Much has been said about Ed Miliband’s latest proposal to grant 3 year tenancies and cap rent rises over the three years but it’s not that bad an idea as a part of a package of measures to tackle the housing crisis. The key problem is that Mr Miliband’s solution would have to be regulated and yet Labour has consistently blocked the introduction of regulation for the private sector housing market.
We need to ensure that all rented accommodation (private, social, co-operative, lodging or council) meets standards of service and quality and this can only be guaranteed under a national licensing scheme.
1. The Landlord will know exactly what has to be done to meet each of the standards of quality and service and will therefore be able to calculate the viability of including the stock they hold into each classification. This means that they will be able to plan their business, medium and long term, and also that any applications to banks for loans etc can be supported by a licence that the bank can fully understand and cost.
2. The tenant will know exactly what to expect from the landlord in the classification of housing they have chosen. It may suit some tenants to have short term lease of 3 months, it may suit others to have a three or five year lease with the prospect of extension if that is how long their current contract of employment lasts. What is important though is that the tenant will have a very clear enforceable legal contract that sets out their rights.
3. The Government can plan its housing strategy based on the need for properties in each licensing group, and could have a single licensing system to cover not only private houses and flats and social and council housing and flats but also care homes, sheltered accommodation, lodging houses, houses with lodgers etc, and they could thereby manage a tax regime that gave appropriate tax relief to each of the various classifications of housing that exist. By requiring that people taking in a lodger register that fact in a license that is a simple standard contract would mean not only that both parties are properly protected, but also that tax relief can be given to the person renting out the room in their house (and that could even be a 100% tax relief in order to tackle the housing crisis).
Ed Miliband may well have proposed a shallow version of what is needed, but sometimes it is far better to develop an idea than to just dismiss it out of hand. As it happens I and a number of Liberal Democrats, have been proposing this licensing option for some time now and it is good to see the Labour Party finally developing policy that moves them in our direction.
* Ian Donaldson is a member of ECE and a representative of the Party in England to FCEC.
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12 Comments
Correct me if I am wrong, but isn’t rent from a lodger free of tax anyway up until a certain level?
The law already allows for this, I just moved and agreed a 2y +3y option with a scheduled rent increase during the 5y period. What we need is more housing, why not use government funds to build affordable housing and then sell it at cost or with 5% profit…
Compulsory purchase of land at agricultural value without residential planning consent, give residential planning consent on the whole parcel, auction off some of it for private development, use the proceeds to build social housing.
I broadly agree, but I think the article is being a bit too kind to Ed Miliband. He’s a bully who is not only targeting the rich, the powerful and the rogues, but wants everything done his way or he’ll use force against you.
Alisdair McGregor is right that we need to come out and attack this policy, but Stephen Tall is also right to show that we have a similar policy ourself, albeit not quite as business hostile. Therefore, I think the best approach is to whack Ed Miliband by saying “of course rent should be regulated, but he’s gone too far and picking a fight with landlords will just lead to less housing.”.
Ed, I make the point about the rent because it would be income and elsewhere we are debating including all income taxable which would mean we would have to make specific exemptions if we are to retain the status quo.
Alex, the law allows it, but does not require it. Also there is far less admin involved in licensing a lodger than in licensing a housing company as the former just needs the filing of a simple document. It does though mean that all rental housing is dealt with in the same way.
Jenny, there are a heck of a lot of other things that can be done to get house building and renovation going again in this country, I didn’t cover them in this piece (you only have 500 words) but am happy to write another piece on them. However three simple suggestions I would make are:
1. Cut the VAT on refurbishment and renovation to 5%. The Liberals in the European Parliament fought long and hard to secure this right, we should now be using it.
2. Make the right to borrow a part of the right to buy so that social landlords can afford to replace the stock that is depleted when people choose to buy the home they have been renting.
3. Introduce a speculative development levy that is equal to 20% of the council tax a year, up to a level of 200% in year 10 of a property not being built/rented/sold and make the developer responsible for paying it rather than the land owner. That way you make it uneconomical to use planning law to block other builders from building by submitting plans that are never going to be developed in order to flood the prospective housing market.
There are a lot of other measures that can be taken on the supply and demand, the funding and the planning law that would also help.
So someone takes in a lodger ( how defined?) and has to be licenced. Excellent way of reducing the housing supply.
@Iain ” That way you make it uneconomical to use planning law to block other builders from building by submitting plans that are never going to be developed in order to flood the prospective housing market.” Any evidence this actually happens ?
Iain, this sounds interesting and you have good points about the overlaps and the differences between Labour and LD policy, but I would challenge that what you propose is still a centrallised scheme. The furore over the Bedroom Tax should have warned us about planning a housing policy for the country that is based on London’s concerns.
I feel the policy differentials here for the LDs should be what they were when Labour proposed a National minimum wage (arguably another form of market-fixing); Liberal Democrats did not demur at the principle, but advocated regionalisation. Anything that does not take into account regional variation and regional accountability is not fit for either the party’s or the nation’s purposes here.
Iain
I’ll keep this as short as I can.
Do you really think that Licensing makes things clear cut? Read the case law, or some of the Council’s rules.
We now have up to a decade of experience of licensing schemes under the 2004 Act, and in Wales and Scotland. It doesn’t achieve the objectives you say we need.
Please point me to the unequivocal evidence that shows that blanket licensing as you propose improves standards and is a benefit to tenants? The last time I looked the various research reports hasn’t produced any such conclusions.
For example in Scotland the govt research (2011, 5 years in) showed that £11.2m in fees had been charged (paid by tenants), 40 landlords had been refused registration, 20% of properties were not registered, and the scheme was admitted to have “not removed the ‘worst’ landlords from the sector”.
Ref:http://www.scotland.gov.uk/Resource/Doc/353982/0119289.pdf
In your own patch of Manchester they introduced a large scheme in 2007; after 5 years they did not extend it because it failed:
“We found that selective licensing did not achieve the outcomes we wanted; dealing with anti social behaviour through improved management standards and improved property conditions while remaining good value for money.
“Responsible landlords often came forward quickly but the time required to process the applications, chase up paperwork and inspect properties pulled the focus away from targeting and enforcing poor landlords to raise standards so the main aim of the scheme could not be effectively achieved.”
Ref:http://tinyurl.com/ooogtfu
I won’t go into the Oxford debacle or the current Nottingham Scheme which will be costing around £100 per tenant per year for 3 sharing. I do wonder why English Councils charge around 1000% more than the Scottish Scheme, though.
Licensing in this form is a dead horse with no proven value added for anyone. Why flog it?
Happy to engage further if you answer.
Rgds
@Ed Shepherd: if you rent a room out in the house you own and live in, the first £4250 is not taxed. This ceiling has not been raised for many years, so if you charge more than £354 a month, then you pay tax on that income. I know because I did this when I was working part-time and studying (needed lodger income to make ends meet!). Official info here: https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme
In many parts of London and the South East you would be hard pushed to get a room for less than than £350 a month (unless it was a cupboard somewhere grotty) and even in many other parts of the country eg Edinburgh, Manchester or Leeds, it’s not difficult to pay more than that for a large room in a nice property.
Incidentally, I struggled to find a model lodger contract, but insisted on having one for my protection as well as that of the lodger (in case I morphed into mean evil landlady; which BTW I didn’t and am still friends with my last lodger!). This makes me think that proper contracts for lodgers may be uncommon, which also makes me wonder how many people who rent a room declare it under the rent a room scheme.
Iain,
I certainly agree there are a host of reforms which should be considered to mitigate the dysfunctionality of the housing market.
Returning to your original idea, I think the issue of a soft form of licensing requires some evidence to substantiate it.
I think some councils, lib dem ones included, have introducing a kind of licensing scheme for landlords of houses of multiple occupation. I think its a bit early to see the outcome but it would be good to take this into account when advocating this reform.
As a renter for many years I’ve had my fair share of good and bad landlords. What I’d really like is some way to check out the background and history of a landlord and property before signing a contract. Agencies always run checks for landlords on the tenants, why not the other way round?
Fiddling while Rome burns. We need more house building.