10
Sep
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.”