We all agree something must be done about rents

It was a bit of a surprise when Andrew Neil on Sunday Politics announced that Labour was ‘split’ on the issue of rent controls. His view was endorsed by his panel of journalists. A ‘big split’ and a ‘50/50 chance’ that Labour would adopt rent controls was the view of Helen Lewis of the New Statesman.

There doesn’t seem to be a lot of evidence for the split story apart from the happenings at Saturday’s Fabian Conference. According to LabourList, a ‘Dragons Den’ style debate led to rent capping being voted by far the most popular policy, and Shadow London Minister Sadiq Khan reportedly praised plans for a rent cap and suggested that it’s something he’d support Labour doing. LabourList comment: ‘Rent controls aren’t currently Labour policy – but it’s unlikely Khan would have endorsed this without speaking to Miliband first.’ Instant rebuttal often feeds the initial story, so it may not have been wise for shadow Housing Minister Emma Reynolds to tweet immediately and emphatically: ‘To be clear.. it is not Labour party policy to introduce rent controls’.

From little acorns big media stories damaging to the Labour Party grow. Of course, no-one ever defines the terms they are using. To the right, ‘rent control’ means a bureaucratic monster with the state setting all rents thereby destroying the market. To the left, ‘rent control’ often means preventing landlords from exploiting shortage by charging rip-off rents that destroy household budgets and push up the housing benefit budget.

The future of the private rented sector was carefully addressed and researched for over 2 years by Jack Dromey MP as shadow Housing Minister (until the last reshuffle). There was a lot of consultation with the sector, several papers were published, and an intelligent, workable and balanced policy to modernise the sector was emerging. No horses were being frightened (although donkeys were inevitably braying). On rents, Dromey always said that he was looking at alternatives based on European models of longer-term tenancies and  indexed rent increases. He always made clear that he was not talking about traditional rent controls, but a new model that works for both landlords and tenants based on making rents more predictable.

This was an important development and good evidence-led policy making. For many years Labour put the private rent free-for-all firmly in the box marked ‘too difficult to tackle’,  despite the basic idea being very popular in the Party. It was hard to challenge the  conventional wisdom that the last rent control regime caused huge disinvestment and that it was a good thing when the Tories deregulated in the 1980s.

There is a common understanding across the political parties that the only real way to bring market rents under control in the long term is to moderate house values in relation to incomes, which can only be done by building many more homes. However, even with a fair wind it will take a decade or possibly a generation of building at more than twice the current rate to have the desired effect. So the issue remains: what should happen to rents in a period of great shortage, when exploitation is rife?

We have shown before on Red Brick (for example here and here) how the countries with the most successful private rented sectors, like Germany, have a culture of long-term investment in residential property and have accepted the reasonableness of state influence over rent increases and stronger consumer protection through longer tenancies and security of tenure. Germany has strong rules against ‘usury’ which it might be useful to replicate in the UK.

It is vital that Labour continues its policy development in this area. Just like the 50p tax rate and the energy price freeze, ‘doing something’ about rents would be hugely popular amongst voters even if it would be bitterly resisted by some vested interests.

For Ed Miliband, the challenge is that high rents are a big contributor to the cost of living crisis. A London Assembly report last year showed that in two-thirds of London boroughs the cost of private renting exceeded half of average wages. Moderating rents should be seen in parallel with policies to tackle low pay and utility bills.

Like it or not, we will be dependent on private landlordism for the foreseeable future. But private renting has to be modernized, professionalized, and properly regulated. And, just like utilities or transport, rents should be subject to fair rules of consumer protection.

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4 Responses to We all agree something must be done about rents

  1. Paul Smith says:

    The ending of rent controls in 1989 is one of the contributing factors to the rise in the housing benefit bill. Bringing some balance into the private rented market including a degree of control over rents is essential. It may mean that some private landlords sell up and return some much needed housing into the home ownership market, which would also be a good thing and could even bring some order back to house prices.

  2. KevinRCarter says:

    I would love to see rent control introduced into the UK private rental sector. Especially now we keep being told that we will have to become a “nation of renters.” We have a situation now where in many areas a private rent is more than a mortgage. I have a theory about how the 90s by-to-let boom is partly to blame for the huge rise in house prices, but won’t hijack your blog post which is a very interesting read.

  3. It was notable that at the Fabians #FAB2014 conference last weekend there was a huge majority vote in favour of imposing rent caps. My response at the time was to assume that most of those voting in favour have no knowledge of the history of consequences of rent control in the UK (Rachamanism, even further diminution and decay of the private rented stock) etc). It’s good that in this piece there is emphasise on the research and thought that Labour has put into this policy area – because it is strategic leadership and effective policy-making that’s needed and not totems of lazy, punitive and counter-productive legislation (like the return to he 50p top tax rate).

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