The “housing crisis”, most would agree, is a bad thing: a generalised social problem with multiple and complex causes, like poverty or conflict. But few are willing, or able, to see their part in it.
Blame the lack of house building, we say, or the financial crash of 2008. Blame the banks, the green belt, immigration, family breakdown. Don’t, whatever you do, blame ordinary people who simply choose to turn the situation to their advantage. And don’t, under any circumstances, consider the social consequences of that advantage.
I wanted to probe the way these relationships work, and the psychology behind them. So I spoke to some “good” landlords, some of whom let rooms or flats to their friends. All the landlords agreed to speak on condition of anonymity, so all names have been changed.
Every landlord interviewed here vocalises a concern for social problems, treats other people with respect, and most vote Labour or Green. None would ever dream of the kind of acts committed by landlords at the criminal end of the spectrum. But when it comes to asking about money, how much of it changes hands and under what circumstances, most are reticent.
When the figures are coaxed out of them, most see the rent they charge as something separate from the way they behave as a landlord, as if that part is not an act of volition. Several struggle to use the word “landlord”, preferring “owner”, or, in cases where they live in the same home as their tenants, “flatmate”. If things have ever gone wrong between themselves and a tenant, they always “asked them to leave” rather than “evicted” them.
Most call what they’re doing “an informal arrangement”, perhaps unaware that when rent changes hands, laws apply regardless of what’s written on paper. And the informality does not appear to work both ways; rent must be paid, and on time. Some display a surprising level of self-deception: a live-in landlady with a mortgage of £390 a month insists she pays a third of it herself, while charging her tenants £550. And when asked why they do it, “it makes sense” is a common answer.
It’s as if, when it comes to property, we’ve disconnected our actions from their social consequences. We prefer to see market-driven inequality as random, chaotic, like a game of snakes and ladders. As if the housing game is so absurd that the moves we make within it have no meaning. But they do.
With market rates (meaning the maximum amount that someone who needs housing will pay if they have to, rather than any indicator of quality or choice) at sky-high levels, it’s easy for someone charging below market rate – perhaps, say, £50 less than the landlord down the road – to feel that they a have social conscience.
Simon, a research administrator in his 30s, bought a £215,000 flat in east London in 2007 when he inherited £35,000 from his grandmother. After he and his partner had lived in it for four years, they took a year off work to go travelling and let the flat through a letting agent, using the rental income to fund their travels. When they returned, they continued to let it – swapping the tenants for friends.
The letting agent was “a little bit pushy, but quite positive” about the area’s new status, and this might have contributed to their decision to re-mortgage the flat on a buy-to-let mortgage, with another £30,000 from Simon’s father. Crucially, it was an interest-only mortgage – which meant that, as buy-to-let landlords, they could make the entire monthly mortgage payment tax deductible. Using that flat as capital, they bought another flat in south London and moved into it, paying £800 a month on the mortgage there.
They charge their friends in east London £1,200 a month, excluding bills, of which £700 goes on the buy-to-let mortgage, leaving £500 to cover the lion’s share of the mortgage on the home they live in, too. Though Simon assures me that some is spent on maintenance costs. According to Zoopla, the original flat is now worth £477,000, but Simon says he wouldn’t sell.
Asked how he sees his part in the bigger housing picture, Simon squirms. “I do feel very lucky. I don’t earn very much, and I feel it’s awful for people who work as hard as me, or who earn more than me, who will never be able to get on the property ladder. I find it quite conflicting as well.”
He prefers renting to friends because they make improvements to the property themselves and it ‘feels more positive’. ‘I’d be happy to rent to strangers again, but if I did, I would probably add a couple of hundred pounds on, per month’, he says.
Simon has only ever needed a loose grasp of the legal rights and responsibilities of tenants and landlords. He explains that he left all that to the letting agent when he went travelling, and now that he lets to friends there’s no need for a “formal contract”, seemingly unaware that proof of rent paid – for example, though a bank statement – acts as a contract, giving any tenant a de facto assured shorthold tenancy (AST) with all the standard conditions.
When I ask under what circumstances he would evict a tenant, I have to explain that, unlike in most other countries, no-fault evictions are legal in the UK in most cases. “I didn’t know that. So landlords have the right to evict you?” he asks.
Some who let to their friends prefer arrangements where they live in the same house. Kim was working in an admin job in Brighton in 2003, earning £22,000 a year, when her parents encouraged her to buy a house, giving her a £95,000 deposit for a two-bedroom property at £190,000. “I definitely needed the income from the tenants to cover the mortgage – I wouldn’t have been able to cover it all myself,” Kim says.
So why did she choose to do this, rather than buy a home with a mortgage that she could afford to pay herself ? ‘That was just the decision’, she says. Kim turned the living room into a third bedroom and moved two friends in. Aged 22, she’d had little experience of being a renter herself, as she’d lived with her parents while at university. Though some live-in landlords choose not to pay a share of their own mortgage, Kim stresses that she paid a third of the “rent” herself because it “didn’t seem right” not to.
When I press her for figures, it transpires that she charged her two tenants a total of £550 between them per month, while the monthly mortgage payment was £390. The amount she paid was just a sum going into her own bank account. It was, I think, something she needed to tell herself to ease her conscience.
She says it was sometimes difficult to maintain friendships with the people who were paying her mortgage, and, though she always accepted that maintenance was her responsibility, felt annoyed when others didn’t do the cleaning. “It’s definitely an odd situation to be in,” she says.
She’s still a landlady and she’s had only four problems in 12 years: one tenant disappeared, while another three were asked to leave with a month’s notice because they could no longer pay their rent. One of them had nowhere to go, so Kim let him stay on a little while longer until he found somewhere.
After 10 years, Kim moved to London, where she now rents a two-bedroom flat with her partner and a friend, for £1,900 per month (excluding bills) between them. “So we’re being fucked over as well,” she says.
Her parents paid off the remaining mortgage on the Brighton house, and Kim now charges £1,220 a month in rent, split between her three tenants, and thinks that being a landlady is easier at a distance. She has, reluctantly at times, dipped into the money she gets from the rental income, and says she would have struggled without it, earning £23,000 a year as a freelance TV props buyer.
When I speak to Alice, she has just had a pay rise to £27,000 a year, but at 34 is struggling to pay off student loans and an overdraft from periods on a lower income. After a recent demoralising search for rental accommodation in London, where prospective flatmates interviewed and declined her, she was pleased to find a friend of a friend who owned a flat with a spare room. She pays him £720 a month, including bills.
Alice has not thought to question this amount, saying she’s just glad the rent is not much more than in her last place, and she’d prefer to think of her landlord’s mortgage as “his business”. I contact him to find out.
Dave earns £40,000 a year, and bought his flat 18 months ago for £420,000 with a 50% deposit after he inherited some money, which brought the monthly mortgage payments down to £700 – which Alice is paying all of. “I’ve only had two ... er ... flatmates, as it were,” Dave says, adding that I must anonymise this interview because he hasn’t told his mortgage provider about the arrangement.
He uses the words “casual”, “informal” and “loose” many times to describe what he is doing. I don’t ask him how he justifies the amount. Instead, I ask him how he sees this arrangement in the context of the bigger housing picture.
He replies awkwardly: “It’s … er … a curious situation that you find yourself in. I’ve got friends who are, you know, very ‘right on’ and they’ve bought an ex-council flat to live in and now they’re looking to buy another place to let out. You think, well, here are these people who tell themselves they’re very leftwing, they benefited from the quintessential Thatcherite policy and now they’re doing very well out of reducing the housing stock.
“I joke around with them about the moral implications, but it’s funny. Well, it’s funny if you’re in that position where you can laugh at it, but I guess less so for other people.”
Later, I ask Alice why people in her situation aren’t more angry, when they struggle to pay off the mortgages of others who could easily afford to pay it themselves. “I think people recalibrate their level of satisfaction according to what they feel is possible,” she says. “It makes sense.”
For some, letting to their peers is a way to change their lifestyle. When Sam was 26, he worked full-time in a record shop, earning £25,000 a year. He inherited £65,000 from a grandparent and, with another £15,000 given to him by his parents, bought a £259,000 flat in 2004, with a monthly mortgage payment of £700.
The flat, in London, has one big bedroom and a box room. Sam says it was “never really the plan” to rent out the box room, but “as soon as I moved in, I thought ‘Well, it would make sense’.” A university friend was looking for a home and agreed to pay £500 a month for the box room. Sam carried on working at first, but after a few years decided to quit his job to play in bands – a move that coincided with his monthly mortgage payment dropping to £450 after the initial fixed term ended.
His tenants have changed over the years, but Sam has always chosen from “friends, or friends of friends”, and always kept the rent at £500. With no housing costs to cover personally – though he’s keen to emphasise that he pays for milk and fuel bills, plus £41 a month in ground rent – he can afford to get by with minimal earnings from working as a musician. He has no plans to return to work.
“I approach it in a really fair way,” he says, as if fairness were a fact rather than a contested term, “in that I can’t really afford to cover all the costs. You have to strike a balance between what the market rates are, what I can afford to cover myself, and … what they [the tenants] can afford, I suppose.”
Many who rent rooms from their property-owning peers are happy with the arrangement. They focus on the fact that their rent is slightly lower than it would be through a high street letting agent, rather than the fact that they’re paying most – or, in some cases, all – of their friend’s mortgage for them, buying them an asset for later life that they may never have themselves. The friend who first rented Sam’s box room was eventually able to save enough money to scrape together a deposit to buy his own home, with a partner. But not everyone was so lucky.
When Sam’s third tenant, Howard, also a university friend, hit financial difficulty, he went to work abroad on a construction project for two months. Sam planned to put a short-term tenant in Howard’s room while he was away, but when that fell through it was assumed that Howard would pay in full, despite not using the room. When the employer failed to pay Howard, Sam granted him a two-week deduction on the two-month period. Howard fell into debt to cover Sam’s mortgage payments, which put a strain on the friendship.
“This is the crux of the problem when mixing friends and renting,” says Howard. ‘“Total professionalism is expected of the renter, but there’s no expectation when it’s turned around the other way. If you ask for anything, then you’re ‘not being a friend’.” Sam eventually asked Howard to move out of the flat. “It worked out the best for him, because his new place is less financially accommodating, so he has to take more responsibility for himself,” says Sam, who has recently moved in his fifth tenant, and discovered that his flat is now worth three times its original price.
It’s tempting to see wealth inequality as an accident; it feels less uneasy if we do. In the world in which people born before 1975 grew up, the relationship between landlord and renter could be (though wasn’t always) a benign transaction: the simple and temporary provision of shelter for an inconspicuous, proportionate rent. But in parts of the country where housing is in short supply, renter-landlord relationships have come not just to reflect inequalities, but produce them.
We might prefer to think that two identical 30-year-olds, living in the same neighbourhood, with exactly the same job, income, qualifications and skill set, will have similar economic lives. If A has been helped on to the housing ladder by family wealth and B has not, we’d prefer to see that as inconsequential; sometimes it’s sunny, and sometimes it rains. It shouldn’t matter. But if B has no choice but to hand over most of their earnings to A, to buy A an asset and a pension that B will never have, things begin to feel rather feudal.
A renter effectively pays not once but three times: first in rent, second as an unpaid caretaker of an inflating asset, and third with the freedoms they forfeit. With the silent passing of every standing order, their roles, their status – their class – becomes ever more entrenched, and the possibility of escape reduced.
Sometimes, wealth inequality has to be carefully revealed by social scientists, using t-tests and regression analysis to unpick complex variables. But in the private rented sector it’s there in sharp, zero-sum relief. And no one can bear to look.
Angus Hanton, economist and cofounder of the Intergenerational Foundation, agrees that it’s a middle-class taboo. “It’s a bit like a dirty secret,” he says. Hanton is a baby boomer with teenage children. Acutely aware of the role of housing in driving wealth inequality – in a personal as well as a professional sense – he says that boasting about wealth has always been considered vulgar, particularly in Britain.
But the structural shifts in housing over the last few decades have produced a particular kind of inequality, and it’s stark. So it’s hardly surprising that those who benefit from it remain quiet.
Rosie Walker, with Samir Jeraj, is the author of The Rent Trap: How We Fell Into It and How We Get Out Of It, published by Pluto Press (£12.99). Click here to order a copy for £10.39
