Labour’s war on landlords
1 May 2014 4:47am
LABOUR leader Ed Miliband will today announce his party’s controversial plans for a sweeping reform of the private rented sector, as he tries to win the votes of generation rent.
The plans have been accused of defying economic logic by think tank the Institute of Economic Affairs, and will see Labour propose a national rent ceiling, an end to all letting agent fees for tenants, and the introduction of three-year tenancies in a bid to make the rental market less volatile.
But the plans have met with a wave of alarm from the housing industry and economists, who fear rent controls risk unintended consequences.
Liam Bailey, head of global research at property consultancy Knight Frank said: “If your objective is to reduce choice in the housing market, to shrink the availability of rental accommodation, to weaken any incentive for landlords to improve and upgrade their properties and to offer private tenants a lower quality of accommodation – these proposals are precisely what you would advocate. The simple lesson of the past century is that rent controls killed the private rented sector.”
Mark Littlewood, director general at the Institute of Economic Affairs, warned the policy would have “worrying consequences for letting agents in the UK” and would fail to tackle the problem of high rent and insecurity.
“Aside from creating unnecessary layers of bureaucracy, this policy may lead to landlords being uncooperative in the hope that tenants leave early. The consequences will be at the disadvantage of exactly the people the policy is intended to help.”
“Labour has got to recognise the problems in the supply side,” Littlewood added. “We need to bite the bullet and allow houses to be built to tackle the root cause of the problem. To deal with high housing costs politicians must urgently liberalise the UK’s draconian planning laws.”
Sam Bowman of the Adam Smith Institute called the announcement: “One of the worst policy decisions in the history of modern British politics.”
In a contrast to the continuing upward trend in house prices, which reflects Britain’s limited supply of new housing for purchase or rental, there was a 0.4 per cent drop in UK house prices between February and March, according to data released yesterday by the Land Registry, although prices are still up 5.6 per cent from March last year. London prices rose 0.6 per cent in March. House prices in the capital have risen 12.4 per cent since last year, the group says.
RENT CONTROL PLAN
Nationwide rent ceilings
Rents would be reviewed annually, with a rent ceiling set against a benchmark, such as average rents.
Ban on agents’ fees
Letting agents would be banned from charging administrative fees to tenants.
Compulsory three-year tenancies
All tenancies would be three years long by default, with six months probation. Breaking a contract to raise the rent would be illegal. There would be special provisions for tenants to request shorter contracts and to cover legacy issues around buy-to-let mortgage conditions.
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