I have published this video this morning. In it, I argue that millions of people living in private rented accommodation are still facing well over inflation-rate rent increases when increases in wages are falling dramatically as most inflation does as well. This penalises those living in that accommodation in a grossly unfair way. Labour could cap rent rises so they must be less than the rate of inflation to control this. It's time it did.
The audio version of this video is here:
The transcript is:
Labour likes to claim there is no money left, and therefore, its scope for action, now it's in government, is very restricted.
I don't agree. I am producing a whole series of videos explaining how Labour could change the well-being of millions of people in the UK simply by changing the laws that govern us in ways that will impose very little cost on it, but which will deliver major benefit for the UK.
Let me provide another example. There are very large numbers of people in the UK, most especially younger people, who live in rented accommodation. And the rents on that accommodation have risen dramatically in recent years, largely as a result of the increase in interest rates imposed on this country by the Bank of England.
At present, rents are rising by an average of at least 7 per cent a year, but we know that inflation is heading back to between 2 and 3 per cent, and wage increases are therefore going to fall back to that sort of level as well in due course.
That means rents as a proportion of the net income after tax of very many people in the UK are going to rise at rates that they will find very difficult to pay because those who live in rented accommodation tend to be amongst the lower paid.
This is deeply unfair. Labour could do something about this. It could set a cap on rent increases. An annual rate of increase that was less than the current rate of inflation would be what is required. And if at the same time, and this will be the subject of another video, Labour stopped no fault evictions of those who are in private rented accommodation, then it would not be possible for landlords to evict people so easily to get round this regulation in that way.
We need to protect people who live in rented accommodation. It is unfair that they are bearing the brunt of the anti-inflation policy of the Bank of England to no real effect at all with regard to the rate of inflation that we're actually suffering, enjoying, or whichever way you look at it. The fact is, Labour should be stopping these penal rent rises.
Come on Labour, it's within your power to make this change for large numbers of people in the UK. Please do it now.
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Would this require primary legislation? With 38 bills announced in the King’s Speech, this session of Parliament is already the most crowded in recent times. I can’t see any hope of doing much extra, so perhaps we have to accept that anything more will have to wait until next year?
I am setting out possibilities. Five years are available.
I suggest that abolishing S21 evictions has to come first.
I would also suggest that making landlords liable for Local Authority costs for illegal evictions and unfit properties might raise Governments game a bit.
Labour should be doing the things they promised in their manifesto, not random things that have never been discussed with the electorate nor which would be approved by the wider population. It would be undemocratic.
You do know that 98% of what any government does is not in its manifesto, don’t you?
It is appropriate to prioritise manifesto commitments in the early part of this Parliament; there will come a time when there is scope for new initiatives, which is when pressure will bear fruit.
How many peoplem read the mmanifesto?
2?
Do landlords ever decrease the rent, I wonder, when their mortgage payments reduce? I think I know the answer.
I think you do
An article covering the discussion and referring to many studies showing rent caps do not work.
https://www.economicsobservatory.com/does-rent-control-work
By those who do not want them to work…and whose opening assumpion is that they do not
All these authors have considerably more knowledge in this area than you!!
Show me where rent caps have worked?
If you define a rent cap as a market failure of course they fail
If you define them as a mechanism to stop market abuse you get a different answer
It all comes down to tour prior assumptions. You assume I am wrong. You chose authors who agreed with you to confirm that. I disagree with you and them.
So you cant provide any examples of where price caps have worked..I thought so…where they have been tried they make the problem worse and soon get reversed.
Others have already done so
@ Paul Madely
During the 70s we had ‘Fair Rents,’ a simple assessment process, with appeals and tribunals which all worked perfectly well.
Rent controls actually work very well, if constructed properly.
Actually, the report you linked to says that they do work. It then tries to hide this by reporting problems affecting properties outside rent controls. Of course, if rent controls are nationwide, those problems disappear.
As mentioned above, adding this to outlawing no fault evictions and enforcing minimum standards would benefit the majority.
As with any policy, there will be winners and losers, but sometimes “difficult decisions” have to be made, where the many benefit rather than the few.
Regards
Another way is to build more social housing. At the moment there is very little available which means that private landlords have no competition other than with each other. I used to own two one bed flats which I let out for £625 a month in 2014, but the estate agent tells me that they are now getting £900 for them and there’s no shortage of applicants.
And do away with Housing Associations, too, which are able to jack up “rents” by charging what they like for service charges. A local one which I have investigated is supposed to be non-profit making but its accounts show large annual “Operating Surlpuses” and meanwhile the CEO takes home a quarter of a million pounds a year. I don’t suppose a local authority Housing Officer would get anything like that.
Thge alternative is for the state to buy housing at kncok down prices after capping rents
I’m not sure I agree with that. Tht buys into the perception that all landlords are very rich people who make a killing out of extracting large amounts of rent from their tenants. But a lot are very ordinary middle-earners who are simply using property as a way of investing money they have saved or inherited. I’ve certainly never regarded myself as rich, and used an inheritance for what, I hoped was wisely, by putting it into property rather than the Stock Exchange. So forcing people like me to sell up at what might well be a loss is not good IMO.
Hang on – I am saying capping increases at infaltion
How does that force sales at a loss?
The state should deliberately cause a fall in prices and then capture assets cheaply?
And you call others facist!
But you’re entirely happy to take all the upsides of the massive state subsidiy for rents in universal crdit without expecting questions to be asked or control to be sought?
Politely, stop being stupid
From The Independent:
https://www.independent.co.uk/voices/rightmove-housing-crisis-rents-affordable-homes-shelter-b2583867.html?lid=zxb037yre7mh&utm_medium=email&utm_source=braze&utm_campaign=Tube%20stabbing%20Breaking%20Newsletter%2023-07-24&utm_term=IND_Breaking_Newsletter
How would a rent cap work if insurance rates rise by 20% (as they have in the USA) plus prices for building materials and labor rise by 15-20% (as the have in the USA) increasing routine maintenance costs thereby increasing the overall carrying costs for a rental property?
Fair question. All regulation can be varied by a wise government if needs must.
Richard, Thanks for your response.
You did say “knock down prices”.
If the state capped rents which then made letting property unprofitable landlords would sell up, causing the market to be flooded with a consequent drop in prices. Maybe lower than they were when purchased. There’s a misconception that landlords made huge profits on letting, but in truth the margins are very tight. I’ve been in the business and had a number of landlords and management companies as clients so I think I know. I’m currently in the process of selling a flat as administrator of a will and we will be hard pushed to make back what the legator paid for it four years ago. Prices are falling right now.
Margins are defined by gearing in this sector
Interest is therefore what creates losses, not rent controls
And pre interest margins are high
I have to disagree with you
You are right that geering is a strong factor in the rental market, which is why rents are rising in lockstep with the BoE. Not, of course, in the case of the very rich who don’t need to borrow to buy. So why do you want to cap rents that are rising in an attempt to preserve margins? Interest is the largest expense for any landlord, and now they can’t even claim it against tax unless they incorporate. In my experience, those margins are not as high in the first place as you maintain. Maybe in London, but not here in Bournemouth or, I would suspect, in Ely for that matter. By and large the ultimate return on rental relies on the increase in the value of the property, and meanwhile it is a struggle to pay the mortgage.
People who take out mortgages to buy properties for rent are taking a risk.
Their ultimate goal is for the property to be paid for by the tenant (or the state if housing benefit is involved)
If the risk isn’t worth it don’t take it, but anyway don’t blame rent caps.
Linda Heap
If you are referring to my comments I am not suggesting that landlords should have their investment protected. As you say, that’s a risk you take, much the same as buying shares on the stock market. What I am saying is that landlords will seek to protect their investment – why wouldn’t they – and if rent caps mean the property is no longer financially viable they will simply sell up and invest in something else, then there won’t be any to rent. It’s already happening. There is such a shortage of private rental property that estate agents typically get 20 applicants for every property and can choose the one they think has the best chance of paying the rent and the least chance of presenting problems going forward. They are expecting a demonstrated annual income of 30 times the monthly rent or two cast iron guarantors. There is even gazumping going on, where desparate applicants offer a higher rent than the one advertised to secure the property.
Rent caps are not the answer. More local authority housing is; at affordable rents which would bring down rents generally.
Richard. Sorry to keep banging on about this but it’s close to my heart and I do know a lot about it.
The properties won’t disappear if private sector landlords sell up, Nigel. They will still be there, either let out by somebody else who can make a margin on the lower price that they have paid, or available for sale at people at more affordable prices. A rental cap will not create a letting Crisis.
All I can say is that isn’t what I’m being told by my contacts in the business. I did phone one of them before posting the comment to check nothing has changed. It has – for the worse. But we won’t ever find out who’s right because this government is highly unlikely to introduce rent caps in the current term.
Where I disagree with Labour’s policy, is that their emphasis appears to be on building houses to buy, yet they have no real plans to address the affordability problem.
What they should be doing is building to provide affordable homes to rent. Either building, or buying properties (from say landlords who sell up), or taking action on “empty homes”.
https://www.actiononemptyhomes.org/facts-and-figures
Lab’s current plan is to “build” 1.5 million new homes over the next five years. Basically, it is the same plan the Tories had. I believe this figure includes what would be built in that time anyway. To get to 1.5 million, you have to ask, are there the builders and skilled workers to do it? I doubt it. I mean, does the state or local authorities have their own builders any more? Or do they contract out the work to private builders? I’m sure it is the latter. Is the building industry actually capable of building 300,000 houses a year?
It is also a fact that Lab in government are just as bad as the Tories – worse, actually. New Labour did not improve anything, Blair/Brown, had an appalling record.
https://fullfact.org/economy/who-built-more-council-houses-margaret-thatcher-or-new-labour/
“The official data shows that the Blair and Brown governments built 7,870 council houses (local authority tenure) over the course of 13 years. (If we don’t include 2010 – the year when David Cameron became PM – this number drops to 6,510.) … the record of Mrs Thatcher’s government, which never built fewer than 17,710 homes in a year.”
When it comes to the rental market, I think it is a reasonable suggestion that rents be capped at cpi level. The question is though, like many things with the rental market, how would this be policed? I’ve always found that landlords find ways around laws, usually by relying on the ignorance of the law from tenants.
Personally, I think that all landlords offering flats, houses, houses/rooms in multiple occupation, properties classed as student lets, should be required to have a licence to do business. There should also be a landlords register. For example, in order to get the licence, a landlord would be required to provide accommodation that is fit for purpose. For this to work, it would need to be policed, say, inspections of properties every 2-3 years. Given the appalling state of some private rentals, what’s to stop Lab doing this?
“The expansion of the private rented sector (PRS) has focused attention on the need to improve conditions. The English Housing Survey (EHS) estimated that in 2021, 23% of PRS homes did not meet the Decent Home Standard – around 1 million homes.”
https://commonslibrary.parliament.uk/research-briefings/cbp-7328/
I know landlords, especially the dodgy ones, would hate being regulated and “policed”, but surely the good ones would have nothing to fear in it? Compared to similar sectors, (ie) hotels, bed and breakfast accommodation, I think private landlords have it too easy.
I doubt Labour are brave enough to do what really needs to be done, though.
Thanks
Repost as it fits better here:
https://www.independent.co.uk/voices/rightmove-housing-crisis-rents-affordable-homes-shelter-b2583867.html?lid=zxb037yre7mh&utm_medium=email&utm_source=braze&utm_campaign=Tube%20stabbing%20Breaking%20Newsletter%2023-07-24&utm_term=IND_Breaking_Newsletter
I agree
This has to happen
But so too do rent controls – because the affordability situation is out of control