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.


There was a model in the UK, probably driven by Maggie Thatcher of aspiring to own your own home. We were encouraged to become property owners – not renters. Renting was for a short term only. It was certainly seen as a second-class system of living.

But things are changing – and have been for a while. 10 years ago there were estimated to be be 2.5 million houses in the rented sector – today it is thought there are 4.8m – nearly double. And the evidence suggests this is a growing market. In 5 years time there could be close on 6m houses…

Rent in the economy is estimated to be £48bn and this is estimated to rise to £70bn by 2017.

So why the changes?

Firstly, bricks and mortar aren’t quite the same safe investment they always were. We have seen some significant drops in value – or rather swings in value – from 2007 to today. Those with large mortgages and small amounts of equity have seen their own money disappear. Secondly, the cost of accessing the buyers market is now high – a 10% deposit on a £150,000 house (forget London for the moment!) is a huge amount to stump up! Parents usually provide the key!

But we are also seeing a bit of a shift in perception. Renting isn’t the social stigma it used to be. We have probably seen the market change as a result of the improvement in student accommodation. For some time the student market has been ahead of the private rented sector – spotting that people are prepared to pay a higher price for better quality.

So we now see some better quality rented stock – for grown ups. That model seems to be getting some traction. There are some new entrants to the market who see this as a massive opportunity – the likes of UK-R – who I am working with. We hope that they will have a pilot scheme in Nottingham soon. It will show a new way of living – and not a moment too soon!