GOVE’S LEVELLING UP PLAN FALTERS OVER LANDLORD CLADDING REMEDIATION CRISIS
Currently, Michael Gove is looking to push through Building Safety legislation on leasehold properties that are defective, thought to be numbering around 800,000. On the surface, tackling the remediation issues caused by cladding is a noble cause. But apparently, if you are a professional landlord, you are going to be footing the bill yourself.
In what is definitely not a levelling up strategy, Gove has gone on record to say that the accidental landlord or a person who lives in a leasehold property will be protected under a new Act.
However, as Gove puts it: “If it is the case that a landlord has a string of properties then that won’t be, but it will be the case that the overwhelming majority of those who have been affected and concerned will be protected by the legislation we will be bringing forward.”
To make his viewpoint clear, Gove also stated that, the aim is to ensure they’re not in a position where they have a “runaway commitment to people themselves who are of significant means.”
He believes that the rich professional landlords have the means to look after themselves, which at an estimated cost of £15,000 per property seems very unlikely.
I had hoped that Gove would not take a populist stance over a matter that, in the main, stems from developers who have constructed substandard dwellings, snaring millions of people in a position where their safety is at risk and the properties can not be sold, leased or mortgaged. No stakeholders wanted to find out their housing was defective, so now the government is looking at a two-tier approach as to who pays for what.
Interestingly, one out of every six MPs is a landlord. One in four of Conservative MPs are landlords. Some even have a portfolio of properties, so it will be interesting to see which way they vote, won’t it? Or will their vested interest make it all the more obvious?
On another level, it makes no sense that a universal problem caused by developers should be a financial burden for people who have decided to own rental properties as a business venture. Common sense in the form of Lord Naseby and his amendment asking that all leaseholders be treated on a level playing field exists, but there is no certainty that the final bill will see any such amendment.
Separately, though connected as all things are in this government, Gove is running the clock down for the developers who he wants to put into a fund, voluntarily, to help with the cladding crisis. With only a few weeks remaining the lack of impetus so far from the new homes developers is showing that the government may need to mandate this too.
The outcome may be that fewer homes are built, and those that are will be higher in value, which of course means that first time buyers will be directly in the firing line; the same people that Gove and the government want to look after as they talk up homeownership as a right for all.
Gove’s position on getting cash from developers is also going to prove difficult as there is a realisation that a number of developers are actually set up offshore, so it may be difficult to bring them to the table.
What all of this tells us is that housing is a very delicate ecosystem, and if ministers or secretaries of state start to make pantomime villains out of super-rich landlords and super-rich builders, it might generate a great soundbite but it does little to help people at the sharp edge – those in property unfit to be, or those professional landlords in the firing line for direct remediation costs resulting in rent increases for tenants.
WHAT LESSONS CAN BE LEARNT AS PROPTECH HOWSY RUNS OUT OF CASH?
Howsy, originally named No Agent, which pivoted from being a service to sell property without a traditional agent into a letting ecosystem where tenancies were digitally let and managed at a lower price point, is now probably being acquired by a traditional agency as it has run out of funding.
Having burnt through the thick end of £7 million in seven years, some of the cash being used to buy at least one other distressed digital lettings concern, there are several things that have become apparent.
The first is, and this comes from my day job having met hundreds of property technology and fintech founders, if your original commercial ideation is flawed, however much cash you raise at subsequent funding rounds, the business will fall over at some point.
The second thing is, and this comes from having had now almost 100 founders of property technology and fintech founders as clients, it is really simple to get funding at an early stage via peer to peer lending or crowdfunding if you strike upon a problem or pain point that resonates with the general public.
In this case, the founding team of Howsy had a simple proposition; buying property via an agent is rubbish, we can do better, invest in us and our technology will make it a seamless process, deep joy for all.
Well, I totally agree that the transaction of property is slow, difficult and stressful, but the causes are legal and financial, and less so on the actual agency side. Replicating the myriad processes carried out by humans using coding is very expensive.
The third thing is that once a startup has some capital and moves forward to execute, at this point they realise that everything is far more complex than they imagined. As the months pass and the cash runway gets eaten up, a pivot – the polite expression for completely changing the original plan– comes into being. In this case, buying up other failing ventures to gain critical mass.
The last thing that is apparent is that digital transformation of real estate is happening, like it or not, and the new SMEs springing up in 2022 are not rooted in the mash and grab tactics that start-ups of five years ago employed.
There are literally hundreds of agile, well-thought-out solutions to big and small problems within the property industry. Laser-focused founders and small teams of developers are beavering away on them at this very minute, which will provide real efficiencies and improve the user experience of all stakeholders.
I know this as in my day job as a consultant helping proptech founders to grow and exit, I get to meet over twenty new founders every month. The whole sector is maturing, with over 11,000 property technology enterprises big and small around the globe, plus thousands in the fintech space adjacent to property.
Digital is going to power how we do property, just as digital runs the rest of our lives. It is inevitable that real estate will have digital embedded in it, much like banking went through a decade earlier.
So, the sooner founders start planning solutions that are not disruptors but actually take the time to drill down to real problems that need great solutions with a huge commercial win, the better for all, including the general public who blindly follow the next great idea, with little protection if things go south.