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For Sale signs

"Sign of the Times". Photo: Andy Beecroft / Geograph / CC BY-SA 2.0, license linked below article

John Smithee explains how the economic crisis will affect buy-to-let landlordism and their tenants, and how socialists should respond

The buy-to-let market is heading for trouble. Following the recent mini-budget, amateur landlords will face a choice either to increase rents or sell-up. Buy-to-let landlordism took off in the early 1990s with the introduction of six-month assured shorthold tenancies, where the landlord can evict a tenant for no reason after that period.

This was compounded by Tony Blair and his Chancellor Gordon Brown, who believed that the expansion of buy-to-let landlordism was more efficient and cheaper than building council houses. Gordon Brown could have stopped buy-to-let landlordism in its tracks by removing mortgage-interest tax relief for landlords, but refused to do so. A whole generation of potential first-time buyers were therefore outbid by buy-to-let landlords who could claim mortgage-interest tax relief, whereas first-time buyers couldn’t.

There are now 2.7 million buy-to-let landlords in the UK, housing four-million people. Because of record-low interest rates on savings since the credit crunch of 2008, many people have put their savings into buy-to-let, which give a return of 7% to 9% on capital employed. However, the day of reckoning for these buy-to-let parasites is nigh.

According to estate-agents Hamptons, a high-rate tax-paying landlord will have their profits slashed to just £212 a year if the 2.25% base rate of the Bank of England is passed on in mortgage costs.

At the same time, according to Moneyfacts, the number of buy-to-let mortgages has gone from 1942 on the day of the mini-budget to just 862 a week later. If interest rates rise to 6%, as is predicted by the summer of 2023, buy-to-let landlords will be making massive losses. The alternative is to raise rents, which are already at unaffordable levels, or more likely, sell-up. Buy-to-let landlords selling up in large numbers will lead to tens of thousands of tenants being evicted. These people will turn to local councils’ housing departments for help.

At the same time, a collapse in house prices of 20% or more is likely. Buy-to-let landlords who make up the base and membership of the Tory Party will look to the government for help. It is therefore ironic that the Trussonomics of Liz Truss and Kwasi Kwarteng will lead to the destruction of buy-to-let landlordism and the parasites involved in it.

I just feel for the tens of thousands of tenants who will soon be made homeless through no fault of their own. The private rental market is estimated to be worth £1.4 tn. A collapse will send the UK economy deep into recession. As Marxists, we see no social benefit in buy-to-let landlordism. Marxists should call for the requisitioning by local councils of all buy-to-let properties with compensation only being paid to former landlords on the basis of proven need.

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