Deposit protection schemes

Well! A landlord has been ordered to pay his tenants three times their original deposit because he didn’t place their deposit in one of the deposit schemes.

This is a great ruling which shows that landlords can’t avoid using the schemes. Earlier this year I was at a conference about the private rented sector in Scotland, and one of the main themes amongst delegates was lack of power to effectively enforce regulations. This result shows that the regulations can be enforced and is a success story for the deposit schemes.

For those reading who aren’t aware, all deposits must be held by one of the deposit protection schemes in Scotland. Currently these are:

My experience has been that it’s a simple and easy process. Landlords avoiding using a deposit scheme are not doing it because it’s difficult or costly.

The challenge is to ensure that all tenants are aware of their rights so that landlords are compelled to meet the regulations.

Housing bubble

A short post to direct interested readers to David Blanchflower’s ever sensible analysis of house prices.

Locally, we have some interesting trends.

Some properties are selling in Edinburgh after only a week or a fortnight on the market. This is going back to the trends we saw before the financial crisis. Edinburgh thought it was over, but it looks like for some sections of the housing market here we are seeing it again.

In other areas of the market, houses are not selling for the asking prices, and owners are taking them down off the market and admitting they can’t sell at their desired price. We’re seeing a further rise in accidental landlords.

What next? I need a crystal ball for my birthday.

Self build cooperative

Currently I’m dreaming about a really big project. A huge project. A project that is too big for me really. I already have a big project on my hands with starting up Silverclear. But I can’t stop dreaming. This is my fantasy project…

There is a great big empty site near where I live which has been derelict for years. It is in an area where there is high housing demand for local people. The site contains a Victorian era industrial building. The outside walls are are absolutely gorgeous and could be restored. Otherwise it’s just a shell and some surrounding land. I am completely in love with this building and want to do something with it.

My idea is inspired by places like the Oxo Tower in London, and an episode of Grand Designs where a group of people built a cul-de-sac of homes for themselves while learning building trades so they could also get full time employment.

The idea is something like this. Design a range of homes that could be built into the existing building and next to it on the site, incorporating some family and some smaller homes. Design a communal garden with leisure space. Sign up local people who have roots in the area and who require a home for the long term. We form a cooperative. The members decide which trades they will provide and which homes they’ll live in when they are finished. The members are supported to learn their trades and gradually build the homes using their new trades. When the homes are finished, and the members are starting to move in, the community has already started to form because they have been working together.

I just need to work out how other groups like this have come together and how to fund it.

Top 10 cities

The Economist Intelligence Unit has revealed the best cities. The Inde has a lovely gallery to illustrate the findings.

I was surprised to see it dominated so much by just two countries. Interesting that they are two countries that haven’t suffered as much during the financial crisis and downturn that we’ve been living through in Europe.

I’m also just a little bit put out that Edinburgh isn’t up there!

Long-term leases and mortgage providers

I was glad to hear Carolyn Uphill from the National Landlords Association talking this morning on the Today programme about longer term tenancies and the conditions that mortgage providers put on landlords.

I’ve long been ranting to anyone who will listen that there is a conflict between the private rented sector and their mortgage providers. Most mortgage providers stipulate that you must only offer a tenancy of 12 months or less. While that’s perfect for students and short term workers etc, it’s totally impractical for many people who want a home.

One of the reasons that that lots of people want to get on the property ladder is housing security. It’s really hard to settle if you don’t know whether your lease will be terminated by your landlord. If you’re raising a family or caring for a family member, you want to be sure you’re going to be living in the same place with some element of certainty.

Currently in Scotland most tenants are on short assured tenancies. These are typically written with a fixed initial period of 6-12 months and then move to an indefinite lease with a 2 month notice period. It means that the landlord can give 2 months notice at any time and the tenants would need to find a new home. It’s incredibly insecure for tenants.

I’m a fan of short assured tenancies – they work well and serve their purpose – but we also need a solution for tenants who want to stay long term. Landlords can choose to put in place a longer notice period or a longer fixed tenancy period if they want, and not use the short assured standard agreement. However, the next barrier is their mortgage provider.

I understand that mortgage companies have to protect their risk, and that’s why they want to be sure they can carry out repossessions if necessary without worrying about the legal agreement the tenants have with the landlord. But it’s in the mortgage provider’s interest to have a good quality long term tenant who pays the rent and looks after the property. It seems to me that the mortgage companies have de-risked the situation so much that they’ve removed all the upside benefits. Baby and bath water.

Nationwide recently announced it would offer the flexibility of a 3 year tenancy. This is great, but the other big providers have not followed yet. It also means that if you’re a landlord and want to offer longer tenancies, you need to switch your mortgage provider, with all the associated costs.

I really hope that the good quality institutions like Nationwide can lead the change in the mortgage market so that landlords and tenants benefit from better housing security in the private rented sector. It’ll be another step towards housing equality regardless of whether you own or rent your home.

 

Help to buy

The FT has a handy summary of the problems with the government’s Help To Buy schemeIn Scotland there is a different scheme, but it’s got the same aims and potential effects.

Let’s look at what that means locally, here in Edinburgh. I’m really concerned about the housing bubble that already exists in Edinburgh and the fact that we are making it worse.

The last figures I’ve found about typical pay in Edinburgh are published by the investment portal Inspiring Capital. In 2008, median pay was £26,623. Let’s say it has increased to £30,000 since then. The normal Edinburgh resident worker could therefore borrow £90,000 (3 x salary) and would typically need to have saved £10,000 (10% deposit).

For £100,000 you can buy a flat (no houses for that price!). You can choose between one bedroom in a nice area or more than one bedroom in a less desirable area. Hilariously, you could also buy a plot of land with planning consents but no actual building.

So imagine our £30,000 salaried worker is the parent of a family. What do they buy? Do they buy a flat with enough bedrooms for their children, but live in an area where their children are statistically more likely to suffer poorer outcomes, or do they cram into a one bedroom flat in a good catchment area? Or do they carry on renting? What a poor set of choices for someone setting out on family life.

This is because our housing is out of kilter with our incomes. There are inflated prices in Edinburgh because there is a severe shortage of housing. Schemes that help people to buy a home at the existing prices will just maintain or inflate the bubble further. Schemes that build more suitable housing will mean the government spending less on buying housing on behalf of ordinary people.

What we desperately need is a house building programme that suits the population size and mix.