POLITICS
Should we worry about rent control?
Ian Wilson, Managing Director, Martin & Co, thinks that maybe we should… T
he local government election result suggests that Labour is on the road to electoral recovery and it’s conceivable that we may see
Ed Miliband leading a majority labour government in the next parliament. Some left-wing thinkers and journalists
have started to float the idea of a labour government re-introducing rent control as a popularist measure. There are several strands to their arguments:
GREEDY AGENTS & LANDLORDS
Rents are rising and biting particularly hard on young professionals in London where rents are rising in real terms. The perception is that greedy landlords and their profiteering agents are taking advantage of a shortage of rented accommodation and a lack of alternative tenure options, since mortgage market rules continue to defeat the first time buyer. Ken Livingstone narrowly missed being elected Mayor of London and one of his pledges was to set up a council run letting agent to undercut the existing agents and take the heat out of rent rises.
SPIRALLING BENEFIT COSTS
Housing Benefit spending has risen from £11bn in 2000-01 to £21bn in 2010/11. If there are no changes in policy it will reach £25bn in 2014. The Coalition response has been to cap benefit for recipients. This is seen as rough justice and although it’s too early to say, because the caps are only now coming into force, there is a belief that we will see thousands of families displaced from high rent areas. If landlords were limited in the rent that they could charge then there would be a saving to the Exchequer and settled communities would not be uprooted.
THE BUY TO LET LANDLORD
Landlords are a new class of asset owner and have done rather well for themselves. The ‘average’ landlord has multiple properties – it depends which research you read but a figure of somewhere around six
56 JUNE 2012 PROPERTYdrum
Rising rents and spiralling benefi t costs, where do we go from here?’
properties each is plausible. This does not make landlords rich, the majority still have mortgage debts to service from rental income but this misses the point – when would-be first time buyers cannot afford a home of their own, individuals who own multiple properties are seen as anachronistic. I once made the mistake of explaining my pension plan to a journalist – I said that if you could own just ten properties, debt free by the time you retire you would enjoy an income of around £5,000 per month and could draw down capital to pay for holidays, cars, health care as you wished. I got a very frosty reception and in a second I realised that my journalist contact was fretting about where to get the cash for their first property, not the next nine. The renaissance of the private rented
sector has its roots in the Thatcher government’s decision to reverse decades of rent control and to allow new lettings at “market” rents on Assured Shorthold
Tenancies, which guaranteed the landlord the right to recover possession. To this day there are elderly sitting tenants enjoying “Fair Rents” under the Rent Act 1977 which contained a formula that a rent should be set with regard to the size, age, character, locality and state of repair of a property but dis-regarding the shortage of rented accommodation. Rent Officers had to inhabit a parallel
universe in which they imagined that if demand for rented accommodation was met with just enough supply, what would the rent be? The answer was about half the market rent; or at least that was my recollection when I worked as a 24-year- old Rent Officer in Tyne & Wear in the late 80s who had to deal with disgruntled landlords who felt they were carrying the burden for the failure of government housing policy. The reason was that rent control usually
goes hand-in-hand with tenancy rights and security of tenure. This is because if you
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