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Opinion: Politicians don’t get the housing market

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Opinion: Politicians don’t get the housing market

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Published by Max Salsbury for 24dash.com in Housing and also in Central Government

Robert Flint Robert Flint

By Robert Flint, private renter and solicitor with Winckworth Sherwood LLP

Something is rotten in the state of housing and recent populist announcements seek to address the symptoms rather than the cause.

The Chartered Institute of Housing (CIH) has reported that in 2012, while 15 per cent of social rented homes failed to meet the Decent Homes Standard, a full third of private rented properties fell below this threshold.

Ed Miliband has entered the fray, commenting that "generation rent is a generation that has been ignored for too long” and announcing that a Labour government would introduce an "upper limit" on rent increases based on average market rates, scrap estate agency fees and introduce longer tenancies.

Should tenants have the legal right to expect something more than the roof not falling in (the Housing Health and Safety Rating System provides some protection in that respect) or should they rely on their own consumer power to force landlords to up their game? Till now, the market has more-or-less had the final word: the Decent Homes Standard does not apply to private rented housing.

In a properly working market, if people didn’t like their homes, they would move out; developers would build more housing to meet demand. Standards would be set by consumers. Bad landlords would go bust.

The problem is, many renters rent because they have to, not because they want to. A flat is a home and it’s difficult to move if you have kids in the local school or a job in the local area. The most vulnerable in society are the least able to vote with their feet to punish dodgy landlords. From this perspective, some regulation may not be a bad idea.

On the supply side, developers are restrained by planning laws and the most profitable homes for developers are not necessarily those needed by those at the lower end of the housing market. There is, particularly in London, a shortage of space. Houses take time to build.

Consequently, certain parts of London (or indeed, the entire South East of England) are unrealistically expensive. The CIH has reported that in Kensington and Chelsea, cuts to local housing allowance has meant that the number of people receiving that benefit and living in the private rented sector has fallen by 25%. On the other hand, taxpayers’ resentment of benefit recipients living in plush locations is also understandable. Private renters are paying their own sky high rents, and are subsidising others’ too. For anyone concerned about a cohesive, fair society, all this should be a worry.

The housing market is clearly not a properly working market. There is an argument in favour of more regulation of the sector to correct this market failure. Generation Rent calls for a national register of landlords and mandatory membership of a landlord body. Labour is now calling for rent controls (though it is not entirely clear how this is proposed to work). This could just be populist announcement which offers a false hope.

The danger is that red tape will reduce flexibility, cost a lot and encourage landlords to leave the market. We need large scale private investment in the sector, and nothing will discourage that faster than old school rent controls. We need to free up planning policy. We need a housing market where people who want to rent can rent, and those who don’t want to don’t have to.

To get to the sweet spot of higher standards and lower prices, we need more housing for rent, more housing for sale and more social housing too. It is that simple.

The views of the author are his own and do not necessarily reflect the views of Winckworth Sherwood LLP, any of its members or employers or its clients.

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