Building to let

[Tim Lund]

The general view of buy-to-letters is not great, but I wonder how people feel about builders to let? I ask because of this I saw recently on the BBC

Insurer Legal & General is looking to become a major landlord in the UK's residential housing market.

This makes sense for such a company, a key part of whose business is selling pension annuities - i.e. promises to pay retirees a regular income for as long as they live. In fact, the law is that at least 3/4 of the value of any pension pot (over £18,000) has to be used to buy such annuitiesat the point of retirement, so it is a big business in which insurance companies have to compete

Your pension scheme pays your pension pot to an insurance company to buy an annuity contract. They will pay your pension to you for the rest of your life.

...

Buying an annuity on the open market gives you the opportunity to shop around so you can use your pension pot to choose the pension (annuity) that suits your needs. Pensions can vary widely in price so it's best to look at a price comparison website or the money section of a newspaper to make sure you get the best deal for you.

Your scheme must give you the option to buy your annuity on the open market.

I know at least five people who do, or have thought of renting out property as a way of financing their retirement, some embarrassed by the tax breaks they find come their way, one flippantly remarking that he and his wife would be able to live off lobsters in the west of Ireland. Whatever their attitudes, and regardless of possible short term fluctuations in property prices, like Legal and General, it seems, they see a steady long terms income from rents as a sensible way of matching long term liabiliites.

So, should we welcome Legal and General getting involved, when we don't generally welcome buy-to-letters? For me it comes down to three main factors:

(1) will they be getting the same tax breaks as buy-to-letters?
(2) will they be better landlords?
(3) will they build better quality houses than those currently being built for onward sale to buy-to-letters?

There's also another consideration, which will appeal more to other people:

(4) will it mean that savings in UK pension funds get invested here, or overseas - which is what Legal and General is likely to have to do if it cannot find these sorts of investment opportunity here

From the way I frame the questions, it's probably clear that I think this is a good thing, but it's complex, so I'm interested to know what others think.

[Eagle]

Interesting Tim
I read this , or a similar article.

As you may recall against buy to letters who seem to be parasites against first time buyers. They drive prices up and then increase rent to pay them back.

This may be an improvement , but not really sure how.

Renting in London may be OK when you have a job , but what do you do when you retire or unemployed.

Other countries such as Germany do not have this problem as rents much lower and pensions higher. Double whammy.

[Tim Lund]

As you may recall against buy to letters who seem to be parasites against first time buyers. They drive prices up and then increase rent to pay them back.

This may be an improvement , but not really sure how.

Because they are building new houses, not just buying up existing ones.

Renting in London may be OK when you have a job , but what do you do when you retire or unemployed.

Other countries such as Germany do not have this problem as rents much lower and pensions higher. Double whammy.

Being unemployed is another question, and it's not as if society is going to sort out their problems by giving them houses to own.

Being retired is different, because you'd hope people who've not had significant periods of unemployment would have been able to save enough over their working life to be able to own their own home by the time they retire - which is more the German pattern. I know that here high rents make saving harder, and prices although prices are high also, they seem to be going ever upwards, so as soon as people can, they try to buy a house. But I really didn't want to go over all that again, but to ask what people's attitudes might be towards a major company, with a brand and reputation to consider, moving into the business of renting residential property, and whether people in regular employment could ever imagine not trying to buy as soon as they can scrape the mortgage together.