Huddersfield Buy-to-Let Landlords Owed £2,084,333 in Unpaid Rent. Rogues or Saviours?

There is no getting away from the fact that the rise in the number of buy-to-let properties in Huddersfield has been nothing short of astonishing over the last twenty years. As a result, many in the press have said Britain is a broken nation, with many twenty and thirty-somethings unable to buy their first home. The press has named this group ‘Generation Rent.’

 

Huddersfield landlords have been accused of scooping up all the smaller Huddersfield properties for their buy-to-let property empires. Others blamed the Government (of both persuasions) for pouring petrol on the buy-to-let fire for giving landlords an unfair advantage with the way buy-to-let has been taxed in the past. Many have said these landlords have priced out Huddersfield's 'Generation Rent'. Many say they are rogues, and you can see why there is little sympathy for landlords, especially as…

 

Huddersfield landlords receive £113,176,452 a year in rent – easy money or what?

 

So, as we come out of lockdown, I want to make a stand for Huddersfield landlords and talk about the great work they have been doing during the pandemic.

 

Since lockdown, it has been (almost) illegal to evict a tenant from private rented property. Yet, in the last few weeks, this ‘ban on evictions’ has begun to be eased, making some commentators forecast a ‘tsunami of homelessness’ as landlords ready themselves to kick out the tenants who cannot pay their rent.

 

You might say they can afford it, yet I need to highlight an often-untold story in the massive numbers of Huddersfield landlords who have co-operated with their Huddersfield tenants to evade eviction.

 

The personal finances of some Huddersfield landlords and tenants have been ruthlessly strained during the last 16 months — something that is going to have ramifications on the back pockets of both landlords and tenants, as well as the attraction of being a buy-to-let landlord (more of that later).

 

1,168 Huddersfield tenants are in arrears with their rent

to the tune of £2,084,333.

 

That's money these landlords need to pay their mortgages with and even to live off themselves.

 

The eviction ban was imposed in March 2020 and the Government has expected private landlords to stand the cost of their tenant’s rent if they could no longer pay. It was estimated over 1 in 5 landlords with mortgages had requested a mortgage payment holiday in 2020. Thankfully, that now stands at 1 in 100 as most Huddersfield landlords with shortfalls in rent have been using their own personal savings to cover the mortgage payments.

 

I have seen so many landlords giving their Huddersfield tenants rent breaks and discounts to help them through these times. However, most landlords I talk to acknowledge that it is better to have a tenant paying something rather than a tenant paying nothing, hoping that total rent will start flowing as the economy recovers.

 

Going into the pandemic, 1 in 25 Huddersfield tenants were in arrears, yet that now stands at 1 in 11.

 

So, are we going to see lots of evictions? I would go as far as to rebuff the idea that we will see a rush to the courts of landlords to obtain possession orders now the eviction ban has been lifted. I have always viewed evictions as a last resort.  

 

Before the pandemic, it took about 12 months for courts to hear rental repossession cases, so this backlog will be nearer two years (if not more). Nonetheless, the threat of a County Court Judgement (CCJ) often makes tenants pay up as it will demolish their credit rating, making it very challenging for them to rent another home.

 

I feel for those Huddersfield tenants under furlough or reduced hours as they have the quandary of wanting to reduce their outgoings by moving to a cheaper rental property, yet whose rental deposits will be sacrificed to cover their rent arrears. However, some have said that because house prices have exploded during the last 16 months, Huddersfield landlords should write off their tenants’ arrears as a goodwill gesture.

 

The issue is, 2,080 Huddersfield landlords only have a single property for rent, so the arrears would have to be funded by their personal savings.

 

For them, the pandemic experience could be the incentive to sell up for good.

 

A National Residential Landlords Association survey found around a third of all landlords were now more likely to sell their buy-to-let properties altogether or sell some of them. This would mean fewer properties for tenants to rent, thus driving up the rent.

 

According to government and industry data, evidence suggests that a tenant who rents a property directly through a landlord and not through a letting agent is between two and three times more likely to go into arrears of 2 months or more. Is this because tenants know that private landlords who advertise directly for tenants on Gumtree and other platforms don't carry out the checks letting agents do on them?

 

Many of those landlords are switching the management of their property to an agent, and for those landlords sticking with self-management of their property, there is circumstantial evidence they are starting to become a lot pickier when starting new tenancies. Even though illegal, spurning tenants on benefits is woefully all too common. I also worry there could be a stigma about renting properties to self-employed people because of the erratic nature of their income.

 

Looking into the future, I envisage a growth in the use of ‘rent guarantor contracts’, whereby the tenant is called upon to provide a 3rd party person to pay the rent if the tenant doesn’t. These are pretty common for student lets and those on certain benefits, and it wouldn't surprise me if these are used more often for self-employed tenants and regular professional lets.

 

That is why I believe Huddersfield landlords should be celebrated ... most of them have been saviours. These are my thoughts - what are yours?

 

How Eco-friendly are Brighouse Homes? And how new Gov’t rules will mean draughty low-eco Brighouse homes will drop in value

"It’s Not Easy Being Green", was the song that Kermit sang on Sesame Street.

 

Yet now being green is a normal way of life for most of us. Walking or cycling places instead of taking the car, recycling and even shunning meat are some of the things most Brighouse households are trying to do their ‘bit’ for going green.

 

Our conduct may have improved but when it comes to our Brighouse homes, there is still a long way to go. It is estimated around a fifth of carbon emissions come from home energy usage (nearly three quarters from heating and lighting). The country is releasing 37% less carbon into the atmosphere than in 1990, yet we have legally binding targets to hit 100% by 2050 — and the Committee on Climate Change has stated the UK will need to eradicate greenhouse gas emissions from homes to meet that target.

 

Landlords were hit first because since April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to eco-friendliness of the rental properties have required all rental properties to have a minimum Energy Performance Certificate (EPC) rating of ‘E’ or above otherwise it is illegal to let out a property, bar a couple of exceptions. This has meant Brighouse landlords have had to spend many thousands of pounds to improve their rental property’s EPC rating (an EPC rating of ‘A’ being the best eco rating through to a ‘G’ for the worst – just like washing machine or fridge ratings).

 

But new Government plans could hit Brighouse homeowners

in the pocket as well.

 

The Government is planning to force banks and building societies to penalise people wanting a mortgage of draughty low-eco homes with an energy performance certificate (EPC) rating of D or lower. For those properties not hitting the correct level of EPC rating, it is suggested some form of levy will be placed on the mortgage provider, who in turn will pass that on to the home buyers in the form of higher mortgage payments. Some are describing this charge as an ‘eco-mortgage levy’.

 

Just over 7 in 10 (71.8%) homes in Calderdale would be hit by this ‘eco-mortgage levy’, thus potentially reducing the value of those homes

 

Interesting when you compare this with the national average of 60.6%.

 

In real numbers, 56,111 homeowners and landlords in our local authority area would either struggle to get a mortgage from a bank or building society or it would cost them more because they were a ‘D’ rating on their EPC or below.

 

 

Looking at the stats broken down for Calderdale

 

·         47 properties are classified as A on the EPC register

·         4,212 properties are classified as B on the EPC register

·         17,751 properties are classified as C on the EPC register

·         30,881 properties are classified as D on the EPC register

·         19,246 properties are classified as E on the EPC register

·         4,226 properties are classified as F on the EPC register

·         1,758 properties are classified as G on the EPC register

 

 

So, what can Brighouse homeowners and landlords do to

improve their EPC rating?

 

Well surprisingly, it need not cost a lot to improve the EPC rating of your Brighouse home. One of the most inexpensive ways to help improve your Brighouse home’s energy efficiency is low energy light bulbs with an estimated cost of just under £40 per UK property. Other efficiencies can be gained by insulating your hot water cylinder, draught proofing any single glazed windows, increasing your loft insulation, and upgrading your central heating controls, all of which can be done for a total of around £750 to £850 per property.

If you want to know the EPC rating of your home, either google the phrase ‘EPC register’ or send me a message and I will find out for you.

 

Finally, as Kermit famously also said, “Life's like a movie. Write your own ending”. If you are a Brighouse homeowner or Brighouse landlord, why not look at your property’s EPC rating and look at the recommendations. You are going to have to spend the money sometime, so why not do it now and enjoy lower energy bills and when you come to sell, you won’t be penalised .. a win-win situation for you and the planet?

Your Great-Great Huddersfield Grandfather Would Have Only Paid £235 19s 5d for his Huddersfield Home in 1871

 

Would it surprise you even more when I said the ratio of house prices to wages are still lower today when compared to 1871?  Yes you read that correctly, as a proportion of average wages British house prices are 17.6% proportionally cheaper today than they were in 1871.

 

I wish to talk about the last 150 years of the British property market and later in the article, the Huddersfield property market. I will also touch on why, before the 1900s, buying a home in Huddersfield was considerably more expensive than today and why that changed.

 

So, let’s look at some interesting stats to get us started :

 

·         In 1871, each house was occupied by an average of 5.33 people (i.e. for every 100 houses, 533 people lived in them), whilst today that stands at 2.39 people per house

·         In 1871, there were 4.5 million properties in the UK, whilst today that stands at 27.9 million

·         In 1871, the weekly average wage was 13s 8½d (68p) whilst today it is £585.50

·         In 1871, only 20% of people owned their own home, whilst today its stands at 65%

 

I stated in the first part of the article it was more expensive to buy in the latter parts of the 19th Century than today. It may only be of historical interest, but back in 1871, the ratio of average house prices to average wages was 10.5 to 1 (i.e. the average house was worth ten and half times the average person’s wage), whilst today it stands at 8.8 to 1.

 

Interestingly, for the next 45 years, that ratio went on a downward trend relative to wages and only stopped falling after WW1, where the average house was worth only 2.2 times the average wage. This made houses more affordable and set the foundations for the homeowning passion we Brits have today.

 

So why did this happen, what can we learn from it and what does it mean for Huddersfield homeowners and Huddersfield landlords?

 

There are three significant drivers that made property a lot more affordable between 1871 and 1911: the Victorians built more property, made them smaller and people's wages rose significantly.

 

·         In the 40 years between 1871 and 1911, the number of properties in the UK rose from 4.5 million to 8.9 million. To give you some perspective, there were 18 million properties in the UK in 1981. If the UK had grown by the same rate between 1981 and today that was experienced between 1871 and 1911, there would be 35.6 million households in the UK (and not the 27.9 million mentioned above).

 

·         In 1871, the average plot size of a property was 0.23 acres, yet by 1911, that was down to 0.06 acres (or a plot of 72ft by 40ft). This came about from building smaller types of property (i.e. a change away from larger Georgian detached houses towards the infamous rows of Victorian terraces), and a downshift in the average size of houses within each category.

 

·         The average value of property dropped by 26% between 1871 and 1911, whilst wages rose by 85% over the same time frame.

 

So, by 1911, the average Huddersfield property had dropped in value from £236 in 1871 to £175.

N.B. – you might have noticed I wrote £236 in a slightly different way in the title of the article. Up to 1971, a pound was split not into 100 pence but 240 pence. There were 12 pence in a shilling and 20 shillings (or 240 pence) in a pound. It was expressed in the form £sd and spoken as "pounds, shillings and pence". I dropped that into the title as it’s the 50^th anniversary this year of when the UK decimalised its currency (younger readers – do google the story – it’s a fascinating topic).

 

So back to the property market and at the end of WW1, four in five people still rented, virtually all from private landlords. Politicians were concerned about the poor living standards of people’s homes, and this led to the ‘homes fit for heroes’ 1919 Housing Act which delivered subsidies for local councils to build council houses. The average value of a Huddersfield property in 1922 was £275.

 

The 1930s - By 1930, the average value of a Huddersfield property stood at £348. With the country building a third of a million houses per annum, interest rates fixed at 2% and hardly any planning regulations, supply of property was outstripping demand, so the average Huddersfield home dropped ever so slightly in value to £322 by 1938.

 

The 1940s - With the bombing of many towns and cities and housebuilding being stopped because of the war, this created a perfect storm to increase house prices after the war. By 1947, the average Huddersfield home had risen in value to £1,076 because just as food was rationed during and after the war, so were building materials. Builders could spend no more than £350 on building materials for a new home (and that lasted until 1954).

 

The 1950s - The '50s were all about building council houses – a quarter of a million of them each year. By 1959, the average Huddersfield home had risen steadily to £1,492.

 

The 1960s - This decade saw even more houses being built in the UK, with an average of a third of a million houses a year being built. Huddersfield is full of 1960’s council houses and now even more owner-occupied housing, meaning by the end of the decade Britain had as many homeowners as renters. The average Huddersfield house had risen in value to £2,737 by 1969.

 

The 1970s - We experienced the first boom and bust housing bubble in the early 1970s with house prices rising by over 30% a year in the early years of the decade (so the current 10% a year is child's play!) but prices dropped in 1974. They recovered quickly in the following years, not because of increased demand but due to hyperinflation, making the average Huddersfield house price rise to £13,920 by 1980.

 

The 1980s - This was the decade of council tenants being able to buy their own homes, although not many people know it was an idea from Labour. They decided against the idea, but it was seized upon by the Tories, who made it the cornerstone of their 1979 election manifesto. The property market helped improve the economy, and by 1988, Huddersfield property values increased to £29,115 (only to drop by 32% a couple of years later).

 

The 1990s - The housing market crash of the early 1990s was painful for all, exacerbated by mortgage interest rates being raised to 15% on Black Wednesday (16 September 1992) and left there for 12 months. Unemployment went from 1.5m to 3m for the second time in ten years, and many of those homeowners who had taken out large mortgages in the late 1980s housing boom could no longer afford the repayments because of the high interest rates, meaning repossessions went through the roof. The crash also made builders nervous, and they only built 150,000 houses on average a year in this decade. Yet, by the mid-1990s, things started to improve. So much so, the average Huddersfield home was worth £54,580 by the turn of the millennium.

 

The 2000s -  The decade of cheap mortgages and the rise of buy-to-let, together with a severe drop in the number of new homes being built, contributed to the UK’s third big housing bubble since WW2. The average Huddersfield house price more than doubled to £146,160 by 2008, before the Credit Crunch brought the boom to an end, and a year later (2009), the average Huddersfield property had dropped to £129,819.

 

The 2010s – The property market started to come back to life in the early 2010s with property values steadily rising throughout the decade, yet builders were only building around 135,000 new homes a year. It also might surprise you that by 2015/6, the number of homeowners was starting to rise quite significantly, meaning today, as we enter the 2020s decade, the average value of a Huddersfield property now stands at £185,008.

 

So, now we are back to 2021.

 

Yes, your Great-Great-Grandfather might have been able to buy their Huddersfield house for a shade under £236 in 1871. Taking inflation into account since 1871, that same Huddersfield house today would be £28,423.78, yet if his wages had increased by inflation at the same rate, the average wage today would be £81.91 per week, not the current £585.50 per week.

 

I appreciate there are plenty of other factors involved with this topic, such as the cost of renting, raising a deposit, changing lifestyles and the biggest point, the cost of borrowing money on a mortgage.

 

All this begs the question, what does the future hold for the Huddersfield property market?

 

It's obvious since the mid-1980s, house prices have sustained a period of impressive growth (even withstanding a couple of property crashes). The Bank of England has gone on record to say that much of the rise in average house values, comparative to wages, between 1985 and now can be seen because of a sustained, dramatic and consistently unexpected decline in real interest rates and additionally concludes that: ‘An unexpected and persistent increase in the medium-term real interest rates will generate a fall in real house prices.’

 

Cheap mortgages and a lack of building have created this situation. So as long as interest rates don’t go back to their long-term average of the 5% to 7% range or the Government decides to increase building new homes to half a million a year (from the current 240,000 per year) … things will carry on as they are in the medium to long-term.

 

These are my thoughts … I would love to hear any stories of your family buying property in the late 19^th Century or early 20^th Century and what they paid for it, together with the affordability of Huddersfield property and the future of it.