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What Would Jesus Say to the Buy-to-Let Minister

By William Ruddle.

“Freeloader”, “scum” and “bastard capitalist” are just some of the things I have been called as a Christian Minister who also engages in a Buy-To-Let property business. Simultaneously, however, Christian Ministers are often encouraged by theological colleges when embarking on ordination training to own a property while they live in tied accommodation, so that they have security in retirement. The Buy-To-Let market has increased eightfold since I was ordained in 1999. Has the landscape changed and what are the issues surrounding property investment for the church minister? This article seeks to explore some of these themes.

The Changing Landscape

Buy-To-Let as an investment phenomenon for private individuals began in the early 1990s with the market liberations introduced by the Nigel Lawson reforms of the late 1980s. By 1995, buying for immediate rent immediately commanded around 3% of the housing stock in the UK. By spring 2015, that figure has risen to 17%, a figure which both the Bank of England and HMG seem keen to reign in (as evidenced by the taxation changes announced in the 2015 budget effective April 2020). Thus, ministers owning a property while they lived in the Manse/Vicarage used to be a rare and `understood’ phenomenon that both society and the taxman recognised as being necessary. However, a second property appears to be increasingly becoming the preserve of the middle classes as they seek a long-term investment product that is safe from the ravages of casino bankers, pension fund raiders and sub-inflation levels of interest paid by High Street banks. While 17% of the housing stock is now in Buy-To-Let land, over 80% of landlords own 3 properties or less – i.e. the Wilsons of Kent (famed school-teachers who bought 200+ properties in the 1990s) are still a rare example. Most landlords are not big business multi-millionaires, but regular Joe’s (or Rev. Jo’s?). The chances are that, as a Minister reading this, you own a property somewhere you don’t live in. If not, it is almost guaranteed that one of your deacons, vergers or church wardens does. It seems therefore a Christian Perspective on such activity is urgently required.

My Context

All articles come from a biased perspective and therefore I probably should declare an interest at the outset. I was asked to write this article for MT following an interview that was conducted by one of the industry Buy-To-Let magazines.

My wife and I bought our first little flat in 1999 as we got married. Living in Bible college accommodation, the business manager at the college actively encouraged such a move to secure our future long-term, so that we would not become a burden on my denomination’s retired ministers housing scheme. Three years later, we moved into a pastorate that had no tied accommodation, but a generous housing allowance that HMRC allowed essentially to be tax-free in recognition of our office-holder circumstances. At the time, we sold our little flat, but as we moved `up north’, we had some spare capital that we knew we needed to invest wisely.

So we bought a little house around the corner and rented it to a succession of young people from our church who were not in a position to buy. A couple of years later, a distant relative was fifteen days from repossession and we stepped in to help – buying the property, so that she could then rent it back from us with the support of Housing Benefit to which she was legitimately entitled. Fifteen years later, we have moved 4 times and in each new location, we have either had to buy a property as the church did not own accommodation, or opportunities have arisen. We now have a portfolio of ten properties, three of which we have lived in as our primary residence at some point or another.

A road paved with gold - debunking the myths

Broadly, I meet two categories of people with widely diverging perspectives. The first are those who do not own multiple properties and consider the Buy-To-Let path to be paved with gold. The other are those with property and argue it’s a constant headache with little reward.

In my experience the truth is half-way between. In a typically un-British way, I am happy to bust the taboo of not talking about one’s personal finances. Our portfolio is currently worth about £1.4 million. I have over a million pounds worth of debt. For that 1.4 million pound of risk, we make about £30,000 a year profit – that’s about 2.2% - hardly stellar. Even if you take out the leveraging, we invest £400,000 of our own money for a 7% return - a healthy return, but most people would not regard 7% as criminal. And yes, if property prices go up we will benefit in the long term if we sell, but we will then pay 28% tax on the uplift in value, with no discount allowing for natural inflation. With the recent tax changes, we anticipate our portfolio will soon return less then 1% gross and less than 3% on net lending. Assuming you don’t consider these figures obnoxious, then you will recognise that Buy-To-Let is not a gross profiteering enterprise. Thus we must turn to the more thorny issue of the impact these 17% of properties have on wider society.

A Black and White Issue?

Very few issues in the Buy-To-Let arena are black and white. Those traditionally on the left politically see Buy-To-Let landlords as competing for properties that would historically have gone to first-time young buyers. They believe that the Buy-To-Let purchaser pushes prices up and forces ‘generation rent’ – either back home to Mum and Dad or into rented property where rents are often 10-30% higher than the equivalent mortgage would be. On the other hand, those on the right see Buy-To-Let landlords as providing the means by which a mobile, flexible workforce are able to move around the country with work and opportunities, no longer shackled by 25 year mortgages (a word derived from old French meaning ‘death-pledge’) and the risks that cyclical changes in the economy bring with regard to negative equity and stagnant housing markets.

The truth I suspect lies somewhere in the middle. Let’s take each point in turn:

Buy-To-Let squeezes out First Time Buyers?

Yes, Buy-To-Let tend to buy smaller properties as they have the greatest yield, but this masks the truth that most Buy-To-Let properties are in urban areas where demand for short term accommodation is highest and young people place a premium on flexibility.  Personally, I think it is a myth that Buy-To-Let landlords are in competition with young people. As a landlord, I have to put down a 25% deposit and, if I am lucky, I will get a mortgage between 4-5%. The equivalent young couple can put down a 15% deposit and get a rate of 2-3%, nearly half what I will pay. I pay commercial rates for a commercial enterprise. The truth is that the days of easy-credit are gone and banks don’t want to be burned again by residential purchasers who over-extended their credit lines in the period leading up to the 2007 bust. If there is a ‘competition’ element, then it may come from the new generation of ‘gran-lords’ – people in their 50s and onwards who have benefited from wealth accumulation or pension release and are cash buyers. Such purchasers are always attractive to a seller, but most ‘gran-lords’ seek to add capitial appreciation by purchasing run-down properties that would be unattractive to first-timer buyers who prefer new-builds.

Buy-To-Let pushes up prices?

This is one element that both sides agree on. Prices are dictated by supply and demand. The long term demand in the UK requires 450,000 houses a year. Successive governments of both political hues have failed to break through 150,000 per annum for over two decades. That’s right – we are 300,000 homes short per year. Do the maths and you soon realise it’s the shortage of 6-10 million homes that is pushing up demand. Furthermore, each landlord who buys a house immediately rents it out, thus removing one more person/couple/family from the pool of people looking to buy. Whether a home is rented or owned is immaterial when it comes to providing housing for people. Your children are not living with you because of Buy-To-Let landlords. They are living with you because your neighbours keep fighting all the housing developments in your town/village/city. Maybe a sermon on that might help when you speak on why your village/town is losing its sense of community.

Renting Stops People Saving a Deposit?

Yes, my tenants pay me more in rent than they would pay on a mortgage, but this is because every time the shower blocks, the cooker breaks, the walls need repairing, the fence falls down, the carpets wear out, the smoke alarm needs testing – I have to pay for a tradesman to come and fix it for them. Most of my tenants are two generations away from anyone who knew how to do proper DIY. I even have one tenant who requires me to change his lightbulbs for him and another who doesn’t know how to bleed a radiator (something required every autumn).

Renting Creates a Flexible Workforce?

While there is some truth to this, there are very serious downsides. I am very comfortable with Vilda and Libus from Lithuania who rent my bungalow. They are young, child-free and are over here working hard, paying tax and are not sure where they will end up. Meanwhile, I feel for Evelyn and Arthur and their three children who, as care workers in Essex, are unlikely to ever be able to gather the £15,000 deposit they need for even the smallest of houses. One man’s flexibility is another man’s instability. Until they came to me, they had been forced to move three times in five years.

Mortgages are less stressful than paying the rent?

For readers too young to remember the 1980s, a brief lesson in history! Rents are generally very stable. Even at their most volatile (last five years), they have only gone up by 4-5% per year, which is more like 3% after allowing for inflation. Compare this with mortgage interest rates which rose from 4%-12% in nine months in the late 1980s or even 2%-7% in 2006. I remember my domestic mortgage more than doubled in six months. Had the government not leaned on banks in 2008 and slashed interest rates, literally millions of our churchgoers would have been facing repossession, eviction and the stress of court ordered bankruptcy.

What would Jesus say to the Buy-To-Let Minister Landlord?

If Christian ministry is principally about modelling Christian discipleship (as I believe it is), then how we handle our finances is as important as how we handle the Scriptures. We live lives that are ‘out there’ on show. I was advised by my regional minister when I settled in my last church not to disclose that we had a buy-to-let portfolio as it will complicate matters. What he meant was that some people won’t like it. I listened, but lived to regret it. I ended up having to be duplicitous at times because I had not declared this interest of mine. I am now bolder and dare I say it, even proud, of the business I have built up over the last two decades.

I want to suggest to readers of Ministry Today UK that Jesus would be largely disinterested in how many properties we own, but far more interested in how we put them to use. “To him who is given much, much is required,” as it says in Luke’s Gospel. Housing, like money and nuclear fission, is morally neutral. How it is put to use is what matters. Make a bomb and kill 140,000, and you are a monster. Make a nuclear reactor and provide clean energy to save the planet and you’re a hero. Jesus was interested in what we do with the loaves and fishes we have and whether we use them in a way that glorifies God. Louise and I have a five-fold business plan that means I can sleep soundly at night and have this conversation in public without compunction. Here it is:

1. We tithe all our profits. At the end of each tax year we take the profits we have made and slice off the first 10%. What figure you use is up to you, but the principle is that we recognise that our income from property is something that God should have Lordship over as much as our stipend and salaries.

1. We rent at below market value. Yes, we could seek another 10% out of each tenant and that would probably double our profit margin, but we don’t need to in order to break even and so we don’t. This makes sound business sense, too, as tenants appreciate the good deal and pay their rent, look after the house and we avoid voids.

1. We treat our tenants well. That means when something breaks, we fix it immediately. When we fix things, we don’t go for the cheapest fix. When deciding whether to repair or replace, we will try and do what we would do if we were living there. If the tenant has a good history with us and runs into difficulty, we help out (we often allow the Christmas rent to come in late).

1. We offer long term tenancies with no early redemption penalties. After one year of successful tenancy, we offer all of our tenants up to five year contracts. Moreover, while they have security for five years, we offer them the chance to leave with just three months’ notice. We do this because we recognise that there is a power imbalance between landlord and tenant and we want to mitigate against this. Capitalism can have a friendly face and a social conscience.

1. We share our faith. I don’t mean in an evangelistic kind of way, but when a tenant is talking with us about our generosity, we will seize the opportunity to say that, as Christians, we believe God expects us to treat our tenants as well as we practicably can.

Now some people will consider our five point plans as being just a velvet glove on an iron fist. Obviously I disagree. Over the past fifteen years, I have found this approach to be a healthy balance of competing interests. Is it perfect? No, of course not, but I believe this approach can be a blessing to landlord, tenant and wider society in equal measures.

Christian Landlords – A Missional Opportunity?

Across the political spectrum, there is a recognition that the housing market needs reform. Renting is no longer a middle-class taboo, but the stories of abuse of power and of accommodation unfit for human habitation are increasingly common. There is an opportunity here for the church (full of middle-class affluent people) to seize the opportunity to role model excellent landlord practice, providing excellent quality, long term, secure accommodation for society. Against such landlords, there can be no opposition. My tenants are truly thankful that they have a landlord like me and as such it opens up an opportunity for all kinds of conversations of a pastoral and sometimes spiritual nature. Our bottom line is not purely a financial one, but a more holistic concern to see an appropriate return not borne on the back of exploited tenants. Can I imagine the birth of the Christian Landlords Association, members of which covenant to a standard that embarrasses the secular equivalents?

All of this can be summed up by what my Father, who was a commercial banker back in the days when it was a proper job, taught me: “Don’t rent something to someone you wouldn’t be prepared to live in yourself.” I think Jesus said it slightly more eloquently, “Do unto others as you would have done unto you.”