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

by Stephen Tall on May 1, 2014

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 Tall is Co-Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond: Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think-tank CentreForum and writes at his own site, The Collected Stephen Tall.