Collected Journalism

Rent Control: Could it Work?

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This article appeared in The Big Issue UK, March 2013

I am a member of Generation Rent. As my fellow members can testify, it is not much fun. More than half my take home pay goes to the landlord. A recent move in London involved not only a whopping deposit but letting agency fees of more than £400 (including a fee for something called “inventory services”). I’m already dreading the daft charges dreamt up at the end of the tenancy.

This is a cycle I’ve grown used to and cannot foresee ending. The idea of buying a house seems as fanciful as a lottery win or a trip to the Playboy Mansion.

To state the staggeringly obvious, I am not alone. Since 1999 the number of households renting privately in England has almost doubled, from around 2 million to 3.8 million. Granted, Generation Rent is not made up entirely of miserable gits like me, but according to IPSOS Mori, 79% of Britain’s private renters say they would rather own than rent.

The worst thing about renting is not the £25 charges for leaving a piece of blue tack on the wall, nor the long struggle to get a boiler fixed. The worst thing is simply the rent, and the depressing fact it keeps on rising. In 2012 rent increases outstripped pay rises: in London they rose by 6.3%, while the average annual rise nationally is 3.4%. A recent report by property website Zoopla suggests it is now cheaper to meet mortgage repayments than rent in 42 of the UK’s 50 biggest towns.

Renting is often described as the “Cinderella” of the housing market: neglected while louder voices command attention. It proved true again this week, when George Osborne studiously ignored squeezed renters and announced a serious of measures to boost the property sector and help those already at the homeowners’ ball.

The time has to come to pay poor Cinderella a lot more attention. Millions of private renters are scrimping so bills get paid, leaving them precious little to spend as the wider economy flails, with many forced to ask for housing benefit to meet the weekly shortfall and avoid eviction.

The government’s current solution is to cap the weekly Local Housing Allowance (a maximum £250 a week on a two-bedroom home) and ramp up the rhetoric of feckless scroungers bleeding the nation dry. The bedroom tax, which comes into force in April (anyone with one spare room will lose 14% of housing benefit), is set to push some out of social housing into a desperate scramble for the worst kind of overcrowded private accommodation.

It’s worth pointing out that the poor and people on low incomes don’t actually see LHA cash. In the magical Cinderella sector, taxpayers’ money goes straight into the pockets of the landlords continuing to push up rents.

Might there be an alternative? Wouldn’t it be better to cap the amount landlords can charge, or at least cap the ongoing rent rises? The time has come to take rent control seriously. The idea is not as draconian or outlandish as it might sound. Different forms are currently in place in mainland Europe and parts of the United States, and Britain has its own history of intervention in a cruel, wonky market.

Rent caps were introduced during the Second World War, then held in place in the aftermath to stop landlords exploiting the millions of soldiers returning home. After a long post-war period of an uncontrolled market, the Rent Act of 1977 gave tenants greater rights and stability, and local authority officers had some powers in setting maximum rents. The cycle ended in 1988 when the Thatcher government, convinced the private rented sector had become too restricted, abolished all controls.

Ken Livingstone was lambasted for proposing a “living rent” for London (rents to be no more than one-third of take home pay) during last year’s Mayoral contest with Boris Johnson. The idea has gained little traction in the Labour Party since, although Islington MP Jeremy Corbyn has launched a Private Members Bill advocating rent control. Corbyn has warned the government’s policy of capping benefits is “leading to social cleansing” in parts of London poor people can no longer afford to live.

If we want to restrain rents, it might be wise to look not only to Germany but also to France and Spain, where gentle control happens in the form of tenant-friendly contracts. Maximum annual rent rises, linked to inflation or the equivalent of the Consumer Price Index, are established at the outset of longer tenancy agreements, often lasting between three to five years.

With so little house-building going on, Shelter are more cautious about pushing rent control in Britain, concerned about anything that might restrict the availability of lets. Yet they do advocate the kind of long-term, genuinely two-way contracts common on the continent.

“When you meet people who have come over to Britain from Europe, they are astounded just how rotten renting can be here,” says Robbie de Santos, policy officer at Shelter. “Particularly in London, where there are so many people looking for somewhere in the sector, landlords have felt they can charge whatever they want. Introducing that stability…where tenancies can go up by an agreed maximum each year, means some landlords could actually have better returns over the longer-term.”

The National Landlords Association, you will not be in the least surprised to learn, is opposed to capping rents. NLA policy manager Chris Norris describes rent control as “an inflammatory term”. But he says some landlords are amenable to independently arranging longer-term contracts where maximum rent increases are set out from the beginning.

The government is trying to attract big investors in build-to-let schemes, keenly aware the laws of supply and demand mean the market will continue to overheat unless new houses and flats are made available. Yet investors are not forthcoming.

Meanwhile, buy-to-let (BTL) mortgages continue to flourish as existing homeowners buy up more homes. “Private landlords, whether accidental, virgin or professional, are seizing the opportunities that come with having the battlefield to themselves,” says Rightmove director Miles Shipside. The Telegraph last month suggested the dependably tidy profits from rising rents meant buy-to-let landlordism “is set to be 2013’s favourite career change”.

The Chancellor may claim his Budget’s “Help to Buy” measures are aimed at first time buyers, but there is nothing to stop already wealthy buy-to-let investors and second-home buyers taking the lion’s share of the apparent advantage. In practice, it may turn out to be little more than help to buy-to-let.

Vidhya Alakeson, research and strategy director at the Resolution Foundation says the government “has not put forward much in the way of an assistance plan to increase rental stock. With the cost of a mortgage less than rent in many places…There’s a sense of unfairness. The buy-to-let landlords are not creating new supply, just shifting it. They are moving the chairs on the Titanic.”

Some of us a sense the looming iceberg, and the dramatic change of course required. A redressing of the balance in power between private landlord and tenant would seem vital, if we want to avoid squeezing a significant chunk of Britain’s population out of aspiration and into poverty. Homeowners remain the favoured, molly-cuddled children of politicians and much of the press. Generation Rent, meanwhile, is skint, restless and pissed off.

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