Tag Archives: housing crisis

The billions of corrupt wealth fuelling London’s housing crisis

money laundering london housing

Around £4.2bn of suspicious money is believed to be laundered through the London property market. 

The report produced by the London-based anti-corruption organization Transparency International claims that the purchase of luxury properties by corrupt individuals is also exacerbating the housing crisis by driving up prices in the rest of the city.

High property prices in the capital are also believed to facilitate large-scale money laundering operations by allowing greater sums to be transferred from overseas jurisdictions.

While there are multiple causes of London’s housing crisis, Transparency International claims to have found evidence that overseas corruption and the purchase of luxury London properties is playing a ‘significant contributory role’.

The findings are based on an analysis of Land Registry data for 14 landmark luxury developments, consisting of 2,066 future homes.

The report published this month follows a highly publicized announcement in December by London’s mayor, Sadiq Khan, of an investigation into the role played by foreign property buyers in London’s housing crisis.

Transparency International claims up to 80 per cent of properties in luxury developments are bought by overseas investors. Around 40 per cent are sold to individuals from high corruption risk jurisdictions. Much of the remainder are bought by ‘anonymous’ companies registered in the UK’s Overseas Territories and Crown Dependencies.

London is an obvious destination for much of this money. Luxurious properties in the capital are in very high demand internationally. London prime real estate is renowned around the world as a symbol of wealth and respectability. The UK is also known as a safe-haven for corrupt individuals worldwide due to its political stability and robust legal system.

Money launderers can easily create offshore companies to hold wealth and assets and provide secrecy for the beneficial owners.

Transparency International claims that over 75% of the UK properties under criminal investigation for grand corruption use offshore corporate secrecy. For all criminal investigations analysed, every property that made use of a foreign company to hold property used a company from an offshore secrecy jurisdiction, rather than a major economy.

The organisation is now calling on the government to implement a public beneficial ownership register of overseas companies that own UK land titles. The creation of such a register was originally announced after the May 2016 Global Anti-Corruption Summit.

Poor International Enforcement

Transparancy International’s report comes following  the Public Accounts Committee’s admission that the UK performs poorly in tackling money laundering.

In 2013 only 26p out of every £100 of identified criminal gains was confiscated.  While the estimated loss to the economy through fraud last year stood at £52bn, enforcement agencies collected just £133m. According to the National Audit Office recovery of the money cost taxpayers an estimated £102m in administration costs.

The picture is similar internationally. In 2012 the UN Office on Drugs and Crime estimated that typical law enforcement detection levels for money laundering stand at around one per cent.

Reporting of suspicious activity in the property sector is particularly poor. Between October 2013 and September 2014, estate agents contributed to only 0.05% of all Suspicious Activity Reports (SARs).

As of July 2014, across the England and Wales, at least £122bn worth of property was held by companies registered in secrecy jurisdictions. Out of 91,248 foreign company-owned properties in England and Wales, nearly two thirds are held via the British Virgin Islands and Channel Island structures.

The Renters Alliance helps renters with bad landlords and letting agents. If you have a story you would like to share, please contact the National Renters Alliance through our website or email us at contact@nralliance.co.uk

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Seven disgraceful statistics about renting in London

Rent Costs London

1. London Renters spend 60% wages on rent

The English Housing Survey reports that Londoners spend an eye-watering 60% of their gross earnings on rent. Excluding housing benefit this figure rises to 72%.

Even more shockingly, 16-24-year-olds are forced to pay 88% of their income on rent in the capital. When housing benefit is included this falls to 81%. However this age group is particularly vulnerable to reductions in housing benefit.

2. It is cheaper to commute from Madrid each day than rent in Camden Town

Renting a flat in Camden Town and working in Liverpool street will cost a Londoner £2,128 monthly or £25,532 yearly.

If the same Londoner rented a flat in Madrid’s city centre and booked return flights from Madrid to Stansted from Monday to Thursday, he or she would spend £1,725 a month or £20,708 a year.

3. The average rent on a two-bedroom flat is £707 a week or £100 a day  

Figures from property investment firm London Central Portfolio (LCP) show that the average rent on a two-bedroom flat in central London is a whopping £707 a week.

Average rental prices of rooms in a flat-share in Paddington (Zone 1), can cost around £1100 a month.

Council taxes are also a significant  consideration. Areas like Richmond and Kingston tend to be the most expensive at around £1929 a year.  Cheaper areas include Wandsworth where council tax averages £823 a year.

4. London professionals are being forced to live “12 to a house”

According to Ealing Central and Acton MP Rupa Huq, London professionals are being forced to live “12 to a house”, thanks to the soaring rents.

In a House of Commons debate Huq said: “Renting is no longer just a transitory thing for those who are in their twenties. It’s becoming routine for people further up the age scale.

“Many in my constituency in their 30s on good money find themselves sometimes 12 to a house with shared sitting room and kitchen.

“At that age, ‘who stole my cheese?’ should not be a way of life.”

5. By 2025, more than half of people under 40 will be living in property owned by private landlords

Over half of 20 to 39-year-olds will be renting from private landlords by 2025, according to accountancy firm Price Waterhouse Coopers.

PwC economists state that: “For 20-39 year olds, we would expect over half to be renting by 2025, implying a continuing rise in the size of ‘Generation Rent’.

The report suggests that home ownership levels will continue declining to dramatic new levels, dropping below 60% by 2025, as the rise of ‘tenant nation’ looms.

6. The UK has the highest private rents in Europe

A study by British Housing Federation found that rents in the UK are the highest in Europe.

In countries like Germany and Holland, private rents are around 50% cheaper than in the UK.

David Orr, chief executive at the National Housing Federation, said: “British renters get a raw deal in comparison to their continental counterparts. Not only do they face crippling rents, but renters in the UK have almost no certainty about whether they will be able to stay in their home from one year to the next.”

7. One in three rented homes are “not fit to live in”

One in three British three homes do not meet the government’s decent home minimum standard, according to 2014/15 English Housing Survey.

A Parliament report published last year admitted that there have been no minimum property standards for private rented housing in England since 2006.

Furthermore, more than 170 tenants are being evicted every day according to 2015 Ministry of Justice figures.  In total 42,728 evictions recorded in England and Wales in 2015.

According to Gillian Guy, CEO of Citizens Advice, “It’s hard to feel at home in the private rented sector. People can struggle to lead a normal life when their home is in a state of disrepair and they could be told to leave at any time. But many feel powerless to speak out.”

The Renters Alliance helps renters with bad landlords and letting agents. If you have a story you would like to share, please contact the National Renters Alliance through our website or email us at contact@nralliance.co.uk

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London Homeowners Slashing Prices As Political Uncertainty and High Prices Impact Demand

London House Prices Fall

London home sellers are having to cut asking prices for their homes and are offering greater discounts as high house prices and brexit uncertainties impact demand.

Lucian Cook, residential research director at Savills claims that price cuts seen in prime central London following the Brexit vote are now filtering through to outer boroughs. “Affordability issues are now a problem after a decade of house-price growth, and buyers are finding they increasingly come up against mortgage-lending limits.”

The latest slowdown in London house price growth comes after home prices in the capital have surged by around 86 percent since 2009. London house prices are now 14.2 times the average buyer’s gross salary according to the research firm Hometrack. This is the highest house price to salary ratio on record and more than double the rate for the UK as a whole.

Data released by the  Council of Mortgage Lenders also shows that there has been a fall of 12 percent in the number of mortgages advanced to first-time buyers in London.  High London asking prices have in many cases now exceeded lending limits allowed to banks under rules set by regulators in 2014.

Central London hit hardest

The house price decline has been most notable in central London. Average prices were cut by 8.2 percent in Kensington & Chelsea on an annualized basis compared with 7.8 percent in July.  Westminster and Wandsworth have been similarly affected recording 7.7 percent and 7.1 percent declines respectively.

london_house_prices

In an apparent reversal of typical trends, outer boroughs have been less affected than prime central London. The percentage of sellers cutting asking prices in January rose in all but two of the capital’s 33 boroughs compared with July.

Listings reductions

According to the property website Zoopla, 37.1 percent of property listings in Merton have been reduced.  John J. King, managing director at broker Andrew Scott Robertson added that sales are down “about 25 percent in the past six months, as they were already affected by stamp duty and the referendum made things worse.”

In Kensington and Chelsea 35.4% of listings have been reduced. Estate agents attribute the fall to changes in stamp duty and the effects of the Brexit vote. However, the house price declines may already be leading to greater interest in buying in the borough. Toby Whittome,  a broker at real estate agent Jackson Stops & Staff, claims that “applicants looking to buy are up nearly 40 percent in January, but that doesn’t necessarily result in sales, as people are hoping and waiting for some good news about stamp duty and clarity over the possible impact of the referendum.”

Ealing has also seen a considerable number of price reductions. Following five to six years of steep price increases, 35.4 percent of listings are now reduced. According to Alex Jerram, a broker at Dauntons, a two-bedroom new build in the borough now costs the same as one in Pimlico. “You cannot justify asking the same price for a property in greater London as one in central London. If sellers really need to sell, they have to reduce prices.”

The Renters Alliance helps renters with bad landlords and letting agents. If you have a story you would like to share, please contact the National Renters Alliance through our website or email us at contact@nralliance.co.uk

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Top Civil Servant in Charge of Housing Says Housing Crisis Will Continue Under Current Government Policies

generation-rent

One of the Government’s most senior housing civil servants has admitted that new government policies will not end the housing crisis and that homelessness will continue to rise.

Questioned by MPs about why the Government is failing to build enough homes, the Permanent Secretary to the Department for Local Government Melanie Dawes admitted that Theresa May’s new policies will not stop the country’s housing crisis from continuing “as it has done for decades.” Miss Dawes added that she was “simply being honest” when she revealed that houses prices are set to stay out of reach of those who cannot offered a property and that homelessness will continue to rise.

The revelation  comes less than one month after after ministers launched a new White Paper “Fixing our broken housing market” which promised radical policies to solve the housing crisis and increase the supply of new homes.

When asked whether the housing crisis will ever resolve itself, Miss Dawes claimed that “It will continue as it has done for decades, I agree, and that will show itself primarily in affordability and in some places in homelessness”

Revelations about the UK’s inability to tackle the housing crisis comes as average house prices have surpassed ten times the average salary in some parts of the country. In November 2016, data published by the research firm Hometrack showed that with house prices in London are now 14.2 times the average salary. Cambridge, Oxford and Bristol  were also identified as highly unaffordable cities with house price-income multiples close to those in the capital. At the same time the number of households made homeless has risen to more than 50,000 per year.

Commenting on the comments made before the public accounts committee, Labour’s shadow housing minister, John Healey, claimed that Miss Dawes’ appearance confirmed the Government’s policies were not working. “It’s clear that the Government’s housing plans have failed, are failing and will continue to fail.”
“Since 2010, home-ownership has fallen, homelessness has more than doubled and affordable house-building fell last year to the lowest level in 24 years.
“After seven years in Government, there’s now a huge gap between the rhetoric and record of Tory Ministers on housing. We need less hot air and more homes from Ministers to fix this housing crisis.”

During the presentation of the Government White Paper in Parliament, the Communities Secretary Sajid Javid, said: “The housing market in this country is broken and the solution means building many more houses in the places that people want to live.”

Mr Javid also claimed that relative to population size, Britain has had Western Europe’s lowest rate of house-building for 3 decades. The Communities Minister claimed that the Government would honour its 2015 manifesto promise to preserve the green belt yet remove the Government’s role in land-banking and free up more public sector land more quickly. Furthermore, in a reversal of decades of housing proposals, the white paper indicated that new homes will be built to rent rather than for first-time buyers.

The extent of the housing crisis comes as data show that private sector rented housing is the most expensive and has the lowest standards of any housing type.  According to Parliament reports, private renters now spend an average of 49% of their income on rent despite nearly one-in-three privately rented houses failing to meet minimum government housing standards.

The Renters Alliance helps renters with bad landlords and letting agents. If you have a story you would like to share, please contact the National Renters Alliance through our website or email us at contact@nralliance.co.uk

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Sadiq Khan asks LSE to investigate London housing market

sadiq_khan

London mayor, Sadiq Khan, has asked the London School of Economics to carry out a comprehensive inquiry into the impact of foreign investment on London’s housing market.

The inquiry which is expected to report back to the Mayor in the spring will investigate the dependence of property developers on foreign buyers and the number of properties kept empty.

Sadiq Khan is keen however to stress that the report is not intended to provide material which might be used to curtail the rights of overseas buyers in London.  Announcing the study, the Mayor underlined the importance of foreign investment in London but also noted that further study was needed to understand the connection between London’s property affordability crisis and foreign investment. The Mayor added that many Londoners were concerned about the number of homes left empty and the link between empty properties and overseas investors.

The current study follows numerous reports that London is being used as a safe-haven for Russian Oligarchs, Chinese Princelings and Middle Eastern Sheikhs.  Many properties in the capital are held by companies in offshore tax havens and many are unoccupied. Khan’s predecessor in City Hall, Boris Johnson, notably called for property developers to market new homes “first or equal first” to Londoners rather than to overseas buyers.

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Chancellor announces plans to ban letting agent fees in England “as soon as possible”

Letting Agent Fees
Letting Agent Fees

In his Autumn Statement today the Chancellor Philip Hammond announced plans to ban letting agent fees in England “as soon as possible” which may be save 4.3 million households hundreds of pounds. 

Currently many tenants face charges to draw up tenancy agreements, conduct immigration and credit reference checks  in addition to the payment of a non-refundable holding deposit paid before signing up to the deal.

The move comes as numerous reports have indicated that many tenants living in sub-standard housing are discouraged from moving out because of extra fee charges.  A report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees.

Nonetheless, landlords groups have claimed that banning letting fees will not necessarily reduce rental costs with landlords and letting agents increasing rental values to offset loss of income. However, renters groups assert that the ban will make it easier for tenants to compare the cost of different properties and reduce the incentive for letting agents to replace tenants.

The move is a culmination of greater regulation of the letting market and will move England further in line with  Scotland where lettings agency fees to tenants have already been banned.  Since 2015 lettings and managing agents in England and Wales have legally been obliged to clearly publicize their fees.

 

 

 

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170 tenants evicted per day as evictions rise 53% in five years

Eviction Notice
Evictions up 53% in 5 years

More than 170 tenants are being evicted every day according to 2015 Ministry of Justice figures.  

More than half of the 42,728 evictions recorded in England and Wales last year were attributable to private landlords with rent arrears being cited as one of the most common factors.  Retaliatory evictions of tenants who complain about poor property standards was also a factor in a significant number of the eviction cases.  Many such evictions may have been brought forward in anticipation of laws against revenge evictions which entered into force on 1st October 2015.

It is believed that a significant fraction of the rise in evictions originated from the private rather than the social rental sector.  Ministry of Justice figures show that the majority of evictions in 2015 resulted from a section 21 accelerated procedure which are usually a feature of private landlord evictions.

This situation is set to deteriorate as increasing numbers of people are forced into the rental sector due to the housing affordability crisis.  According to information from the Association of Residential Letting Agents (ARLA), home ownership is expected to be permanently out of reach of around a fifth of people in the UK.  Property unaffordability is exacerbated by rising rents with an average renter in the North East and London estimated to spend around £31,300 and £68,300 respectively on rent over a decade.  To compound this situation further, rents are forecast to climb at a faster rate than house prices in future.

 

 

 

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Private landlords receive £9.3bn in housing benefit

 

housing_benefit

Private landlords received £9.3bn in housing benefit payments, almost double the amount a decade ago according to a study published by the National Housing Federation.

This situation is set to deteriorate with the decades long trend of decrease home ownership exemplified by a House of Commons research report published earlier this year which reported that 48 per cent of 25-34 year-olds in England now rent,  up from 21 per cent in 2003-04.

The National Housing Federation report found an increase of 42% in the the number of households using housing benefit to pay rent to private landlords since 2008.  Housing benefit is paid to households that cannot afford to cover rental costs in addition to essentials such as food, clothes, heating and lighting.

This situation has been exacerbated by stagnation in real middle-income household earnings with the greatest increase in housing benefit claims coming from households with net incomes between £20,000 to £28,000 per year.  Furthermore, in 2008 around a quarter of private sector tenants in receipt of housing benefit were in employment, a figure which has risen to almost a half today.

In order to address the crisis in property ownership in the UK both parties have adopted standard policy positions.  The Conservatives  have signaled a preference for supply-side solutions to improve housing affordability with little detail on easing planning restrictions and tackling construction sector skills shortages.  Labour on the other hand have suggested a combination of rent-controls and investment in social housing with few details on the practicability of such proposals.

The National Housing Federation claims that if all those housed in the private rented sector lived in affordable housing, taxpayers would save £1.5bn a year in housing benefit payments. The federation’s chief executive, David Orr has said, “It is madness to spend £9bn of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes. Housing associations want to build the homes the nation needs. By loosening restrictions on existing funding, the government can free up housing associations to build more affordable housing at better value to the taxpayer and directly address the housing crisis.”

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London renters trying to move to flat shares to save money ‘pay £2,000 in fees’

generation-rent

New research has shown that London renters looking to save money by moving into shared accommodation are paying an average of £2,000 in agency fees. The figure, mostly made up of up-front deposits and letting agent fees is almost £1,000 more than the national average.  On average London renters moving into a flat-shares  have to pay £2,043 on top of their deposit compared with the national figure of  £1,175. Around 20% of these fees are paid to letting agents according to the flat-sharing website Spare room.

A further impediment to moving also includes a six-week deposit which is now normal across large parts of the UK, up from an average of a four week deposit a decade ago. Often tenant cash-flow problems may be exacerbated by deposit disputes between landlords and tenants despite the introduction of deposit protection dispute resolution schemes in 2007.

Foreign tenants are at a particular disadvantage also in this regard with many reporting being required to pay a holding deposit in addition to paying six months’ rent in advance.  The National Renters Alliance is particularly concerned that this may encourage letting agent intimidation of tenants who have sometimes committed the equivalent of 8 month’s rent and substantial agency fees before occupying a new rental property.

Despite calls to ban or impose tighter regulation of letting agent fees as in Scotland, the government has been unwilling to impose new legislation in this area.  Letting agent charges can include drafting and amending tenancy agreements, credit checks, references and administration costs.  Across the UK 95% of people who used a letting agent paid fees. Many letting agents also charge prospective tenants holding fees for reserving rooms in shared houses.

The issue of letting agent fees is leading to more tenants to look for properties managed directly by landlords.  However, this might be a luxury for some with many areas particularly in places with high student populations where managed properties dominate the rental housing stock.

 

 

 

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Letting Agent MP Backs Buy-To-Let Capital Gains Tax Cut

hollinrake

The founder of the Hunters Estate agency and Conservative MP for Thirsk and Malton Kevin Hollinrake has backed a campaign by the  Residential Landlords’ Association (RLA) to reduce Capital Gains Tax paid by landlords when selling their rented home to sitting tenants.

The proposal involves an amendment to the Finance Bill currently before Parliament. Currently Clause 72 of the Bill  seeks to reduce Capital Gains Tax from 28 per cent to 20 per cent except for the sale of residential property where the rate will remain unchanged.

According to the RLA, Hollinrake is tabling an amendment to the Bill which will extend the tax cut to private landlords selling a rental property to a sitting tenant.  “Given the recent attack on the Private Rented Sector by Chancellor George Osborne…more and more landlords will want to exit the market as renting [sic] becomes financially unsustainable for them” the RLA said.

The RLA further purports that 77 per cent of private landlords would consider selling their property to tenants if the tax liability were reduced.

Hollinrake claims that the amendment will support the government’s wider home ownership agenda while at the same time offering landlords a route out of the sector minimizing their financial hit.  According to the RLA, the amendment  includes safeguards to prevent such a tax change being abused.

 

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