonable, if you assume that people earning more will move into their own places.
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Re: Buy to Let and private renting

Post by Bird on a Fire » Wed Sep 22, 2021 3:09 pm

monkey wrote:
Wed Sep 22, 2021 3:04 pm
noggins wrote:
Wed Sep 22, 2021 2:48 pm
Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am

It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
Rents are high, too high, but those figures are b.llsh.t.
Misleading, I think. They are using take home income, where usually it uses gross income, which would give a lower percentage.

English Housing Surveys, which should contain that sort of information for England (obvs), can be found here - clicky
Thanks. The latest report on the rental sector says
Private renters spend a higher proportion of their household income on rent
than social renters. This proportion is highest for those who live in London.
On average, private renters spent 32% of their household income, including
Housing Benefit, on rent. The average for social renters was 27%.
Private renters in London spend an average of 42% of their household income on
rent. The same figure for social renters in London is 30%.
That is gross income, plus top-up benefit from the government.

Take-home income seems more relevant, as it's not like I can choose to spend my tax money on rent instead.

I suppose it's fair enough to include housing benefit too.

So it's a bit better, and perhaps more in line with typical mortgage repayments? But it's not like renting is a cheap option.
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Re: Buy to Let and private renting

Post by Cardinal Fang » Wed Sep 22, 2021 7:55 pm

I live in SE England i.e. London commuter belt

I work in the NHS but I'm a lab gremlin, and somewhat of a specialist, so on a salary above the national average (not much above but still). The lab techs who are on Band 2 and 3 easily spend 80% of their take home pay on rent. The social housing waiting list in the area is so long that odds are they'd never reach anywhere close to the top of it.

I have to live in a shared house to be able to afford rent. Getting a gaff of my own renting I'd be easily looking at over half my net take home pay on rent alone. Even before you then factor in bills, council tax, inflation (and the fact that any pay "rises" we get are below inflation so your pay doesn't go as far each year). Sharing at least means once you've covered rent, bills etc you still have a bit left over at the end of the month.

Mortgage repayments would be about what I pay in rent in my HMO BUT I'm never going to be able to get a mortgage because the banks ask for so much of a deposit, and renting means that I'm never going to save enough to afford a deposit. House prices mean that even something like a 10% deposit is a chunk more than I've got in the bank.

TBH I'd be more happier being part of "generation rent" than I do now IF tenants had any rights at all. At the mo I can be booted out or have my rent hiked exponentially with a couple months notice. I have colleagues who literally move house every 6 months or a year because the landlord has hiked rents or decided they can make more letting to students or Air BnB-ing it to tourists. I'm lucky - I've managed 4 whole years in my current place, but have been given my marching orders for the end of November. And each time you have to raise a new deposit, letting agency fees, sort out transport to move your stuff (I can't drive, so it's not like I can just load a car up or something), sort out post diverts and so on. And good luck getting your previous deposit back whole - hypothetically landlords can't take money off for reasonable wear and tear but they all do, and cost (in both time and money) of going to small claims means it isn't worth it.
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Re: Buy to Let and private renting

Post by Cardinal Fang » Wed Sep 22, 2021 8:05 pm

The interesting thing a lot of people aren't talking about is this

There are a couple of generations of people now who are basically never going to be able to afford to buy a house. Because our relationship to the property market is never going to change, no matter how much we scrimp and save, there basically isn't any point even trying to save for a deposit. You're never going to be able to save enough to get your foot on even the bottom rung. So if there's no point trying to save, why do it? A lot of my peers spend extensively on leisure pursuits, holidays and so on. They're going to get to the end of their working lives having paid enough money in rent to have paid the mortgages on two or three different properties (their landlord's properties obviously), but with nothing to show for it.

How are they going to fund their social care? The Tory sleight of hand about "solving" social care only covers care costs. Doesn't cover board and lodgings. I'd reckon a big chunk of the millenial (me - just) and generation Z groups will never have enough assets to be able to pay. And with an aging population and demonisation of immigrants putting people off coming to the UK, there's going to be fewer people coming after us to put money in to paying for us. The current lack of affordable housing is also going to end up exacerbating the lack of funding for social care.

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Re: Buy to Let and private renting

Post by Millennie Al » Thu Sep 23, 2021 1:41 am

Bird on a Fire wrote:
Wed Sep 22, 2021 10:56 am
Millennie Al wrote:
Tue Sep 21, 2021 10:52 pm
And, to comment on house prices. One of the biggest drivers of house prices is the amount of money people are willing to spend on houses. When the country is generally obsessed with home-owning, so people are willing to pay a large fraction of their income towards housing, we'd expect prices to be high (where high means a large fraction of a person's income).
It's not just buying houses that's expensive. English tenants pay an average of 45% of their salary in rent, which rises to 75% in London.
The more believable bit of that seems to have been the case for a long time: from https://www.1900s.org.uk/1900s-incomes.htm
Rents were about 12 and 13 shillings a week.
...
[men's wages were] probably between 25 and 30 shillings a week.
So about half the household's income went on rent (obviously women didn't earn wages as housework for a family was a full time job then).
Mortgage repayments are considerably cheaper than rents for a similar property, plus you have more security and autonomy.
That rather depends on whether you have one of those old fashioned jobs for life or not. If you lose your job, owning your house can be quite a problem as you have to sell it or let it, and if you lost jour job due to an economic downturn (which might be fairly local if a big employer closes) that can be difficult. And, in sufficiently bad times, your mortgage repayments can rise to the point where you can no longer pay them. In the 70's and 80's interest rates were typically over 10% and peaked about 17%. Today's rates are minuscule.
So I'm not sure it's a question of "willingness" - housing is a necessity, and there aren't cheap options. It's a structural choice made by policymakers to increase the wealth of the wealthy at the expense of workers.
That depends on whether you're prepared to live like a poor person. If you're willing to sub-let rooms (which may require hiding this from tyour landlord), it should be possible to save quite a lot.

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Re: Buy to Let and private renting

Post by sheldrake » Thu Sep 23, 2021 5:51 am

Millennie Al wrote:
Thu Sep 23, 2021 1:41 am


So about half the household's income went on rent (obviously women didn't earn wages as housework for a family was a full time job then).
Women in the poorest families often did do some paid work in those days, but yes, having half your income go to an investor is grim.
That rather depends on whether you have one of those old fashioned jobs for life or not. If you lose your job, owning your house can be quite a problem as you have to sell it or let it, and if you lost jour job due to an economic downturn (which might be fairly local if a big employer closes) that can be difficult. And, in sufficiently bad times, your mortgage repayments can rise to the point where you can no longer pay them. In the 70's and 80's interest rates were typically over 10% and peaked about 17%. Today's rates are minuscule.
Not sure which country you're based in, but in the UK you can get help paying mortgage interest (but not capital) from the state for mortgage balances up to (I think) about 200k iirc, as that usually works out cheaper than paying the rent via housing benefit for a re-housed family. Mortgage repossessions don't generally start with the first missed repayment either, so it very much depends how quickly you get another job. They're definitely supposed to try and work out a repayment plan with you first, and if you can't agree on one then they have to go to court https://england.shelter.org.uk/housing_ ... on_process
That depends on whether you're prepared to live like a poor person. If you're willing to sub-let rooms (which may require hiding this from tyour landlord), it should be possible to save quite a lot.
This option is not really practical for many people with children. I certainly wouldn't have wanted to take in a stranger as a lodger when my children were in primary school.

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