Is Labour now in favour of rent controls?

25th January, 2014 5:39 pm

Housing is going to be key to Labour’s offer in 2015. Most of the debate so far though has been to talk about the need to build more homes.

But could Labour be about to come out for rent capping/rent controls?

At Fabian Conference this afternoon, Shadow London Minister Sadiq Khan praised plans for a rent cap and suggested that it’s something he’d support Labour doing. As well as being in the Shadow Cabinet, Khan is close to Ed Miliband – he ran his 2010 leadership campaign.

social_housing.jpg

Rent controls aren’t currently Labour policy – but it’s unlikely Khan would have endorsed this without speaking to Miliband first.

Should we expect Labour to come out for rent controls? It’d certainly be consistent with a Milibandite “predistribution”/market-intervention approach by tackling costs…

Update: Quick as a flash, Shadow Housing Minister Emma Reynolds tweets to say that rent capping is NOT Labour policy. So it seems Khan has been off script here. Here’s what Reynolds had to say on the matter:

emma reynolds rent cap

Yet eagle-eyed Jessica Asato notes that Ken Livingstone advocated a “London Living Rent” back at the last Mayoral election. So is this perhaps a policy endorsed in London only? It’s not clear…

(Incidentally, in a vote at Fabian Conference, rent capping was by far the most popular policy in their “Dragons Den” debate)

Value our free and unique service?

LabourList has more readers than ever before - but we need your support. Our dedicated coverage of Labour's policies and personalities, internal debates, selections and elections relies on donations from our readers.

If you can support LabourList’s unique and free service then please click here.

To report anything from the comment section, please e-mail [email protected]
  • Steve Stubbs

    History Dear Boy. Look at what happened when rent controls were last introduced with Rent Tribunals setting ludicrously low rents – the rental Housing market went into almost terminal decline and it was the trigger that moved the UK from being majority rented accommodation to majority home ownership. Rental property owners just sold their stock off as it became vacant (less difficult then to evict people). Yes there had been abuses (Rachman?) but it went from one extreme to the other and the law of unintended consequences came into operation.

    I hope they do think very carefully if there is a move in that direction again.

    Disclaimer: I do not own any other houses other than the one I live in.

    • robertcp

      I am not an expert on this but would landlords selling off their stock be a bad thing? It might bring down house prices, which would be good in my opinion. The free market has resulted in property prices being too high, so the state should intervene to bring prices down.
      Disclaimer: I only own the flat that I live in.

      • Steve Stubbs

        Bit confused by that. Yes dumping additional housing stock onto the market might depress prices, not necessarily a bad thing as they are up in the unaffordable levels at the moment , but you can’t have a free market and have state intervention at the same time, regulation yes, but intervention no. The last time round mortgages were quite hard to get and a big deposit was needed. With the current ease of credit and 95% or larger mortgages, I think prices would in effect stand still at least. Personally I would like to see them fall back to about 30% to

        their historical mid price range, But that would lead to massive negative equity for a lot who have bought at high rates. Couple that to the inevitable interest rate rise following a Labour win in 2015, and you have a recipe for hard times like we have not yet seen the like of in this recession.

        • robertcp

          I would favour rent controls and more social housing, which will hopefully bring property prices down. A mixed economy will involve a mixture of state intervention, regulation and the market. Regarding interest rates, people were foolish if they expected 0.5% interest rates to continue indefinitely.

      • PeterBarnard

        If an individual has to apply to government (in this case, local) to build a house, then by definition there is no “free market” in housing. The supply-side is constricted.

        On the demand side, finance can turn on the money tap almost in the blink of an eyelid, when it thinks there’s money to be made (for itself) in bricks and mortar, and the inevitable occurs when demand is unsatisfied : prices go up. It is economic nonsense to restrict the supply side, and leave the demand side unfettered.

        In a research paper published in 1995, the House of Commons Library Staff noted that , “Since the government removed the system of rent control on new private sector and housing association tenancies created after 15 January, 1989 in England and Wales, and 2 January 1989 in Scotland, , expenditure on Housing Benefit on these tenancies has risen by 350 per cent … The government is concerned that expenditure on Housing Benefit has doubled in real terms since 1988 …”

        And, indeed, my own research indicates that we arrived at the situation, when the Conservatives left office in May, 1997, 57% of housing rentals were paid for by Housing Benefit. Labour had that down to 40% by 2007-08, and it was 45% in 2009-10. Having said that, Labour’s record 1997-2010 on housing was not, from some perspectives, something to shout about …

        • rekrab

          @Peter Barnard, long time no hear Peter, how are you?

          Brilliant post Peter, the private housing sector has a lot to answer for.

          • PeterBarnard

            I’m fine, Derek, thank you. Long time not on LL – I had problems with Disqus last year, but they are (obviously) now resolved.

            Happy New Year, ol’ cock, and I hope that you are well. On the housing market, many don’t know (or choose to ignore) that for a long time, in the 1950s, 1960s, and very early 1970s, we had gently rising prices – in line with wages, and supply in both private and rented sector was adequate to meet demand.

            Then along came Anthony Barber, “Competition and Credit Control” (so-called “credit control” was a massive oxymoron, given what actually happened), house prices went astronomical, secondary banks almost brought the whole bl**dy lot crashing down …. if history teaches us anything, it is that finance has to be kept on a tight leash.

            Some people, in the name of “economic purity,” just won’t accept that.

        • robertcp

          Does this mean that you favour rent controls?

          • PeterBarnard

            On balance, yes.

            And actually, when there was a so-called “free market” in housing in the 19C, no-one can say that the result in the rented sector was a pretty sight.

          • BillFrancisOConnor

            A cogent argument Peter. I am undecided about rent controls though. In Lisbon, for instance, where they have rigid rent controls, parts of the city look as if they have been bombed from the air. Many landlords do not maintain their properties because there is no point and tenants inhabit dilapidated tenements where basic facilities like heating, lighting and water often don’t work properly.
            Similarly, growing up in London as a teenager in the 1970s (the golden era of rent caps) I remember streets upon streets of corrugated iron, crumbling tenements and a dilapidated housing stock.
            How would we guard against a return to that scenario?

          • PeterBarnard

            Although I cannot speak for either Lisbon, or London in the 1970s, I think that one has to take a long-term view, and certainly I would have thought that London in the 1970s was a light year or so distant – as far as the aggregate (and average) quality of housing is concerned – from London in the 1870s.

            I also think that one cannot take one feature in isolation, ie rent controls, and say that it is actually responsible for the quality of the rented housing stock. Coincidence is not cause.

            Having said that, the UK in the 1970s was much more prosperous than the UK in the 1870s, and this prosperity must have fed into both the overall quality, and the overall quantity, of housing. On quantity, between 1951 and 1978, while the population grew at 0.4% per annum, the housing stock grew by 1.5% per annum ; even during the Conservative years 1978-1997, the housing stock grew at 0.85% per annum, while population grew at just 0.2% per annum.

            It’s a complicated picture. How do we guard against poor-quality private sector housing for rent? We build public sector housing to a quality specification (note : quality does not = luxury).

          • BillFrancisOConnor

            Of course the picture of public sector housing in the 1970s wasn’t great either. More often than not Labour councils were gigantic landlords who got oceans of criticism from their natural supporters for not carrying out basic repairs on the housing stock they owned and ran, A lot of the public housing stock was in a mess as well (ie broken (and sometimes p**sed in) lifts, families on the 15th floor of tower blocks with children having nowhere to play, unlit and unsafe areas on estates, poorly constructed high rise buildings that ended up being blown up, etc).

            I have no reason to doubt that the quality of housing stock in Britain during the 1970s wasn’t better than it was during the 1870s but in my opinion much of it, private or public, wasn’t great. In developing a new housing policy we need to surely recognise the reality of rent controls and widespread public housing rather than the fantasy.

          • Alexwilliamz

            Yep. Requires gvt to change its mindset to be comfortable recognising its role in ‘overtly’ intervening in areas of the social fabric of society. It already does this in non overt ways but doing many of the things that really need doing will take on vested interests directly. Ed m might come round to recognise his next windmill tho?

          • PeterBarnard

            After 30+ years of the “private sector good, public sector bad” mantra (from both Conservative and Labour), I shan’t hold my breath, Alex W.

          • Steve Stubbs

            My point exactly.

          • robertcp

            Thanks for clarifying that point. I know that the 1970s were a good time to buy for my parents’ generation and I was lucky to buy my flat in the mid 1990s.

          • PeterBarnard

            Up to a point, Robert ( …good time to buy …”). House prices were stable up the last quarter of 1971, and then “Competition and Credit Control” was introduced By Messrs Heath and Barber in 1972. In 1973, the same duo went for a “dash for growth.”

            It was unfortunate that, at the same time, the immediate post-war bulge of births were coming to the age where they were getting wed, and many were looking for a house to buy, so that house prices rose 40%, relative to wages (more accurately, relative to GDP per capita).

            Much the same thing happened in the late 1980s – the second post-war bulge of births (of the early 1960s) was “coming on the housing market”, and prices peaked, relative to GDP per capita, in 1989 Q2, not helped by Nigel Lawson’s advance notice that tax relief for multiple purchasers would come to an end in August, 1988.

            If you bought your flat in the mid-1990s, it was an excellent time for a purchaser – house prices fell by 40% (relative to GDP per capita) between 1989 Q2, and 1996 Q1.

          • robertcp

            Thanks for the info. Yes, I bought in late 1996 more by luck than judgement.

  • Chris Cook

    1/ Apply local levies on land rental values (ignoring the value of buildings & improvements)..

    2/ Distribute the resulting pool to all occupiers directly (ie don’t let government get its hands on it) as a local Land Dividend in the form of credits returnable in payment for the levy.

    Owner occupiers would use the credits themselves,while tenants could pay their rent with them, since landlords would have to pay the levy. Any excess credits could be sold or exchanged for value.

    The outcome is a net transfer from those with more than average land-holdings to those with less than average land-holdings.

    Such a levy is both equitable and unavoidable, and in London would particularly address overseas land-owners currently hoarding London properties and driving up prices.

    • BillFrancisOConnor

      Sounds horribly complicated.

      • Chris Cook

        1/ Collect levy (using existing data from government valuation offices).

        2/ Distribute equally and directly as a dividend of credits (aka vouchers or tokens) to occupiers.

        If you find that to be horribly complicated, what precisely do you find to be simple? And how on earth do you deal with your tax return?

    • jaime taurosangastre candelas

      Chris, as ever, your argument is hard to work through.

      1. Who sets this value? For someone who already wholly owns their property, do they ignore this entirely? For someone who has a mortgage on their property, are they suddenly required to pay tokens to some third party as well?

      2. Who distributes it? What is the token or credit measured in? Money value? What do the owner occupiers use these tokens for? Why should the tenants receive anything at all?

      Is such a scheme working anywhere in the world today? Not some experimental arrangement with trading Iranian oil, as you also set up, but in normal environments?

      • Chris Cook

        Firstly, the levy is denominated (measured) in £ sterling. Just like a tax on land rental values. The land rental value of each site would be set by a beefed up government valuation office.

        http://en.wikipedia.org/wiki/Valuation_Office_Agency

        Let’s say the aggregate levy chargeable is £50 billion.

        Then we pay directly to every qualified person (which raises interesting questions) a Land Dividend. Let’s say 50 million people qualify. They each receive 1,000 levy credits each returnable in payment for £1.00 of levy.

        The market price of a £1.00 prepay levy credit in £s will be whatever supply and demand determine. But these levy credits will never rise in price above £1.00 because otherwise land-owners will pay the levy using conventional bank-created £s.

        Landlords will always accept £1.00 levy credits – which will be fully interchangeable – at ANY price below £1.00 because they can use them against their levy obligation because it’s free money. If tenants happen to have more credits than the landlord needs to pay his levy, then the tenant may sell or exchange them on the open market.

        Land-owners subject to a mortgage would pay their levy either using their entitlement or in £ sterling.

        I guess HMRC could be trusted to distribute the dividend, but frankly, I’d prefer to give everyone a dedicated mobile payment terminal/phone and pay the dividend using that, which would bypass banks altogether.

        I would also create local Treasury Branches purely as custodians, with a monetary authority supervising issuance. It starts getting interesting when you consider what you could do by issuing more credits at a discount to investors and using the proceeds to repay debt.

        Prepayment of taxes at a discount (which were pretty much all land taxes) was how UK sovereigns raised funding for maybe 600 years until banks came along..

        So, even though the method is not today in use, it has been tried and tested over a very long period indeed.

        • Chris Cook

          Essentially the outcome is a land-based currency,. John Law proposed a land-backed currency 300 years ago for Scotland, and it was actually a pretty good scheme.

        • jaime taurosangastre candelas

          I still don’t understand it. If I’ve got a mortgage, I pay the bank as per the mortgage agreement that both parties freely enter into. I don’t need or require some valuation agency to stick the nose into my life.

          I still don’t understand by what right any tenant gets hold of your credits either. They pay rent to the landlord, at least in the traditional arrangement. They don’t get tokens simply for temporarily living somewhere. If they want tokens or some other stake, they need to buy them with proper money.

          The whole thing sounds massively complicated. And I don’t see the mathematics working.

          • Chris Cook

            You are missing the point. This is essentially a tax on the privilege of ownership of the commons of land, but in this case the levy goes nowhere near the government but essentially results in a very simple direct net transfer to those less privileged.

            An owner currently pays council tax. This would be replaced by the levy. The valuation agency will assess the land rental value – without bothering you – according to long established principles.

            An owner would be subject to a levy; would receive a dividend of credits, and would have a net amount to pay.
            The mortgage is irrelevant.

            It’s up to the landlord if he accepts credits from tenants or not in payment of rent. But unless he’s barking mad, then whenever credits are offered at par value or less he will accept them because he has his own levy obligation to pay. Tenants are not subject to the levy: they don’t have both a landlord and the levy on their shoulders.

            It could hardly be simpler. You are looking for complexity which simply is not there. The fact that it does not suit your particular circumstances as a property owner is unfortunate, but there will be vastly more winners than losers in what is – I submit – a fundamentally equitable policy.

          • jaime taurosangastre candelas

            So it is a new tax, perhaps to replace Council Tax in tokens. But councils pay real money to their workers, and for other services they buy. This real money still needs to be raised from someone.

            We already have tokens called pounds sterling. Having another sort in addition called Land Value tokens seems complex, and if you are merely shifting things about(and still not explaining the mathematics of tenants getting tokens of value when currently they don’t) I am unsure of what is better.

          • rekrab

            As far as I can tell, it’s the landlord who would be responsible for the land tax, whether or not he rents his properties or land out.The land currency would do away with rent benefits and the landlord has the chance to pay his taxes by credits or have the bank exchange those credits for cash.

            It’s a dam site better than what we have at present, that’s if I have read into it correct?

          • Chris Cook

            Ah. ‘Real’ money. I’m glad you mentioned that but would be surprised if you can define it.

            And of course councils are an endangered species are they not?

            Naturally, we wouldn’t introduce land value credits in isolation.

            Although land value does back the majority of conventional money in existence it does so through mortgage loans

            There’s no reason why land levy credits could not be created and issued to replace both public debt and private secured debt. ie replace mortgage loans with (say) Public Land Loans.

            Other forms of credit, based upon energy, and the capacity to provide goods and services, would require different agreements.

          • Got it Chris – Land is a function of Life and something which none of us created but which all of us need and therefore we each have an equal right to a share of the Earth – Simple, Liberating and Fair – Peace brother!

  • rekrab

    Happy new Year! @Peter.

    I’ve always held you in the highest regards @Peter and again you make the case on housing and finance so compelling.

    Hope you stick around @Peter, the education from you is worthwhile. All the best Derek. P.S. IN REPLY TO MISSING POST?

    • PeterBarnard

      I think it’s in moderation, Derek. There was a glitch after I made my reply.

  • swatnan

    I was there. I would have gone for the death duty tax on estates for elderly care..
    Once again no one is moving towards a solution for elderly care the most pressing problem of our times and one which will simply not right itself natually like the ‘economy’ or ‘youth unemployment’ or ‘education’ regardless of what politicians get up to and do. Some suggested an increase in NI, which sounds right, and NI is contributory so everyone should benefit, those that contribute anyway, Its a trusted insurance scheme. At the other end of the age spectrum, jobs for the youth, guarnteed, sounds good electorally, but bound to raise huge problems in implementation. These two policies are electorally winners. And that age old chestnut of building more houses; but I’ll believe that when I see it. And pigs might fly.

  • El_Sid

    From the Guardian’s coverage of Argentina :
    To 68-year-old Aida Ender, after 40 days without power in her eighth-floor apartment in the middle-class neighbourhood of Almagro in Buenos Aires, the slogan grates like a bad joke.

    “There’s no plan, the president is out of touch with reality, she’s lost like Alice in Wonderland,” says Ender, who has had to move out of her apartment, where she has had no water, no working lift and no refrigeration since 16 December. Her plight is shared by thousands of neighbours and even hospitals, in the middle of unusual summer highs of close to 40C.

    Economic observers blame the government’s populist policies – including keeping utility prices artificially low to disguise inflation – for the power crisis. They say this has made it impossible for firms to invest in maintaining power lines.

    So populist policies imposing price controls on energy prices end up leaving little old ladies without water or refrigeration in a heatwave?

    Who would do that to innocent pensioners?

  • Grouchy Oldgit

    It might help in the short term, but with sufficient council/housing association homes (the real solution) there would be no need for rent controls.

  • Pingback: We all agree something must be done about rents | Red Brick()

  • althejazz

    Thatcher did away with rent controls and sold off as many council houses as she could get away with and that is why we are in the situation we have today. Many of these ex council houses are now being rented out by private landlords at exorbitant rents. None of these private landlords would be homeless if they had to cut their rents and many of them are not even spending money on keeping their properties up to a decent standard. This is Rachmanism on a grand scale for which we need a radical solution and that solution is rent controls and compulsory acquisition by local authorities where properties do not reach a satisfactory standard.

  • Pingback: Home ownership: first-time buyers are the losers iFixYourPC.co Your Local Computer Scientists in Tunbridge Wells Kent UK()

  • Pingback: Home ownership: first-time buyers are the losers - Legal and Financial Home Buying Services()

  • Pingback: Home ownership: first-time buyers are the losers | 365 Banking()

  • Pingback: Are rent caps the answer? | Shelter blog()

  • Pingback: Home ownership: first-time buyers are the losers | Up right now()

  • Pingback: Second Generation rent controls: Solving a problem that doesn’t exist. | Hopi Sen()

  • Pingback: London Remade | Are rent caps the answer?()

  • Simon Whaley

    In the media today if a lot of the advertising revenue driven editorial is to be believed landlords are sat around with their heads in their hands weeping into their cups of tea at labours proposals on reform of the PRS, well er no !

    Being one of those who self manage lets see the pros and cons .

    Fees to tenants , I don’t charge any other than a minimal credit check fee £20 and a small admin fee at the start of the tenancy £30 I can stand this as I have very little churn so won’t miss that too much
    Tenants will be a lot better off saving an average of a months rent in agency fees
    Letting agents will be screaming as the old farming expression goes ‘ like a stuck pig ‘ as they will no longer be able to soak tenants .

    Longer tenancies , brilliant any landlord who does not want tenants in for a long period is frankly barmy! About half of mine have been in longer than that anyway and landlords do not want voids where we are making nothing .
    Tenants will be happier and have a better sense of security
    Letting agents, here’s that pig coming along again! Agents love churn it makes more money in fees from both tenants AND landlords who use them.

    Rent control , I have always worked on the principle keeping the rents a little lower keeps people in reduces the voids and the turn around costs and overall maximises my profit
    Tenants once again a measure of inflation plus ..xx. Annual rent reviews based on a specific area is no bad thing and enables tenants to plan ahead it would be a simple add on function of the valuation office in a similar way to LHA
    Letting agents total reversal of above ,if they squeeze another hundred quid a month out of tenants then they get a greater proportion of the overall rent from the landlord using them ,so what if the tenants leave after six months it creates more churn fees from new tenants and the landlord has lost the extra money he thought he had gained because of this .

    So for the millions of self managing landlords this is not a great worry , agents will say oh but rents will go up as all the fees will be passed onto the landlords using them , great ! Yet another competitive advantage I will have.

    I am a private landlord and one of the founders of privatelandlorddirectory.com

x

LabourList Daily Email

Everything Labour. Every weekday morning

Share with your friends










Submit