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Up until 1919 most rental properties were owned and rented by private landlords in one way or another. Then Lloyd George’s government required councils to provide “Homes for Heroes” with a new law introduced in 1919. It was not until after World War 2 that the building of council houses began in earnest with the Atlee’ government and for the next couple of decades to come we were building over 300,000 houses per year.

These houses were rented at a rent we would consider today at below market value. Private landlords generally owned these properties outright and therefore had no mortgage costs to cover. It was therefore the preserve of the wealthy looking for a secure asset to park their money. Hence the term “safe as houses.” Yet it’s interesting to note that even for some of this period no one wanted to buy houses as they no longer regarded them as a safe bet.

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On a personal note my grandfather was able to buy up several blocks of flats at knock down prices in the 1930’s

There were also other reasons it was not attractive to be a private landlord apart from rents being low as a tenant was a tenant for life. Once they were in they were in unless they decided not to be in.

What do I mean?

When they signed the lease, it was their home for as long as they wanted it to be and they could under certain circumstances pass the rental on to a family member. Let me give you an example. Let’s suppose a husband and wife have a son or daughter that stays at home and never moves out. Then at some point their parents die while the son or daughter are living there. The son or daughter could choose to stay on in the property and there was nothing the landlord could do to remove them from the property.

Rental properties were therefore difficult to sell as they would have to be sold with sitting tenants and this created downward pressure on the house value. Additionally, if the tenant felt that the rent being charged was unfair then they could apply to a rent tribunal to review the rent who would then look at market comparable rents, which was usually council houses and often impose a lower rental figure which the landlord was legally bound to honour.

The only mortgage products available in those days were through building societies and they only lent to private individuals for private residency. After all that was the founding principle of building societies and you had to be a saver as well as a borrower with them. I remember a very uncomfortable interview with a building society manager when applying for a mortgage in the 1970’s when he demanded to know why he should lend to me when I had only been a saver with them for a couple of years.

There was however an alternative rental market that was more favourable where homeowners would let out rooms in their house by taking in a lodger who would often share a room and have breakfast and dinner provided for them.

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Then there were furnished lets multiples most popular with students and young professionals. This was where a single room was let out in a property and was the model I pursued in the 1970’ and early 1980’s. This most closely resembles HMO’s today. However, mortgages were still not available for these properties other than commercial loans at high interest rates.

This was in stark contrast to the rental market in the US which was and is predominantly private landlords who rent out at commercial rents that cover all cost and make a good cashflow. These are single family homes and apartment complexes with managers on site to look after all aspects from finding tenants, collecting rents and with their own dedicated maintenance staff and in the more upmarket complexes providing concierge services.

Jim J Davidson
Jim J Davidson

Property Developer, Trainer & Coach, Jim's first property investment was an HMO in the student district of Edinburgh in property in 1973. His company Fyneside Developments Ltd. began developing new build residential properties in 2005.

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