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Opinion

Whisper it, but companies might make better landlords than people

As department store John Lewis says it will move into the ‘build to rent’ sector to protect its business, could corporate landlords be the future?

What with the pandemic and the lockdown and the recession, retailers haven’t had the easiest of years – and thanks to the inexorable rise of online shopping, many of them weren’t in the best of states to begin with. It’s of no surprise, then, that they’d be looking for new sources of income. What may be more surprising, though, is that some of them are looking to renters to get it.

Last autumn, John Lewisannounced it had identified 20 sites on which to build new housing, which it planned to rent out to provide long-term income. Its accounts for the last year showed losses of over £500 million, so it’s no wonder the company is looking for other ways to make cash. By 2030, the company said, it hoped that as much as 40 per cent of its profits would come from “non-retail” activities, with housing as a cornerstone.

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John Lewis is, if such a thing can be said to exist, a much-loved company, associated with employee shareholding and cutesy Christmas ads, and it claims its new homes will be “affordable”. Other companies may take a less cosy approach to getting into the landlord game. In January, Goldman Sachs (what’s the opposite of a much-loved company?) spent £150m on a build-to-rent portfolio in north west England. A number of shopping centre companies, like Intu and Hammerson, meanwhile, are also talking about moving from renting to retailers into renting to people.

This is a new departure for the British housing market, but it’s more common elsewhere. The USA’s corporate-owned housing sector has ballooned since the credit crunch, for uncomfortable reasons you can probably guess at. Less soul-crushingly, big companies have owned a big share of the large German rental market for decades. At any rate: ten years ago, the odds a rented flat you were interested in would be owned by a corporation were tiny; ten years from now, it could happen rather a lot.

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You might find the idea of having a corporation for a landlord pretty terrifying to contemplate, and your fears are unlikely to be soothed by the offputting way those guys tend to talk about it. “The existing imbalance between demand and supply should continue to support growth,” notes an advertorial by Legal & General Investment Management, placed inLocal Government Chronicle a couple of weeks back. “For investors… with long time horizons and a requirement for diversified returns, we believe the sector could be a compelling investment opportunity.” These guys don’t see tenants as human beings: they see them as numbers on a spreadsheet.

The idea of powerful corporations profiting from the fact so many Britons are locked out of home ownership feels gross, I know. But really – wouldn’t you rather have John Lewis for a landlord, than a buy-to-let boomer who can’t afford that boiler?

All that said, there’s a compelling case that companies may actually make better landlords than individuals with a couple of buy-to-let properties. Corporations, after all, are unlikely to claim poverty when a boiler breaks or the locks need changing. They’ll have the resources to deal with tighter regulation, rather than simply ignoring it, possibly bitching about it to tenants all the while. They’re more likely to invest from the long term; less likely to announce they’re selling a property on a whim. They’re unlikely to indulge in revenge evictions when a tenant complains or asks for a repair, either.

And they’re almost certain to have a sense of their legal responsibilities to their tenants – it’d be too risky and expensive not to be – which would stop them from, say, letting themselves into your home in the middle of the day with no notice, then to justify it on the grounds that they actually own the property, yeah?

In other words, a private rental sector with a bigger corporate presence is likely to be a much more professionalised private rental sector, in which landlords understand that tenants are a customer and providing for them is a job – as opposed to the status quo, in which some landlords seem to think tenants should be grateful for the opportunity to rent from them. It’s worth noting that Germany, with its huge corporate residential property portfolios, also has a much more functional rental market than Britain. The corporate presence is probably not the reason it works (longer tenancies and better regulation are probably a better explanation) – but it clearly isn’t a barrier.

There’s an Orwell quote that seems apposite here. “Ideally,” he wrote in The Road to Wigan Pier, “the worst type of slum landlord is a fat wicked man, preferably a bishop, who is drawing an immense income from extortionate rents. Actually, it is a poor old woman who has invested her life’s savings in three slum houses, inhabits one of them, and tries to live on the rent of the other two – never, in consequence, having any money for repairs.”

The idea of powerful corporations profiting from the fact so many Britons are locked out of home ownership feels gross, I know. But really – wouldn’t you rather have John Lewis for a landlord, than a buy-to-let boomer who can’t afford that boiler?

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