This tweet was published by the Equality Trust (whose work I recommend) yesterday:
The overwhelmingly clear message is that the rate of inflation for those on lower incomes - many of whom will be private renters - is much higher than the reported rate of inflation for the UK as a whole.
The reasons are clear. First of all, the rate of inflation on essential items like food remains above CPI as a whole, as Office for National Statistics data makes clear.
Second, and as I noted here this week, rents are currently rising at a rate equivalent to the overall rate of inflation suffered by those living in private accommodation i.e. by in excess of 9 per cent at present.
There is one organisation to blame for this horrid and unjustified as well as unjustifiable resulting increase in inequality in the UK, and that is the Bank of England, whose interest rate policies directly impact rental housing costs and so the increasing poverty of those who live in it.
I am unapologetic for being angry about this. The policymakers of the Bank of England live in considerable comfort and security. Their salaries guarantee that. So does the extraordinarily generous Bank pension scheme. Apparently, they cannot see beyond that enclave of privilege in which they live, let alone care about the impact of what their policy has on those least able to cope. Nothing excuses that.
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Worth pointing out that there will be many landlords with small or no mortgages who will be happy to put their rents up despite their costs not having increased
In the USA this rent increase is referred to as the “Free Market System”. If one rent goes up then all rents go up.
Well said. I know of at least one!
It also has to be said that while mortgage rates will fall for homeowners at some point when interest rates do fall (I suspect before the election), it is highly unlikely that rents will fall. I have never known a landlord to reduce their rent when IR’s are falling! Never. Rents going up are seen as a one way ticket. A gravy train that I think was part of the Tory plan when they sold off affordable to rent council housing and did not replace it.
I think that at a very fundamental level, if you are a tenant/renter in the UK, you are now treated as a second class citizen. There are no politicians fighting for you (other than the Greens as far as I can see). They never talk about affordable rents, and there is never any concern or help for renters, unlike the mass hysteria of politicians about mortgage rates going up. No concern about rising rents at all, about landlords milking the system for all they can get. The only time tenants got some brief help was during the early days of covid. Of course, that ended.
https://www.gov.uk/government/news/housing-secretary-extends-support-for-renters-during-pandemic
“Make housing more affordable
Though it feels like the cost of everything has rocketed all at once, the cost of housing has in fact been rising more than it should have for decades, and successive governments have done little to address it – which means we’re now dealing with a housing emergency and a cost of living crisis at the same time.
This is unsustainable.”
https://england.shelter.org.uk/support_us/campaigns/cost_of_living_crisis
Rent is also underrepresented in any inflation index, even though as a % of what people pay each month, it is a huge burden for those stuck in the rent trap. And, if you don’t get on the property ladder, you have a life sentence of rent burden. But how do you get on the homeownership ladder, given the British obsession, promoted by the Tories, of house prices always going up, usually many times the rate of CPI inflation and wage increases?
Since 1979, the Tories have historically failed to deal with housing crisis, after crisis. Labour also failed under Blair/Brown/Prescott. Forty-five years of failure. Not a surprise where we are today.
Currently, around 30% of Tory MPs are landlords, which probably explains why the no-fault eviction ban keeps being dropped. The Tories can pass laws in five minutes that put money into the hands of their backers, but help for tenants? Zero. The only reason the Tories are concerned over housing now, is because most young people are priced out, relatively low paid, paying a massive rent. They hate the Tories. Polls show that hardly anyone under the age of thirty will vote Tory.
Unfortunately, Labour are just as bad. Starmer wants them to be the party of homeownership, when they should be the party of affordable rents. Lab and the Tories currently have plans to build 1.5 million homes, which I doubt will happen, because they have always failed in the past. But imagine if that plan was to build 1.5 million homes to rent?
The Green Party are the only ones that I can see who want to do something about rents. To challenge the status quo of ever higher rents.
“The Green Party of England and Wales is calling for more funding to help councils build homes and say they would introduce rent controls in areas where prices are high.
They also highlighted a long-standing Green policy to abolish the right for tenants to buy their social home, introduced under Conservative prime minister Margaret Thatcher.”
https://www.bbc.co.uk/news/uk-politics-68732007
I think the Bank of England are part of the problem, but again it comes back to the political desire to actually see the problem for what it is. We have had 45 years of failure. When it comes to such a basic need, the free market is not the answer in isolation, because it will use that “need” to simply make as much money as possible, and that is what we are seeing.
I’d like to think something different will happen after the Tories, but I doubt it.
You are right on many issues, most especially on rents not falling and the under-representation of rent in indices, meaning they cannot indicate the true infaltion rate of those who rent.
How about another radical no cost idea for Labour a Rent Freeze and Security of Tenure for private tenants?
I suggested this during the Covid era – saying it was essential if society was to recover from that problem
Temporary rent freeze, I hope. All the analysis of rent-protection programs I’ve read show the same conclusion: it’s advantageous only to those who are there at the start of the freeze period, and has no real long-term effect on non-rent-protected homes.
Regarding tenant tenure, I agree it should not be possible to turf out tenants who paying their rent on time.
As someone who rents out two rooms to lodgers, I am frankly embarrassed at what we can charge in Cambridge. We do keep our rents at the low end of what are the going rates around here, but it’s still ridiculous.
I am aware, from students
What I find especially shocking about these findings is the fact that the level of food insecurity for *social* renters is almost double that for *private* renters – and the rate for private renters, 16 per cent, is dismal enough.
What could account for this? Surely not that social renters pay a much greater proportion of their income on rent (even with service charges factored in)?
I do not know
“What could account for this?”
I would suggest that:
Social renters are occupying family homes mostly, private renters cover the whole gamut of household composition and size.
It isn’t the fact that they don’t care that matters; but the fact that they are making political policy without even being in Government, and are not answerable to the electorate. Power without responsibility. Blow £30Bn on an LDI fiasco? No matter, carry on regardless; we have been dong this since 1694. Never been collared yet.
The BoE used to have the privilege of operating as the Government Bank and a private bank, making profits on its own account. It is a miracle we survived that solution, even in the eighteenth century. Now it is Government owned, it operates with the special privilege of effectively making economic policy for the Government by proxy, without let or hindrance; no questions asked; nods and winks come free. It is a miracle we survive this solution.
According to the Government, Parliament, politicians, economists, bankers, and Britain’s execrable Press – the BoE know what they are doing: but they don’t, and that can be proved, on the basis of their atrocious and clearly identifiable, well documented record of failure. But it makes no difference, because Government, Parliament, politicians, economists, bankers and Britain’s execrable Press – have no idea what they are doing either, and most definitely understand nothing whatsoever about economics; which is why they are all so keen to palm it all off on the BoE (and still claim ‘credit’ when the system doesn’t actually fall over).
Sunak takes credit for the UK fall in inflation, which he also attributes to the BoE (have you cake and eat it). The fall in inflation has nothing to do with the BoE or Sunak (they didn’t see it coming and knew nothing about it when it blew though them, like they weren’t even there); it was an inflation spike for reasons Richard had recounted here many times. If anything the BoE is keeping inflation higher in the UK than it would be without the policy.
Why might I say that? What evidence might we consider in such a difficult area (beware the BoE always over simplifying the issues to inflate their supposed insight). One simple usable check (a first level check, not comprehensive insight – there are none), is to compare us with a fair comparator – the EU. EU interest rate is 4.5%; UK 5.25%. Inflation of UK and EU comparison?
“UK inflation, as measured by the CPI, was 3.4% in the year to February, down from 4.0% in January and the lowest since September 2021. In February 2023, UK inflation was 10.4%. EU inflation was 2.8% in February, down from 3.1% in January. In February 2023, EU inflation was 9.9%” (House of Commons Library).
Draw your own first impressions. That was done in haste, but it should provide a starting point for reflection on just what sort of expertise the BoE is offering, and whether it is fit for purpose. Start from there, and convince yourself, if you can…..
What school of economics do the members of the Monetary Policy Committee adhere to? Mainstream economists no doubt – do you call them neo-liberal or neo-classical on this blog?
They think neoclassical
No one on the right admits to being neoliberal
Pardon my ignorance, but does that mean that neo-liberal is a subset of neo-classical? Thatcher and Reagan started out with neo-classical, which is essentially the belief that money is the only measure of value required and markets should be free of all interference or control? Isn’t Tufton St, Truss etc all neo-liberal ideology, while the BoE governors are neo-classical?
Neoliberal is a term used by those mainly on the left to describe a right of centre mindset
They don’t agree it
Is that so hard to understand? There are ideological disputes in play here.
Well actually yes. But I think I’ve grasped it. Wikipedia has an entry in its Economics series on neo-classical economics with an academic description of the fundamentals of neo-classical theory, while it has an entry in its Politics series and its Capitalism series on neoliberalism, mentioning “The term has multiple, competing definitions, and is often used pejoratively.”
Yes
I think Hayek is the gatekeeper of neoliberalism.
Surely Neoliberalism is money extraction at the expense of moral values.