January is a scary month, financially. The festive fun is over and the bills are on the way. Commuters face train fare rises and the income tax deadline lurks at the end of the month. For millions of Britons there is another source of midwinter dread: a possible notice from the landlord about the rent. There will be no getting out of it, if it’s a rise. Unlike landlords in most Western European countries, ours can do virtually what they want with their properties.
Ever since the private-rented sector was deregulated under Margaret Thatcher, rent control has been seen as a non-issue in this country, or rather as a hobby horse for hard leftists who don’t get free markets. But the public mood is shifting. A poll commissioned for the campaigning organisation Generation Rent shows about 60 per cent of respondents back some form of rent control, including most members of all the main parties and indeed non-renters.
Some will maintain that polls invariably supply whatever answers the organisation that commissioned them wants to obtain. However, it is becoming hard to shrug off claims that the private-housing market in Britain is now so dysfunctional as to require intervention. About 40 per cent of the income of private renters – who now outnumber those renting social housing – goes on rent. This unsustainably high percentage helps to explain why the proportion of housing benefit paid to the private sector is rocketing upwards, from 25 per cent 10 years ago to 40 per cent today.
The private-rented market is not overheated throughout the UK. North of a rough line from the Severn Estuary to the Wash, monthly rents average a manageable £500 to £600. It is south of the line that trouble starts. Rents average around £800 in the South-east, around £1,200 in outer London and a punishing £2,315 in central London. Labour has spied an opening here. In May, Ed Miliband said he would reintroduce some regulation, starting with three-year tenancy agreements, rules making it harder to evict tenants and a cap on rents, pegging rises to inflation. The Tories denounced this as old-style socialism, red in tooth and claw. The party’s spokesman Grant Shapps claimed that Mr Miliband had drawn his ideas from Venezuela. “Rent controls lead to poorer-quality accommodation, fewer homes being rented and ultimately higher rents,” he said.
This may have been the case once – but Mr Miliband was not proposing a return to the old system of fixed rents that began in Britain with the rent acts of 1915 and 1939 and stayed more or less in place until 1989. There is no doubt that these rules made renting out property so unprofitable that it almost destroyed the sector. There is also no doubt that the massive increase in small-scale landlords renting out rooms in their own homes is a result of deregulation.
However, the choice is not between sledgehammer controls and nothing at all. Many European countries manage more calibrated systems in which landlords set initial rents but cannot increase them arbitrarily. The Dutch use other levers, “de-controlling” rents where there is a housing surplus, for example. One benefit of this continental model is the creation of a more stable class of long-term renters. A privately rented home in Europe is a standard choice, not the last resort of the desperate.
Rent controls cannot solve problems alone. Where demand for housing hugely outstrips supply, as in London, building many more homes is the only remedy. However, the fact that we are not building enough homes does not obviate the case for intervening in the market in rented property. The distress signals from this sector are getting too loud to ignore.Reuse content