Labour has changed tack, from previously promising compulsory 3-year tenancies (as well as rent controls) to going the “whole hog” and committing to “indefinite tenancies”. This would use the German model for residential tenancies in the private rented sector (PRS) in England. But has Labour done its homework? See below…
Labour’s Shadow Housing Secretary John Healey has pledged that a new Labour Government would give extra protection from eviction for private tenants in England by offering them legally binding “indefinite tenancies”.
The new tenancies according to Mr Healey would be based on the same rules as those currently operating in Germany.
In an official press release Labour says:
“The change would revolutionise the private rental market. German tenancies last, on average, 11 years, compared to around 4 years in England. The German system is also widely seen to act as a brake on rent increases, given that landlords may use the changeover of tenants as an opportunity to hike rents. Tenants themselves are still be able to choose to leave the property after a period of notice.”
Labour claims that in England, landlords or their agents make the decision to end almost one in five tenancies (18%), a figure disputed by many experts in the industry who claim that the percentage of tenancies ended by landlords in less than 10% and most of those for rent arrears.
At present, says Labour, “…tenants can be evicted without any reason being given, and despite having done nothing wrong. One in three private renters – 1.6m households – have dependent children. Under the German system, tenancies are effectively open-ended with a tenant only able to be evicted on tightly defined grounds, for example if they don’t pay the rent or commit criminal behaviour in the property.”
Mr Healey says:
“People shouldn’t be living in fear of losing their homes. The insecurity of renting is a power imbalance at the heart of our broken housing market, where tenants are afraid to report problems in case they are evicted, and families with children are forced to move at short notice.
“Many landlords provide decent homes that tenants are happy with, but the Government is allowing rogue landlords to take advantage of good tenants. Renters deserve better.”
What Labour does not say:
What Labour does not say, with its ideas for secure tenancies, is how it would deal effectively and speedily with evictions? so as not to drive private landlords from the market.
For example, persistent delays in paying rent or serious arrears, with our existing slow and cumbersome county court system, can take landlords months and sometimes over a year to evict non-paying tenants, while they run up thousands of pounds in arrears.
There are major differences with Germany
The German tenancy system is quite different from England and Wales, with tenants’ responsibilities being much more onerous.
Yes, German tenants have more security of tenure, but they also have far more legally binding responsibilities for the condition of the property in terms of maintenance. In this respect the German residential tenancy is more akin to an English commercial insuring and repairing lease, where the tenant is legally obliged to maintain the property in a “tenantable condition” and could face hefty bills at the end of the period if this is not done.
This is what was said in a 2014 report produced by the London School of Economics (LSE) and commissioned by Camden Council, on international renting comparisons and rent stabilisation:
Germany: the example of good practice?
“Germany is currently seen, especially by foreign commentators, as the best exemplar of rent stabilisation. Nearly 50% of households rent privately. Most have to make significant investment in the dwelling through bathroom and kitchen furniture and equipment, making it more obviously their home but also increasing the costs of moving.
“Rent increases within the tenancy are linked to specified indices. Initial rents can be set up to 20% above comparable rents in the area (in some cases up to 50%), giving comfort to the landlord in case of unexpected changes in costs not covered by the index. Security is indefinite but eviction procedures are relatively well defined. Importantly, general inflation has been very low and real house prices had been falling since the 1980s in many areas.
“However, since 2008, and indeed earlier in some cities (notably Munich), the situation has changed. Landlords have faced unexpected costs, particularly because of stricter energy efficiency requirements. House prices have been rising rapidly with commensurate increases in owner-occupation.
“The atmosphere in terms of eviction has become more toxic. Most importantly it is becoming increasingly difficult to access private rented accommodation in cities with buoyant markets. As a result, political pressure is growing for stronger rent controls in major cities (an important factor in the latest elections). Concerns are also growing about how any increase in controls might make it harder for working households to find accommodation and could constrain investment.”
Has Labour done its homework here, and taken into account the effects on the rental market when strict measures are taken to introduce more control over market forces? The German experience would tend to support previous evidence and arguments that wherever and whenever strict tenancy controls have been introduced, it tends to work against tenants in the long-run by increasing rents and reducing choice.