‘You can’t be friends with your tenants, bro, you’re a landLORD, not a landmate,’ instructs Tomothy, the older brother of JP, lead toff in Channel 4’s hit series Fresh Meat. To the unacquainted, JP, played by Jack Whitehall, is wearing a monogrammed stripy merlot and maroon dressing gown and his brother looks like a young David Cameron. Tomothy’s here to get JP’s housemates to pay their rent, because, of course, JP and Tomothy’s parents own the house.
It’s a great plot device - Vod, JP’s supposedly streetwise tenant becomes the world’s worst drug dealer in order to make rent. But it’s not all fiction, as this week Loughborough Building Society announced plans to introduce a ‘Buy for Uni’ mortgage. Using a proportion of the value of their parents’ home as security, a student can get a mortgage for at least 80% of a property’s value. The repayments are at a relatively high interest rate of about 4.6% and are made with the assistance of tenants in the form of other students.
In simple terms, if you’re a student, and your parents own a property and have re-paid over £50,000 of the mortgage then, bingo, you can own your own place. And your mates can become your tenants.
LBS, based in a town where students make up 28% of the population, is yet to lend one of these mortgages, but their canny idea comes from Bath Building Societywhich, incidentally, is also based in a city where students comprise 28% of the population.
‘Imitation is the sincerest form of flattery’ explains BBS chief executive Dick Jenkins. ‘About 10 years ago, we sent somebody out to studentville in Bath, a place called Oldfield Park, to see how we might be able to do some mortgage business there. A young lady came back and suggested a student mortgage.’
The ‘Buy for Uni’ mortgage now makes up 10% of BSS’s business, and Jenkins likes it like that: ‘It seems like a good level, we’re a small building society and we wouldn’t want all of our eggs in one basket. There’s a lot more interest in the marketplace than we’d ever be able to tap ourselves so I'm comfortable for other lenders to see the benefit in this.’
Jenkins outlines the benefits: because this property is in a first-time buyer’s name when it’s sold, the profit will be exempt from Capital Gains Tax (whereas the sale of a second home in the parents’ name wouldn’t). Also: ’We’re all getting to the point where our children need to inherit from us long before we die and this is a way we can, in fact, use the wealth in an older generation to help younger people onto the property ladder. There are potential benefits for all of us.’
When he says ‘us’, who exactly does he mean? BBS put me in touch with Natalie Tseu. A 20-year-old biomedical student at the University of Hull who owns a three-bed property nearby. She lives there and rents the other rooms - including a spare reception room - out to three friends.
‘It’s not something I try to announce to people, but It was quite easy to find people to live with me and they knew what they were getting into,’ Natalie tells The Debrief. ‘You hear stories that agencies take a long time to fix things but because I live there as well, any worries and I can straight away sort them.’
Natalie’s housemates make a joke of her landlord status, she says: ‘They’ll be like “Oops, I did this, sorry landlord!” and we all laugh about it’, but as for discrepancies in who pays what: ‘I pay the bills and I am fortunate not to pay the rent, so it’s just the three of them who pay it. It’s enough to pay the mortgage with a bit left over in case any damages have to be paid for.’
Natalie recognises how unique her situation is: ‘People always say what a good idea [Buy for Uni] is and it’s something I’m very grateful for as not many people are lucky enough to come by it. And I got the house because of inheritance, it’s a good idea to use that money wisely for an investment, instead of just spending it stupidly. It’s like a more grown up thing to do.’
But, with the average adult, let alone student, looking to own their first property by the time they’re way beyond 30, and half of all young people renting, might it be a little unfair?
Natalie’s mum, Helen Tseu, understands: ‘Obviously everybody’s circumstances are different, not many people can always come up with a deposit for a child going off to university, and obviously it’s an expense certainly for a kid to go to uni too. I was just lucky with my circumstances.’
‘My parents died around the time my son was doing his A Levels and I inherited some money and thought it would be something my kids’ grandparents would like to contribute to. They were always big on education.’
As for when Natalie graduates? Well, her brother, Matthew is 22 and also did Buy for Uni in Bristol before leaving to work for a year. He’s now returned to his student-bought flat for postgraduate study, but Natalie doesn’t see her future in Hull: ‘I want to explore different places and it’s almost guaranteed I won’t settle in that house, it’s purely an investment at the moment.’
And, should she move to London, well, that little bit of profit made on the Hull property will go towards alleviating her rent payments.
In 2009, BBS introduced ‘parent assisted mortgages’ and ‘mates mortgages’ for non-students and other first-time buyers. ‘We are somewhat expert at getting young people into the property market,’ Jenkins boasts. But not all young people, surely? ‘It does require the parents to have some equity that they can throw into the equation and that would generally point towards better off students,’ he admits. ‘We haven’t found a way of helping everybody, but that doesn’t mean we shouldn’t help those who still need help as well. I’d love to help more people, but the fact is there still has to be an economic equation that adds up.’
Our broken housing system means that social class has come to be defined by a binary of who owns property and who rents, and ‘Buy for Uni’ is a clear symptom of this. It’s easy to see how it’s happened: decades ago, property wasn’t in such hot demand, and now that it is, even humble abodes have matured into piles of untapped gold. And what parent wouldn’t want the best for their child, defending their investment on the basis that young renters are paying ‘dead money’ to landlords regardless?
However, well-intentioned as it might be, this scheme highlights that the haves and have-nots are becoming divided earlier on in their lifetimes. It wasn’t that long ago that students could, with a reasonable expectation of one day owning a property, study freely without being so intensely aware of their economic prospects. Things sure have changed.
‘The reality of our broken housing market is that it works for some people and not for others. Those with wealthy parents can get ahead of their peers and onto the housing ladder early,’ says Baroness Grender, the Lib Dem peer who has campaigned to make renting fair. ‘But everyone else who can’t turn to the Bank of Mum and Dad face a very tough struggle to save for a deposit and fear they’ll never get on the ladder at all. Nothing demonstrates the inequality in our society more than our housing system, and even at university, these differences are becoming increasingly clear. Until there is more investment in genuinely affordable housing this won’t change.’
The solution? Just as before: more houses, more houses, more houses. And in the meantime, make renting fair once and for all. Because when it comes to living securely and safely, even though some are lucky enough to become their own landlords, way too many adults are still left out of this imitation game.
You might also be interested in:
Are Help To Buy And Shared Ownership Schemes Screwing First Time Buyers Over?
Renters Are Still Waiting For The Government To Finalise The Ban On Letting Fees
Follow Sophie on Twitter @sophwilkinson
This article originally appeared on The Debrief.