All posts tagged: Margate
The CIH says that 720,000 private rented properties in England will become unaffordable to people on benefits from this week, as the local housing allowance caps kick in. The prediction is that some people affected by the changes will be forced to migrate to low rental areas, like Margate and Hastings in the South East, creating benefit ghettoes in some of our decaying seaside resorts. I know Margate well (I grew up on the Isle of Thanet) and it already has a reputation for poverty and decay, with some of the most deprived wards in England. In comparison to the rest of the South East it is an incredibly cheap place to live. You can rent a two-bed flat for as little as £66 per week. The closure of Dreamland and the disastrous decision by the District Council to build a huge new out of town shopping centre at Westwood Cross has devastated the town centre. Margate is making huge efforts to regenerate itself and the recently opened Turner Centre is starting to have an impact, but a further influx of the poorest and most desperate will hardly raise the town’s fortunes.
I spoke about the CIH report to PRS expert David Lawrenson, the author of the top-selling UK book on property who told me:
“Obviously, the whole problem is one of housing market failure – a much wider issue. But looking at the PRS on its own, one really key issue is that private landlords don’t want to let to people on Local Housing Allowance for a number of reasons.
“A non-LHA let has a number of advantages over most LHA lets: a landlord gets rent paid in advance (not arrears), they get a deposit they can bank and earn interest on and a lot less paperwork. Also, payments are less likely to stop without warning simply because the tenant’s working circumstances have changed. They also know that under buy to let mortgage conditions, some mortgage lenders (scandalously in our view) still preclude a landlord from letting to “non working” people.
“If the government could level the playing field, they would find lots more landlords coming forward and the problem substantially resolved.”
You may recall that Iain Duncan Smith predicted a fall in private sector rents as a result of the benefit changes. That hasn’t happened so far, due primarily to the increasing demand for PRS lets from frustrated first time buyers. But 720,000 dwellings represents 20 percent of the private rented sector in England, so if all of these properties are vacated by claimants it could have a significant impact upon the housing market as a whole. The reality is likely to be more complex and will depend upon the reaction of landlords and tenants. My guess is that three things will happen. A few tenants will negotiate lower rents that meet the caps and will be able to stay put. Secondly, many tenants will be forced to move to cheaper areas (this is already happening). But remember that the PRS has increased by around 1.4 million properties over the past eight years, an increase from 12 percent to 17 percent of all homes in England, and yet rents have continued to rise. That looks like a bubble to me and all bubbles eventually burst, so my third guess is that the more astute landlords will start to offload their stock for sale, since they know that demand for their properties is going to fall in the longer term. This could have the paradoxical effect of keeping PRS rents high and lowering house prices in the short term as more properties flood the market. Of course, the bigger issue is overall supply and the availability of mortgages, but that is a subject for another time!