Today Ed Miliband rides to the rescue of ‘Generation Rent’ – taking the boldest of steps and bringing together a number of Labour’s big themes – by promising thorough reform of the private rented sector.
Tackling the cost of living crisis, taking on vested interests, intervening in a hugely dysfunctional market, extending the core rights of consumers, and tackling the cost of benefits by sensible reform – all in one new policy which matches his energy prize freeze as a spectacular initiative.
For years now, people have been saying ‘something must be done’ about the private rented sector, and now ‘something’ is on the agenda. It’s the right thing to do, it’s audacious, it’s imaginative, and it’s not before time. And it will come under sustained attack from the Tories and from the less enlightened end of the landlord lobby. Already the lead Tory buffoon Grant Shapps has called it ‘Venezuela-style’. He has apparently never heard of Germany or Ireland, where rules similar to these have been successful and led to a much more stable private rented sector. I suspect Shapps knows next to nothing about Venezuelan housing policy and is ignorant of the great success of the late Hugo Chávez’s Great Housing Mission, which aimed to build 350,000 houses in 2011 and 2012 – a target actually exceeded by nearly 25,000. Shapps can only dream of matching Venezuela’s housing achievements, or even those of Angela Merkel.
No other major UK industry has been left in such a mess for so long. Despite being a supposed ‘free market’, private renting is a major cost to the taxpayer: it benefits from a patchwork of subsidies, guarantees and tax reliefs and is the main driver behind the escalation in housing benefit costs. Encouraging private renting rather than building social housing has been one of the biggest policy blunders of the last 25 years. A hugely expanded sector is here to stay but it must be brought into the modern world where there is a greater equivalence between the power of the producer and the rights of the consumer. As with Labour’s energy reforms it is the role of Government to step in and provide regulation when the producer gets their own way for too long, benefiting both tenants and landlords although, crucially, not letting agents.
By making a longer-term tenancy the ‘default’ position in a letting contract (with suitable exemptions), with capped rent rises during the term, Labour is dragging the sector into the 21st century. Labour has learned from some of the more successful examples abroad, where private renting is seen as a stable long-term investment rather than a ‘get rich quick’ hedge bet. And before the Tories and the vested interests get their arguments running, let us be clear that this is not ‘old fashioned’ or ‘blunt’ rent control which is blamed for bringing the private rented sector almost to extinction in the decades up to 1988. It is a modern approach, tempering the market and cooling price increases whilst giving occupants – who increasingly are families with children – a greater sense of commitment to their home and some security on which to build the rest of their lives.
The three elements of the reform package are:
- three year tenancies to be the norm, with suitable exemptions (eg a mortgage covenant and students) and a 6 month probationary period.
- an upper limit on rent increases during a tenancy.
- scrapping extortionate letting agent fees to tenants, saving tenants an average of £350 for each letting.
Miliband plans to deal with some of the usual criticisms made of longer tenancies and greater security: that landlords may need to sell their property or may need it for their own use. These will be reasons for regaining possession, but ending a tenancy to get a higher rent (the letting agents’ favourite) will not be.
Ed Miliband said: “One of the biggest causes of the cost of living crisis in our country is the price of renting or buying a home. People simply can’t afford it, they’re priced out, saving for a deposit year after year, decade after decade, or having to look for somewhere to live further and further away from where they go to work or where the kids have always gone to school.”
Coming on top of the commitment to build 200,000 homes a year by the end of the next Parliament, and the growing interest in developing a strong ‘benefits to bricks’ policy to curb housing benefit spending, Labour’s housing policy is beginning to take shape.