Labour rent capping?

There is a major problem, in particular in London, for people who rent their homes. Many of them are reluctant tenants – they simply cannot get on the rising buyers market. It’s a major problem.


Yesterday Ed Milliband announced that a Labour Government would intervene in the market – effectively placing a cap on rent rises. He wouldn’t interfere with the initial market setting – but would attempt to benchmark the uplift and then apply this notional figure in annual rises.

So in order to make this actually work he would need to alter the basic terms of an agreement. As now, a tenant would be able to terminate a tenancy after the first six months, with one month’s notice. A landlord could only do so with two months’ notice and if certain conditions were met – such as the tenant failing to meet their rental payments, engaging in anti-social behaviour or breaching their contract in other ways. After the six-month probationary period, contracts would automatically run for a further 29 months – so a total of 3 years.

Milliband has suggested the RICS were helping with setting the average rises – something that has been denied by the RICS. This seems a little sloppy. I do know from the Institution that they do not take political sides. The RICS is apolitical.

I think this is a poorly thought out policy.

I have sympathy with those renting – and the inexorable rise in rents. But this is partly as a result of a lack of supply – and the market sorts that out itself. We do have a number of policies to provide more accommodation in the private rented sector. There are millions of pounds being currently placed in the market. Enough to make a difference. These investors and developers could easily be spooked by rent caps. Historically they have not worked.

What will potentially happen is that there will be a reduction in the numbers of houses coming forward. The market hates Government intervention and Governments of all colours think they can buck the market. In the majority of cases they simply can’t.

2 comments on “Labour rent capping?

  1. The reality is that the issues these policies are aimed to guard against only affect a small section of the rental market. Most landlords in the East Mids would prefer to keep tenants in rather than increase the rent and risk losing the tenant. A small increase in rent is lost quickly if the property is empty for a month or two. Not being able to get possession would be a problem for the whole market – particularly the lenders.
    The section of the market affected by these sorts of issues would be even smaller if there was more social housing built rather than relying on small scale landlords to pick up the slack. But it makes better reading to bash the landlords and call for rent controls than it does to either commit more funds to Registered Social Landlords or even get in to bed with insurance companies so they can help to increase supply.

  2. Dan the folks I have spoken to in the last 24 hours have all said that this is really a London issue and the whole of the UK is being tarred with the brush. I guess it is what we have come to expect – a disconnect between Government and those who live North of Watford!


Leave a Reply