As Buy-to-Let loses tax relief, property investment alternatives become more desirable

I have long been a critic of buy-to-let, specifically about the unlevel playing field between landlords and homeowners.

Buy-to-let has always been popular but that is now changing

Buy-to-let has always been popular but that is now changing

The chief concern has traditionally been the favourable tax treatment for buy-to-let. This has allowed landlords to offset many costs against rental income to lower their tax bills – the big one being mortgage interest which was removed from homeowners years ago.

Now I understand that when buy-to-let was conceived it was considered as a business and the principle behind that has always been that tax should only be charged on profits. So in the business of buy-to-let, mortgage interest and other allowable expenses are costs and therefore deducted before the profit is calculated.

That situation is changing as result of many landlords buying property not as a business but just as another property to maximise their capital gains.

“Ha ha” I hear you shout, that is a business – an investment business; but Chancellor George Osborne does not see it that way and has decided full-on mortgage interest income tax relief on buy-to-let was unfair or possibly a prime target for getting some extra tax in – and took the axe to it in his summer Budget.

He has also changed some allowable expenses such as the blanket 10% allowance for furnished properties which is also going.

Buy-to-let less attractive due to tax changes

Buy-to-let less attractive due to tax changes

But the big one is restricting buy-to-let mortgage tax relief to a maximum of 20%. This will diminish the attraction of buy-to-let. Yet Britain’s small army of cash-rich minor property investors still appear to be piling in. Especially as you can now take your pension out and do with it what you will.

This is a classic example of intervention by Government, for the right reasons, having often  unforeseen consequences which requires another intervention:

  • Release the shackles on pensions and we go and buy more property to rent out.
  • By more potential landlords competing for property, owner occupiers are further priced out of the market.
  • This means the would be home owner is driven into the very houses they are priced out of and the new landlords have just bought.
  • This increases the UK rental trap that over 1 million people are currently in.
Mortgage application

Buy-to-let mortgages easier to get

One of the temptations to become a landlord is the current very cheap buy-to-let mortgages. A new deal arrived this week, a two-year fix at just 1.84% from Accord. And this highlighted another place where the playing field is not quite level.

Most buy-to-let mortgages are interest-only, whereas most owner-occupiers must take out a repayment mortgage.

  • On an interest-only basis, a £150,000 mortgage at 1.84% would have monthly payments of £230.
  • On a repayment basis, monthly payments would be £628

Furthermore, across the mortgage industry, with MMR and affordability the same borrower is likely to find a buy-to-let application far less onerous than a residential one.

Budding landlords should be warned though – change is in the air.

They may find the rules are much tighter when it comes to remortgaging at the end of that two-year fix with the up coming EU changes to buy-to-let mortgage approval rules. But more of that in a future blog.

Of course the easy route into UK property for both home occupiers and investors has now become through Joint Equity and its associated Investment Bonds.

See if you want to own your own home,

and if you want all the information about joining the ethical UK property investment revolution.

Brad Bamfield

4.4 million households rent in the private sector

English Housing Survey Headline Report 2013-14 was published in February 2015:

What it had to say about the increase in the Private Rented Sector (PRS) and about the 25 to 34 age range is significant.

The private rented sector remained larger than the social rented sector.

RentingIn 2013-14, 19% (4.4 million) of households were renting privately, up from 18% in 2012-13 and 11% in 2003.

The proportion of households renting social housing remained steady at 17% (3.9 million).

Young households aged 25-34 were more likely to be renting privately than buying their own home.

In 2013-14 almost half (48%) of all households aged 25-34 rented privately, up from 45% in 2012-13.The proportion in this age group living in the private rented sector has more than doubled from 21% in 2003-04. Over the same 10 years, owner occupation in this age group dropped from 59% to 36%.

Average weekly private rents in London were consistently higher than outside of London from 2008-09 to 2013-14.

In 2013-14, average weekly private rents were £281 in London and £145 outside of London. There was a smaller difference between average weekly social rents in London (£125) and outside London (£87).

The number of non-decent homes in England continued to decline. In 2013, 4.8 million dwellings (21%) failed to meet the decent homes standard, a reduction of 2.9 million homes since 2006, when around a third (35%) of homes failed to meet the decent home standard.

Damp problems were more likely to be found in private rented dwellings than social rented or owner occupied dwellings. In 2013 about a million (999,000) homes (4%) had problems with damp, compared with 2.6 million (13%) homes in 1996. Some 8% of private rented dwellings had some type of damp problem, compared with 5% of social rented dwellings, and 3% of owner occupied dwellings, although private rented dwellings tended to be older properties more prone to damp problems.

graph increase In 2013-14, the private rented sector accounted for 4.4 million or 19% of households. Throughout the 1980s and 1990s, the proportion of private sector households stayed steady at around 10%. However, the sector has undergone sharp growth since then and has doubled in size since 2002, driven by a number of factors.

In the late 1990s rent controls were removed, and assured shorthold tenancies became the standard, giving greater flexibility in the length of tenancies. Lenders also introduced the buy-to-let mortgage at around the same time. 

In London, the proportion of households in the private rented sector increased from 14% to 30% between 2003-04 and 2013-14, Figure 1.2. Over the same period, the proportion of households in London that were owner occupied, but buying with a mortgage declined from 39% to 27%. In London, the private rented sector became as large as the mortgagor sector in 2013-14.

The whole document can be read HERE

No way out of renting for four in ten tenants

Home ownership is out of reach for 42% of tenants, who say they cannot afford to save for a deposit at all, and other want-to-be homeowners are unable to save enough.

fap_average_ftb_450 The average amount saved by the 35% of tenants who do save for a deposit is £12,125 – about 7.3% of today’s average house price of around £165,000. That’s significantly less than the 10 to 20% which is typically required (approx. £16,000 to £30,000).

What many people aren’t aware of are the alternative co-ownership options available to them. With Joint Equity, for example, the minimum deposit required is 5% of the home value which for today’s average house is £8,250.

Surprising still is that nearly one-third of tenants are spending more than half their take-home pay on rent, and 35% of those managing to save a deposit are having to dip into it, either regularly or to pay for holidays. Among the under-30s, 60% have already used their home savings pot for other things.

These statistics are all from the property-sharing website SpareRoom, and another interesting and perhaps unexpected statistic shows that the large majority (79%) of those polled described themselves as employed professionals.

Matt Hutchinson, director of, said: “A significant proportion of the people we polled expect to live in rented accommodation for at least five years, and many believe it will be much longer than that.

“The facts speak for themselves. Soaring living costs mean it’s a struggle for many households just to keep their heads above water each month, let alone have enough spare cash to put aside towards a deposit. The survey shows that even those who are squirreling away funds have not managed to save anywhere near enough to buy the property they want.”

percentageBrad Bamfield CEO of Joint Equity said, “These stats continue to shock us which is why we’re determined to help educate people about alternative home ownership options. For instance, our Resident Partners can now live in their own home in co-ownership with us on a 50/50 basis. In nearly all cases if you can afford to rent you can afford to buy with Joint Equity.”

“We aim to help over 25,000 people leave the rented sector for their own home every year and our vision is that no one who does not want to rent should be forced to stay in it longer than really necessary”

For more information visit

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Retired and still renting –  a concerning trend

Joint Equity now helps retired people who are trapped in rental properties buy a home of their own. We have always helped first time buyers and divorced and separated but the demand from older would be buyers who have perhaps been refused mortgages or believe they will never have the security of their own home  is overwhelming.

Buy-to-Let has always been popular but that is now changingIn the 2011 census there were 4.2m households living in private rented accommodation. 50% of the head of household were in the 50 to 75 age group – that is over 12m households. 50% of these people declared themselves as economically inactive.  The majority said this was because they were retired. That is a staggering 3m households.

In the 50 to 75 age group just over 25% were renting and – using the same proportion of social to private sectors. This suggests that over 350,000 households are retired and living in the private rented sector.

“At later stages in life, where security and peace of mind is even more of a priority, it’s concerning that such a significant percentage of our retired population is having to endure the uncertainty, and many other issues, that come with renting a property, “ says Brad Bamfield CEO of Joint Equity.

“There are so many unappealing aspects of rented living – the prospect of having to regularly move, the upheaval, the concerns about rising rent prices. A priority must be to educate people more about the alternative home ownership options available to them. There are new ways to escape the rental market, take control of your housing finances and own your own home.”

If any of the following questions strike a chord with you, as it does many of our current Resident Partners over a “certain” age, and you answer yes then you need to read on and see how Joint Equity can help you now because if you can afford to rent you can afford to buy with Joint Equity.Rock and Hard Place 1

  • Are you retired and living in rented property?
  • Do you dislike the insecurity of rented accommodation?
  • Worried about future rent rises?
  • Do you have savings that earn you next to nothing?
  • Do you think you can never live in your own home with all the security that provides?

Joint Equity can help change things for the better.

You own 50% and we own the other 50% in Partnership. So any growth in the property is shared 50/50 between us and when you sell your Share in the property you get your deposit back as well.

And we do this often for less than the cost of renting.

Remember we are not your landlord we are you Co-owning Partner and its absolutely your home with complete security to stay there as long as you want.

Your investment in your home can be passed on to your heirs together with your share of the increase in value, we are not Equity Release taking great chunks of your value. Nor do we interfere in your life while you live in your home however, we are always available 7 days a week if you need advice or help with the home – we are you Partner after all.

bradBrad Bamfield CEO of Joint Equity said “the retired renting sector is very important to us as security becomes more important the older you become. We all remember when we were young nothing was frightening and moving every year or so was exciting. “

“This is not the case when you are over 60 when change and upheaval, usually not through your choice but usually imposed by your landlord, is frightening, difficult and deeply upsetting.”

“Joint Equity offers a real alternative to many people in this sector offering peace of mind, security and a real Partnership for the future years.”

Joint Equity offers an alternative for retired people living in rented accommodation and a viable, secure way of owning your own home. For more information find out about how to become a Resident Partner and check out our video page for a real life Resident Partner and her experience.

Sources: Housing Census headlines here

Joint Equity Co-Ownership – an alternative way

Joint Equity offers a new way to buy a home and new opportunities for investors.

There are over 1 million people trapped in the rental market with all the wasted money and insecurity that entails when they would rather live in their own home. There are also many investors falling out of love with Buy to Let who still want to invest in the UK residential property market. Now we have a solution that brings benefits to both these parties.

For 35 years I have been a builder and developer selling well designed flats and houses that I am very proud of, and my buyers are happy to live in.

But I have always been aware that for every home I built 10+ people were disappointed being unable to get a mortgage or not being able to raise a high enough deposit. This meant they remained in rented accommodation.

In my time I have lived in rented houses and I hated both the insecurity of a Short Hold Tenancy and the restrictions and interference of the landlord and agent. And if I hated it, so do many others.

I really do not want anyone who does not want to to have to live in the rented sector so my vision was to devise a way to help those who needed help to get a home of their own.

Big ask? You are right but I was convinced there was a way to help people move out of rented into home ownership.

In 2006 I devised, invented, designed (call it what you will) a new structure that combines traditional approaches to buying and investing in homes in a new way – Joint Equity Co-Ownership.

As my personal targets have always been the “shoot for the moon” types, I have set the goals for Joint Equity as

  1. To help 25,000 people every year buy their own home and
  2. To provide investors with higher returns and less risk than Buy to Let.

Now with Joint Equity Bonds we have the means to attract sufficient investors to make this happen. So now my goals are within our grasp.

We can easily see what our Resident Partners get from Joint Equity.

  • Security,
  • A home of their own,
  • No landlord or letting agent
  • A knowledgeable Partner who is on your side
  • A 50% share of the growth in house prices.

But what do Joint Equity Bond investors get?

  • Their money back at the end of the Bond.Escalating Returns from Joint Equity
  • Secure investment paying a good rate of return which increases the longer they hold the investment. I call this an escalating rate of return and it seems innovative.
  • A terminal bonus that is linked to the increase in property prices over the life of the Bond.
  • No hassles associated with being a landlord or having agents always asking for more money. No voids, damage, late payments, problem tenants, increasing legislation, changing tax regimes. (I could go on but there really is none of the problems with the traditional Buy to Let process).

Investors also get the big win with Joint Equity – the feel good factor, the personal satisfaction that comes from knowing that they are helping people who without their investment could never have the security of living in their own home.

So is my vision to help 25,000 people a year move into their own homes and to deliver good returns to investors achievable? Absolutely.

I am a hard headed developer but I also know there are 1,000’s of who really do want to get involved and help while making good returns on their money.

It’s a market solution for a social need – the perfect definition for ethical investment.

Brad Bamfield

CEO & Founder Joint Equity

More information