10 Sep

Miliband slammed over Labour policies on private rented sector

Miliband slammed over Labour policies on private rented sector

 Labour’s plans to introduce rent controls if it wins next year’s general election have come under fire.

In a withering report, the Institute of Economic Affairs says that Ed Miliband is going for completely the wrong solutions and accuses him of flawed thinking.

Instead, the IEA says he should instead look at a radical liberalisation of the planning system to allow the private rented sector to grow.

As well as rent controls, Labour wants to ban letting agent fees charged to tenants, and to increase the default length of the tenancy agreement to three years.

Under its rent control proposals, Labour would allow the rent to be set at the outset of the tenancy, but there would be restrictions on how much it could be raised during the tenancy itself.

But the IEA says that Labour’s proposals would actually result in higher rents, because landlords would raise them before the start of each new tenancy to compensate for future losses.

It also argues that landlords and agents would deliberately seek out highly mobile tenants, so that they could raise rents in between tenancies.

The IEA also attacks the proposed three-year tenancies, saying that security of tenure is not a major consideration for most tenants.

It also warns that if Labour’s proposals go ahead, they would be very hard to reverse, because of the vested interests of statutory bodies. It says tenant lobby groups would “gain the upper hand over small landlords, young people and mobile households”.

Mark Littlewood, director general at the IEA, said: “It is absurd that households across the UK have to pay such a large proportion of their monthly income on rent.

“But imposing rent controls on the market will do nothing to improve affordability, and will simply result in a number of perverse incentives that will harm those very individuals which such a policy sets out to protect.

“The Government needs to wake up to the fact that only through increasing the supply of rented accommodation can we really address the problems of high rents and poor tenancy security.”

The IEA’s report also says that rent controls in Britain between 1915 and 1989 were associated with the collapse of the private rental sector, from close to nine-tenths of the housing stock at the start of the 20th century to close to one-tenth by the late 1980s.

Swedish economist Assar Lindbeck – a socialist – once said: “Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.”

And Vietnam’s foreign minister Nguyen Co Thach said of rent controls: “The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realised it was stupid and that we must change policy.”

Cookies We use cookies to ensure that we give you the best experience on our website. To find out more about our cookies policy, see our cookies policy here or in the footer.