Rent reforms – Miliband to announce 20th area of Lib-Lab agreement today

decent homesSix weeks ago I highlighted the 17 policy areas where there is significant agreement between Labour and the Lib Dems. These range from tax-cuts for low-earners and the mansion tax to local school accountability to an EU in/out referendum. There were also two areas I omitted, flagged by Adam Corlett in a comment here: childcare and a living wage.

A 20th area can now be added, with Ed Miliband set to announce Labour’s plans for the private rental sector, some of which mirror the Lib Dems’ Decent Home for All policy adopted in 2012 – notably this:

3.4.3 The assured shorthold tenancy with its market rent and limited security of tenure has brought more properties into the private rented market and the flexibility suits many tenants and landlords. However, the insecurity of tenure can be damaging to employment prospects and particularly difficult for families who need continuity of access to education, health and other services. Although tenants already have the right to negotiate a longer tenancy term than the standard six months, this is not widely known and in any case depends upon the landlord or agent agreeing an extension.

3.4.4 Liberal Democrats will encourage a new form of tenure; a ‘mini-lease’. This would have a probationary period of 6 months to a year to give the landlord/agent an opportunity to assess the reliability of the tenant, followed by an agreed fixed term of at least three years. It would be possible for landlord and tenant to agree reduced landlord responsibilities (for example, for day-to-day repairs) in return for a lower rent.

Here’s how today’s Guardian outlines the Miliband plan:

New three-year tenancy agreements that would start with a six-month probationary period allowing landlords to evict a tenant if they are in breach of their contract. This would then be followed by a two-and-a half-year term in which tenants would be able, as they are now, to terminate contracts after the first six months with one month’s notice.

Spot the difference? Me either.

Two further areas of reform are highlighted by Miliband which aren’t in the Lib Dem policy paper:

• A new formula to prevent excessive rental increases. Labour will be guided by the Royal Institute of Chartered Surveyors, which is examining options for a new benchmark. This could be linked to average rent rises, inflation or a combination of the two.

• Ban letting agents from charging tenants fees just to sign a tenancy agreement. They will instead have to ask landlords for fees.

On “rent controls” – or ‘Venezuelan-style rent controls’ to give them their full Grant Shapps title – I’d be interested to know what actual difference this will make to most renters. As Daniel Knowles points out at the Economist, the proposals are pretty modest, in line with how most of the market already operates, and unlikely to impact negatively on most landlords, at least not the long-term, responsible ones:

Rents will be set initially at market levels, and rent increases will not be banned, but rather limited, and only then for the three years in which tenancies will last. That is actually very much in line with how most landlords already work – most wait until a tenant leaves before pushing rents up. The rental market is extremely amateurish and a lot of its faults are simply the result of people doing what they’ve always done. It might take legislation to bump them into changing their ways.

As for banning letting agents charging tenants tenancy agreement fees, will this simply result in landlords passing the costs to their tenants?

The Miliband ‘Generation Rent’ reforms seem generally innocuous – an attempt to ensure the rental market accurately reflects market prices. If your rent is above market price, they’ll help. But if your rent is in line with market prices, but still too high, they won’t. Rent reforms can tackle abuses but won’t and can’t do much to address the real cause of the housing problems: under-supply, that Britain isn’t building enough homes to house its citizens. It’s tackling that cause of market failure which remains the fundamental cure.

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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25 Comments

  • Like you say it all seems pretty innocuous, would be nice to hear him talk about the real issue; the lack of housing!

  • Eddie Sammon 1st May '14 - 10:17am

    The problem is not that the idea is overly socialist, it is that Ed Miliband wants a socialist country. It’s not healthy for democracy if liberalism is basically socialism or conservatism with a few added extras.

    Regards

  • Mack (Not a Lib Dem) 1st May '14 - 10:33am

    @ Stephen Tall
    “Rent reforms can tackle abuses but won’t and can’t do much to address the real cause of the housing problems: under-supply, ”

    Which is why labour has promised to build 200,000 homes a year. A real pledge, unlike the Liberal democrats’ pledge on tuition fees.
    http://www.independent.co.uk/news/uk/politics/labour-pledges-billions-to-build-200000-new-homes-per-year-if-it-wins-next-election-8952691.html

  • Mack (Not a Lib Dem) 1st May '14 - 10:46am

    @ Stephen Tall.
    “Spot the difference? Me either”.

    The difference is that the Liberal Democrats have been in government for four years. So why haven’t they implemented these reforms that are so worthwhile and so similar to Labour’s?

  • You’re being a little disingenuous here Stephen, the real headline grabber is rent increase caps, which as you say isn’t part of our policy. The fact we agree on the lease reforms will cause us massive problems come the election, as Mack says why haven’t we got on and done this in government? We bang on about a dysfunctional housing market but have failed to build enough homes to stand still, let alone reduce the housing shortage.

  • Frank Booth 1st May '14 - 10:54am

    My landlord made a simple point to me. Why has he bought this property to rent? No point having savings in the bank when you don’t get any interest. He could have bought shares, but like most sensible Brits wouldn’t want to be at the mercy of spivs and speculators. So why not instead invest in the never fail property market? A house price correction would cost the banks billions (so that won’t be allowed to happen). For all sort of reasons we have a complete misallocation of resources in the UK. Far too much bank lending goes on mortgages. Building more homes would help, but we need an economy in which other assets are attractive to people.

  • Frank Booth 1st May '14 - 11:01am

    So we have a policy on which Lib and Lab broadly agree. The Tory reaction is incendiary – similar to their Tea Party brothers in the US and yet…………. Lib Dem strategy remains ‘equidistance’ between the other two parties.

  • Richard Dean 1st May '14 - 12:31pm

    I couldn’t find the word “LibDem” on the webpage for the Guardian report. So if the LibDems do not correct the impression that Labour invented this idea, then the idea is a LibDem failure.

    Are the proposed reforms all that helpful? Landlords normally gain from continued occupancy anyway. How will this affect mobile workers who may not want 3-year agreements? What effect will it have on council house tenants where councils have a duty to house people and may therefore be restricted in their ability to evict bad tenants?

  • Mack (Not a Lib Dem) 1st May '14 - 12:50pm

    “Maybe because the Lib Dems have 9% of MPs. There may be other reasons, but that’s the first I’d reach for.”

    That’s the justification for pusillanimity that the Lib Dems always reach for. If having only 9% of MPs prevents the Lib Dems from implementing policies dear to them, i.e. opposition to Tuition Fees, or Landlord and Tenant reforms, what on earth is the point of them being in government at all? Why are they shoring up the Tories who couldn’t get a mandate , standing by powerless and watching their own poll ratings run into the sand? If Labour’s policies are so good and the Liberal Democrats partially claim credit for them they should attempt to implement them. After all, there is plenty of room in the next Queen’s speech thanks to the lame duck year you insisted be added to the parliamentary term and which has resulted in MPs feeling redundant because of the obvious lack of legislation. In a situation where the Coalition has run out of steam why not energise the process with rent reforms? The electorate would be very grateful: particularly those insecure and vulnerable tenants whose lives are made unmanageable by rogue landlords. You never know, it might even produce beneficial poll ratings for you. Ed Milliband is prepared to stand up to rogue Landlords and all those other predators: that’s why I so deeply admire him. Why don’t the Lib Dems show some fight?

  • Alisdair McGregor 1st May '14 - 1:03pm

    The rest of Miliband’s policy – especially the Rent control part & the fees changes – is pretty toxic, even anti-competitive & not something we should be supporting.

  • Stephen Howse 1st May '14 - 2:28pm

    I agree with Alisdair. Not because I think letting agent fees are reasonable – £200 to print a contract, £50 to renew a lease (i.e. change the date on said contract and print it out again) is disgraceful – but because the alternative will simply see letting agents passing those costs on to landlords instead. Result – rents are increased instead, which means the longer your tenancy is, the more you will end up paying on top.

    We absolutely should not be going down the road of rent controls. Instead of punishing existing suppliers of a desirable good, we should be increasing supply – which simply means building more homes in and around the places people want to live. That might mean concreting over a few green fields, but so be it.

  • Alisdair McGregor 1st May '14 - 2:36pm
  • Matt (Bristol) 1st May '14 - 2:49pm

    Rent controls will only make anything approaching sense if applied locally/regionally, not nationally (and then who by – where does power lie here?) – there’s still some detail we need to see, but I would hope people in the party see that Labour is moving in a direction that is not antithetical to Lib Dem values.

    I would be prepared to see the LibDems and Labour both support a fixed-term rent control arrangement, UNTIL the target level of new homes built is reached; whilst I can see that longterm market fixing is bad for the economy, there are many people now who have given up hope of owning their own home, and the rental sector has been ignored for a long time, whilst buyers get wooed endlessly by political parties with policy sweeties.

    It’s all very well to say that the problem is supply, but how successful have attempts to drive up supply really been? The last attempt was the bedroom tax; how’s that working out?

  • Mack (Not a Lib Dem) 1st May '14 - 3:57pm

    @Alisdair McGregor

    Show me some evidence that competition has reduced the rents of private landlords big or small. It hasn’t. It’s simply competition for competition’s sake because the Lib Dems and the Tories, supporters of Capital, are ideologically wedded to the idea of competition even when it produces no tangible benefits. (cf the sell off of the profitable State owned Royal Mail and East Coast Rail). I look forward to the time when the private rental sector is tiny and properly regulated, and most social housing is owned by the state. Only then will people be able to obtain security of tenure and avoid iniquities such as the Bedroom Tax. Ed Miliband’s proposed reforms are a welcome step in that direction. Housing benefit provision means that a huge part of the rented sector is shored up by the state anyway, so let’s get rid of the private landlords and use the housing benefit to build affordable council accommodation for people instead of subsidising irresponsible, mercenary landlords. Does the Coalition really want the re-surgence of Rachmanism to be counted amongst its many dreadful legacies as well as the Bedroom Tax?

  • Miliband’s proposals would massively decrease the housing subsidy paid to landlords from the Social Security budget.

  • Just heard Tim Farron on ITV news & surprise surprise, he doesn’t approve of this policy……..

    Yougov daily asked the question though & 61% voted in favour of the proposal so yet again! Edit Miliband scores a hit.

  • Eddie Sammon 1st May '14 - 11:30pm

    I have an urgent message about monetary policy and housing. House prices and rents rise for many reasons, but one big factor is the Bank of England’s extremely loose monetary policy. I am not saying disagree with the bank, but what I am saying is that if people assume this cheap money world is going to last forever and develop policy around that, such as building on the masses of green belt land or draconian immigration controls, then society as a whole will suffer.

    We need a balanced and proportionate housing policy.

  • When I first heard these reforms, I thought they looked strangely familiar. Something I would vote for. So not surprised they are in libdem policy documents.

    I think you are wrong in your analysis that letting agent fees will be passed onto the tenant indirectly. Those fees are grossly inflated and almost pure rent-seeking rather than an actual cost. Competition would drive those fees out as there are not enough landlords with property and tooo many tenants.

    I think the line this will affect the minority of bad eggs is really wrong. It is quite a major step-change as it eliminates those high-return landlords who capitalise on tenant churn to maximise returns and repay frothy loans. Given buy-to-let stoked a bubble as many investors entered, this is a sensible demand side cooling measure.

    The truth is that I have not seen a single political party (including libdems) which has fully grasped how to address an utterly dysfunctional housing market. I wouldn’t mind if there a proper regulator in place to stamp out misconduct but there isn’t.

  • Richard Fagence 2nd May '14 - 11:38am

    Interesting comments from Mack(Not a Lib Dem). Leaving aside the fact that here is another opponent of the party who is too ‘frit’ to use their real name on posts, I have a couple of questions for him. During the thirteen years that Labour were in power how many houses were built per annum? Why has it taken Mr Milliband and his chums four years to come up with this new pledge?

    And talking of pledges, how many Labour candidates at the last General Election signed the National Union of Students pledge on tuition fees? Does he know? Does he care?

  • @ Stephen

    “I’m not sure why that’s disingenuous – the point of the piece was to highlight where Lib/Lab policy overlaps”

    You’re right, disingenuous is a bit OTT from me 🙂 my point really is there’s more we disagree on here than agree – the policy on rent controls is much more contentious. I could see most parties thinking the longer lease legislation makes sense – I can’t see LibDems going for rent controls.

  • Julian Tisi 2nd May '14 - 1:36pm

    While it’s reasonable to point out where Labour and Lib Dems agree it’s only right to also point out where we don’t. The headline of the new Labour policy is rent controls. I agree with Tim Farron – I don’t think these are a good idea. There’s a thread coming through Labour economic policy which I really don’t like. It’s about finding populist eye-catching answers to essentially complex problems by laying the blame for the problem on an easy scapegoat. In the case of rent controls, this is unscrupulous landlords. As Tim said on QT last night, the real problem with rent prices is lack of supply. Increase the supply of housing and it will become a buyers’ market, then rent controls won’t be needed. Without addresing the underlying problem (lack of housing), rent controls could actually make things worse by skewing the market in certain areas. The likelihood is that rents would become higher than ever in certain areas, as landlords add in the cost of not being able to increase rents by the market value.

    A worse example of Labour’s populist but damaging interfering in the market is their energy price freeze policy. Once again this ignores the underlying issue – the high and volatile wholesale cost of gas and electricity, due mainly to ageing energy infrastructure and a failure for decades to invest in expoiting new energy sources. Instead it ignores the underlying problem, blames it all on the easy scapegoat – profiteering by energy companies – and creates perverse incentives, such as risking putting small energy suppliers out of business should wholesale prices go up during the freeze.

  • John Ramsbottom 2nd May '14 - 3:49pm

    Moving the administration charges from the tenant to the landlord will not push rents up significantly. Landlords will not pay the excessive fees now being asked for by letting agents. They will either negotiate a lower charge or find some way (perhaps with others) to process the paperwork cheaper. The system of not charging prospective tenants a fee to rent a property operates in Scotland and I did not notice much of an increase here. Our contract is written in such a way that after six months the contract seems to auto renew on a monthly basis with a two month notice period required from either side.
    This is a real vote winner for the Labour Party. Many tenants struggle to find the contract and renewal charges. It will have a far better electoral impact than the raising of the Income Tax threshold will produce.

  • Helen Dudden 4th May '14 - 11:51am

    I think that all social housing should be up to a certain standard. The Decent Homes is still not finished.

    I have lived in a flat, and it was not great to say the least. Very difficult to move on, no housing.

    So upsetting, not to have a home that is a place you can rest and relax in.There was no way forward.

  • I think Nick Clegg should be replaced as leader as soon as possible. He’s relegating our party to league 2 status and I would like to see a social liberal, Tim Farron, replacing him as leader.

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