To emphasise the fact that property and renting in particular will be a major political issue come the general election, Diane Abbott is putting rent controls squarely on the agenda.
Hackney MP Diane Abbot, a future London Mayoral candidate, is calling for rent controls in a concerted joint campaign with Alexander Hilton director of Generation Rent.
Alexander Hilton says:
“This rent slavery, where people are ground down working to build their landlords’ buy-to-let empires, is untenable.”
“Rent Control is one of those strange policies that’s popular with the public but beyond the pale for much of the political establishment. This is because it devalues the price of land, and wealthy people have a lot of money tied up in land at the moment…
“…Rent control is a means government can offer to bring respite to people, or indeed landlords could just choose to charge less rent – and that occasionally happens. But tenants also have a means to devalue land wholesale.
“Tenants can organise a rent strike. And when you work hard and every year see you’re getting less and less for doing so, there comes a time when a rent strike doesn’t sound so crazy.”
The campaign is claiming that pretty much everyone has been demanding reform to the private rental market, because, they say, it has distorted the cost of living in the capital so much that some people face rents of more than half of their monthly salary.
They claim the Coalition Government has been slow to act.
Boris Johnson’s London Rental Standard (LRS) is a voluntary scheme, but Diane Abbott’s and Generation Rent’s proposals would be compulsory – they would force landlords to comply with the GLA’s rent controls or face an extra charge of 50%.
Diane Abbott has written the Prime Minister David Cameron and Labour leader Ed Miliband demanding powers for the London Mayor and local authorities to introduce rent controls, saying their current policies of rejecting full rent controls must end.
The proposed policy is to limit monthly rents to no more than 50% of the local annual council tax bill. So, for example, they quote, a family living in a two-bed flat in Camberwell would have a council tax banding of B (£942) and a rent of £1,200 per month, so their rent cap would be £471. If they landlord chooses not to comply and extra charge of £364 would be imposed, which would go to the Mayor of London to pay for new social housing.
Diane Abbott has said:
“A major international city without measures to stabilise rent runs the risk of rents spiralling out of people’s reach. It is no coincidence that New York, Paris and Berlin all have some version of rent control. For too long politicians have rejected any form of rent controls but it is time to look at the issue again.”
Alex Hilton of Generation Rent is calling on Britain’s baby-boomers to support the organisation’s campaign for rent controls.
However, in an interview for The Guardian newspaper, Alan Ward, chair of the Residential Landlords Association has said that arguments for rent controls may be superficially attractive but “the reality is that such a solution amounts to a short sighted, political sticking plaster that would lead to widespread disinvestment and the creation of ghettos of slum housing within 10 years.”
He asserts that London-centric calls for rent controls ignores the evidence “that controlling market rents would choke off investment in much needed new homes and reduce the choice tenants have over their housing needs.”
Alan Ward puts forward the argument, backed by Office for National Statistics published statistics that, UK rents have actually fallen in real terms. He says private rents between May 2005 and May 2013 increased by 8.4% in England overall and 11% in London. Meanwhile inflation increased by 30.2% over the same period.
Ward blames a severe shortage of suitable housing in London for the high rents that exist because of landlords responding to market pressures. He calls for more support for the “almost 90% of landlords in England who, as individuals, rent just one or two properties out, to increase the supply of new homes available.”
Ward says, “If those advocating rent controls are as committed to housing growth as they claim to be, it is time they come clean on the devastating impact that such controls would have on much-needed investment in new homes.”
Former housing minister Grant Shapps has said:
“Rent controls resulted in the size of the private rented sector shrinking from 55% of households in 1939 to just 8% in the late 1980s.” Is that what proponents of rent control really want to see? Tenants denied choices over their housing needs and reduced incentives for landlords to compete on quality, service and cost.”
A recent cross-party select committee study into the private rented sector concluded:
“Rent control would serve only to reduce investment in the sector at a time when it is most needed. We agree that the most effective way to make rents more affordable would be to increase supply, particularly in those areas where demand is highest.”
Chris Walker is Head of Housing, Planning and Urban Policy at Policy Exchange says, quoted in a Spectator article:
“Unless we boost supply in the rental market we will see future shortages. Figures from the DCLG English Housing Survey show that the private rented sector is growing fast, from around 12 per cent of homes (2.4 million) in 2005 to around 17 per cent (3.8 million) homes today. There are no signs this growing demand is abating so we need to increase future supply to meet it.”
“More supply will mean more investment in the sector, from both Buy to Let and institutional landlords.” Housing Associations also have a role to play according to Chris Walker.
“We need to create an environment that encourages investors to put more money in. Unfortunately rent controls do just the opposite and could damage future investment.
“Not only do rent controls reduce future returns for landlords – lower returns imply lower investment – but they send entirely the wrong signal to future investors creating more uncertainty, not less…
“Basic economics tells us that if you artificially hold down the price of something, you get less of it in the market. This is as true for housing as it is for anything else. At a time when we appreciate there is a housing shortage, this policy is particularly short-sighted.”
Many others have argued against rent controls claiming it’s the tenants who lose out in the end because they say rents actually rise in better locations, forcing them into “rent ghettos” where landlords allow their properties to degenerate into slums. It then becomes inevitable that a small minority of rogue landlords will use Peter Rachman* style strong arm tactics outside of the law. Once implemented, just like social benefits, a rent control policy becomes politically sensitive and difficult to reverse.
The Swedish socialist economist Assar Lindbeck said of rent controls: “next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities”.
*Peter Rachman (1919 – 29 November 1962) was a landlord in the Notting Hill area of London in the 1950s and early 1960s. He became notorious for his exploitation of his tenants. The word “Rachmanism” entered the Oxford English Dictionary as a synonym for the exploitation and intimidation of tenants.
Generation Rent – The Rent’s Too High: 21st century Rent Control
Diane Abbot MP (Future Mayoral Candidate) – Calls for Rent Controls – http://t.co/nrA2NHKpAy
— LandlordZONE (@LandlordZONE) December 11, 2014