“Labour’s rent controls” are nothing of the sort. Just redressing imbalances in the provision of a basic need. 

Leave a comment

April 27, 2015 by Paul Goldsmith

image

Pollsters released some interesting data just after Labour made their announcement on Saturday about the “rent controls” they are going to bring in should they get elected. It turns out that many of the top target seats that Labour are going for to take off the Conservatives have higher proportions of people renting than owning than constituencies they are are not targeting. So the Labour plans to legislate in the private renting market (which they actually launched months ago) are strategically efficient if nothing else. As to whether they will help make the renting market more efficient is being hotly contested. I have been very clear about my concerns in terms of Labour’s intended interference in the price mechanism, particularly in the area of energy. But, as someone (unlike many) who has read their proposals, and unlike many (some rather self interested who have distorted the substance of the proposals) think it is worth trying in a sector that is, let us not forget, providing a basic need for millions of people in this country. What you think about it could tie in with whether you think that peoples’ basic needs should be completely subject to the operations of the free market.

First of all, this is NOT rent controls. This is not a maximum price. This is not in any way like the New York system of the 1980s and 1990s in which the actual rents charged by landlords were capped. The actual rent agreed between landlord and tenant is NOT going to be interfered with. It is not surprising that Tories and supporting media outlets others have made sure to ‘confuse’ people over this. If you own a bunch of buy-to-let properties you are pretty likely to be voting (and probably donating) to the Conservative party after all. But to be very clear, the proposals do NOT set a maximum price on the rent.

What they do is try and rebalance some of the imabalances built into the current system.

Firstly, they are stopping letting fees being charged by estate agent to tenants. The estate agents work for the landlords, so only the landlords should be paying them.

Secondly, they are requiring landlords and estate agents to reveal the rents paid by the previous tenants. This is correcting the information imbalance that exists, and there should be no reason landlords should have a problem revealing that data. Making the market price more transparent should surely help the market operate?

Thirdly, they are making three year tenancies the norm, rather than one year tenancies, which gives some security of tenure to some of the 11 million people, and in particularly the 1.5 million families with children who rent.

Fourthly, and related to the third point, they are capping the amount the rent can increase each year of those three year tenancies to the rate of inflation (CPI). The final two moves redress an imbalance caused by landlords being able to end tenancies after a year so that they can put up rents by a much larger amount.

Fifthly, they are penalising ‘rogue landlords’ who allow their properties to fall into disrepair by reducing the tax relief that is available in which you can assign 10% of the rent to costs related to “wear and tear”. The thinking here is that this tax relief is to give landlords the money to maintain the property, and if they aren’t doing it, they don’t get the money.

The argument against this is that these moves will reduce the number of properties on the market available to rent. This criticism is based on the basic rules of demand and supply. If you reduce the price landlords can get from renting out a property then there will be fewer properties on the market available to rent. Firstly, they are NOT reducing the price landlords can get. Secondly, if some of those properties are released back into the housing market more people may be able to afford to buy properties. Thirdly, the Tories in particular cannot complain about the effect of Labour’s policy on the rental market when they are going to legislate for the ‘right to buy’ housing association properties which in itself could remove over a million properties from the rental sector.

No, this is an attempt to redress and imbalance in the market for a basic need that is failing. I venture that landlords who feel unable to abide by these policies are possibly not the sort of people we should have owning and renting out a basic human need. I have been quick to point out Labour’s silly, populist, economically illiterate policies, so I need to be quick to point out that this is not one of them.

Advertisements

I welcome any comments - whether you agree with me or not!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 1,524 other followers

%d bloggers like this: