Martha Mackenzie
Martha Mackenzie

By Martha Mackenzie

A rent cap in name only

This blog was originally published as part of #BeyondtheBallot the Huffington Post UK’s alternative take on the UK General Election 2015. Visit the website to see the original post and join the debate.

A year ago to the day, Ed Miliband announced that a future Labour Government will legislate to make long-term tenancies the legal default. After calling for stable renting since 2012, Shelter welcomed this turning point.

On Sunday, this was repackaged a ‘cap on rents’.

Cue hysteria. Communities Secretary Eric Pickles decided this was analogous to a bombing campaign. The Residential Landlords Association cried a return to ‘the dark days’. And ‘industry experts’ warned that this ‘economically illiterate policy’ would decimate the sector.

Amidst the over-cooked language on all sides, a crucial piece of analysis remained absent: according to any common understanding of what they mean, Labour are not proposing rent caps.

Really?

Now, Shelter have our reservations about ‘old style rent caps’ (setting overall maximum rent levels); we’re not convinced that this is the best way to help the people most affected by high rents. But this is not what Labour are suggesting.

They are proposing three year fixed-term tenancies, which limit rental increases. A sensible move if you want more stability. Without placing a ceiling on rent increases, landlords would be encouraged to hike up their rents as an alternative route to eviction – completely defeating the point of long-term tenancies.

This is precisely why the government’s own ‘family friendly’ model tenancy agreement includes a clause on rent control – and why the Liberal Democrat manifesto includes a remarkably similar promise.

Far from being “Venezuelan-style rent controls” that will lead to the collapse of the sector, this model of renting is based on well-established continental trends. In Germany and France tenants have access to longer tenancies – and here’s the killer – their rental markets are bigger and better than ours.

So far, so sensible.

Yet Labour have chosen to portray this policy as ‘rent caps’, thus stoking up an already polarised debate. And the analysis that followed has generated far more heat than light, which ultimately doesn’t help renters.

Why is this problematic?

If you want to give families more stability, then long-term tenancies are the only route. One and a half million families rent privately – and they are crying out for more stable renting. Attempts to introduce this are commendable.

But instead of creating aggravated, artificial fault lines – we need to build on existing cross-party recognition that a move towards stable renting is unavoidable. Our system of fragile, short-term contracts cannot continue. The next government must deliver a sustainable solution; over-exaggerated language from all parties will not get us there.

And tackling affordability will take something more. The loss of a private rented home is now the leading cause of homelessness. At the same time, homeownership has collapsed amongst young people – who are trapped in private rented homes, unable to save for a deposit.

It is extremely encouraging that all sides are at the beginning of a sensible debate on building more homes. But to deal with chronic unaffordability, we need drastic action – including wholesale reform of housing delivery. The next government must commit an additional £1.2bn a year to affordable housing – prioritising direct investment in social and shared ownership homes. And in the meantime, we need to close the affordability gap for the growing number of people who have no choice but to rent – yet cannot afford market rates.

Supply is the big political issue we’re finally reaching consensus on – but in the meantime, renters deserve a meaningful debate. There are 11 million of us – and we’re not going anywhere soon.

One Response to A rent cap in name only

  1. Katherine21 says:

    Nice article especially for us in Real Estate .