July 29, 2013

 Bob Young is managing director of CHL Mortgages


Those of you that have read any of my previous columns on the topic of regulation will know that I’m not exactly a keen advocate of introducing any legislation that might impede the natural growth of the buy-to-let market and recent research from Paragon Mortgages would suggest I’m not alone in adopting this viewpoint.

Landlords were polled for their opinions on the possibility of selective licensing and other regulations being implemented and almost three-quarters of those surveyed thought introducing such red tape would deter new landlords.

Three-fifths said they would not invest in buy-to-let property where selective licensing was in force and the sentiment was shared equally among the professional and private investor landlords surveyed.

For those not up to speed with what selective licensing entails, the Housing Act of 2004 provided councils with the power to introduce licensing of privately rented properties in selected areas and the controls came into force in 2006.

It requires that within a designated area, all private rented properties are licensed and certain standards and conditions are required to be met in order for a licence to be granted.

Private landlords failing to obtain a licence or achieve acceptable management standards are liable to fines or having control of their properties assumed by the authority.

My problem with such measures is not that I don’t think landlords shouldn’t have to adhere with certain benchmarks, but more that the existing and self-imposed restrictions are doing a good enough job on their own without further meddling.

People in favour of such schemes – usually Government officials with precious-little experience of how the housing and financial services sectors actually work – point to how the residential mortgage market is regulated and how bringing buy-to-let within this remit is a natural progression.

Pardon my ignorance, but the increasing bureaucracy that plagues residential mortgage advisers seems to have made very little noticeable difference apart from making the whole process more time-consuming and complicated than previously.

Compulsory regulation didn’t stop the mortgage market imploding when the global financial crisis hit, it didn’t stop the big banks being bailed out and it didn’t lessen the need for subsequent revision such as those seen in the Mortgage Market Review.

I guess my mantra when it comes to regulating the buy-to-let market has long been “if it ain’t broke – don’t fix it”.

Obviously it is vitally important that landlords adhere to requirements such as fire safety checks, tenancy deposit schemes and have a moral obligation to ensure their properties are clean and habitable, but I just fail to see what selective licensing will achieve that isn’t being accomplished already.

It is no surprise to learn that most proponents of the buy-to-let market coming under stricter controls are those who believe that its success somehow inhibits growth in other areas such as the first-time buyer sector but I’ve long argued that strong performance in both areas is not mutually exclusive and the private rented sector shouldn’t be blamed for owner-occupier market ills.

In what increasingly resembles a nanny state, further red tape always seems to be in vogue but, more often than not, extra edicts are not required.   





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