Thursday, 1 May 2014

Labour's barmy rent control announcement will be terrible news for tenants

Labour's big announcement at their European elections launch is that they will introduce rent controls. Just setting aside for a mo the fact that this has nothing to do with the EU elections, this policy is likely to do more harm than good to the housing market. It will certainly be extremely expensive.

Let's start with those who will benefit - anyone already in rented housing will see their rents capped. All will be good for them, at least until any major repairs need to be done.

The people who will lose out most will be people in need of rented housing. After all, who will invest in new housing for rent if you know that the amount of income will be capped. Maybe you will get a fair return now, but what about the future? And without a degree of certainty, few will make an investment that will require many years to get a decent return. So without a steady supply of new housing for rent coming onto the market, what will happen to all those people needing housing? They will be forced to continue living in cramped or inadequate housing, sleeping on sofas or with family.

Of course, local councils have started building council housing again, but the numbers are tiny and they are not likely to rise all that fast in the near future.

Those already in rented housing will lose out as well - at least in the medium to long term. With rents capped, the investment needed in renovations and repairs will be harder to make so properties will slowly dilapidate.

So in order to provide homes to rent under Labour's plan, there will need to be vast subsidies from the state - either the government or local councils - to encourage developers to build and to make sure that homes remain at a decent standard and get repaired when they need it. And let's face it, there isn't a lot of spare cash floating around in the public sector. The only answer will be big tax rises either locally or nationally.

Nobody thinks that tenants should be ripped off by having to pay exhorbitant rents. But the answer is surely to use market forces - by building lots more homes for rent - rather than artificial means to keep rents fair.

Slow, fair and steady rent rises are the best way of ensuring a market which rewards those who invest in rental housing with a fair return whilst making sure that the people who pay the rents (both tenants and councils) can afford to pay. That is what we have traditionally done in Cornwall under both the previous Conservative administration and under the new Liberal Democrat/Independent leadership.

Interestingly, the Labour group on Cornwall Council seem to disagree with their party leader. Back in February they didn't raise a peep in opposition to the slow and steady rent rise proposal. So will they actually support their new party dogma?

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