Rent Controls Would Spell Disaster For Thousands Of Buy-To-Let Investors

[ProleStore]

This Parliament has been a huge wasted opportunity. The Blair-Brown years were a hyperactive spending spree with a packed legislative schedule. By contrast, the Coalition had no money to spend and a very modest legislative programme. They should have been using this quiet period to intelligently crack on with reforms that don't cost taxpayer money like improving the laws that govern the private rented sector.

Planning liberalisation is an even better example. It costs nothing, and is entirely consistent with the Conservative's professed desire to reduce government regulation.

So why hasn't it happened?

[Si1]

Planning liberalisation is an even better example. It costs nothing, and is entirely consistent with the Conservative's professed desire to reduce government regulation.

So why hasn't it happened?

Vested interests

Remember, Margaret Thatcher was notorious for bringing people down. Galtzieri (apologies if spelled wrong), Scargill, Callaghan, kinnock.

The first person she brought to heel, however, was Ted Heath. The very first thing she attacked and beat was the vested interest ruling class of the Tory party itself.

[Si1]

With some help from Christopher Chope (Con, Christchurch)

Well, despite me being centre right wing, the Tories lost my support there.

[The Knimbies who say No]

With some help from Christopher Chope (Con, Christchurch)

Yes, worth remembering.

[Ah-so]

Rent controls aren't an economically rational solution, but they are no less rational than a massive programme to build houses which, by and large, aren't needed.

The problem is not a shortage of supply, but an excess of demand. The excess demand is not (for the most part) demand for housing. It is demand from landlords for a work-free income from the state. The correct way to tackle the problem is therefore to reduce that demand.

The right solution (or at least, the best proven solution) is a land value tax, which would force people to pay the market price for their unearned income, leaving a net income of close to zero. Failing that, any measure to restrict or tax the earnings of landlords is the next best thing, although the positive effects will be smaller and the negative effects greater.

Building houses to feed the bubble will work, but only by flooding the market, and making hoarding unprofitable. However, it is ultimately malinvestment, and a waste of time and resources. It is like allocating 10% of the economy to grow tulips in order to dampen out tulipmania.

Just to be clear, I am 100% in favour of an end to planning restrictions and consequently a massive increase in private sector house building, both on moral grounds and because the housing emergency is so desperate. It is also perhaps the most politically acceptable solution. It calls the bluff of the faux-marketeers, rather than fighting against them, and allows plausible deniability when the landlords are inevitably wiped out.

In fact, it is what I would do if I was in government, along with a public sector building programme. That's just realpolitik though, and it doesn't change the basic facts.

I do not buy your argument - are you able to provide any economic evidence for it?

Over the past few years we have an large rises in rents, particularly in certain pays off the country. The rental market is a reasonably good market - there are plenty of participants and no one able to control the market and so rents that we see represent supply and demand. The fact that they are so high suggests that there is insufficient property to meet demand.

I would agree that property prices are exaggerated by low interest rates and additional demand from landlords, but this does not change the fact that there is insufficient supply in aggregate in the economy.

The population of the UK has grown by about 4m over the past 15 years and the housing supply by about 1m (if that). Demand for housing has increased more than supply has. You do not need to be an economist to see that this will have a positive effect on property prices.

Edit for typo.

Edited January 5, 2015 by Ah-so

[Si1]

I do not buy your argument - are you able to provide any economic evidence for it?

Over the past few years we have an large Roses in rents, particularly in certain pays off the country. The rental market is a reasonably good market - there are plenty of participants and no one able to control the market and so rents that we see represent supply and demand. The fact that they are so high suggests that there is insufficient property to meet demand.

I would agree that property prices are exaggerated by low interest rates and additional demand from landlords, but this does not change the fact that there is insufficient supply in aggregate in the economy.

The population of the UK has grown by about 4m over the past 15 years and the housing supply by about 1m (if that). Demand for housing has increased more than supply has. You do not need to be an economist to see that this will have a positive effect on property prices.

So we're trying to squeeze people into about 4% less space per person.

You do not need to be an economist to see that this doesn't justify tripling house prices.

Edited January 4, 2015 by Si1

[davidg]

Over the past few years we have an large Roses in rents, particularly in certain pays off the country.

[Bland Unsight]

...

Over the past few years we have an large Roses in rents, particularly in certain pays off the country.

...

Note accordion to the IPHRP.

Private rental prices paid by tenants in Great Britain rose by 1.0% in the 12 months to September 2014.

Private rental prices grew by 1.0% in England, 1.4% in Scotland and 0.2% in Wales in the 12 months to September 2014.

Rental prices increased in all the English regions over the year to September 2014, with rental prices increasing the most in London (1.5%).

Source: ONS

That's a real terms fall - which would fit with the real terms fall in earnings, which would fit with the general principle that people pay rent with earnings.

[long time lurking]

I agree.....there will be a tipping point soon when BTL tenants start to be seen as a block of voters worth courting (much as current policy is often "pensioner friendly"),

I think that day has already arrived hence Dave &co`s latest promise of free money to the under 40`s to buy a house,why under 40 ? i would say they can see the generational divide and they want to be seen doing something for the side that was given the shity end of the stick

[long time lurking]

Note accordion to the IPHRP.

Source: ONS

That's a real terms fall - which would fit with the real terms fall in earnings, which would fit with the general principle that people pay rent with earnings.

Quote

Private rental prices paid by tenants in Great Britain rose by 1.0% in the 12 months to September 2014.

Private rental prices grew by 1.0% in England, 1.4% in Scotland and 0.2% in Wales in the 12 months to September 2014.

Rental prices increased in all the English regions over the year to September 2014, with rental prices increasing the most in London (1.5%).

Surprised there was any increase in Wales even if it was tiny,most have given up asking preLHA cut prices and have reverted to the lower LHA price

[justthisbloke]

Note accordion to the IPHRP.

Is everyone using phones and tablets these days? "Rent Roses"..."accordion to the IPHRP"?

Am I the only one who still owns a keyboard?

My malapropisms are 100% mine.

[long time lurking]

Is everyone using phones and tablets these days? "Rent Roses"..."accordion to the IPHRP"?

Am I the only one who still owns a keyboard?

My malapropisms are 100% mine.

Nope I got one,so any spelling mistakes and bad grammar are all my own doing

[Exiled Canadian]

Is everyone using phones and tablets these days? "Rent Roses"..."accordion to the IPHRP"?

Am I the only one who still owns a keyboard?

My malapropisms are 100% mine.

Just think...if they'd stuck to a trusty old PC and keyboard instead of wasting money on these newfangled gadgets they could have got on the housing ladder by now.....

[Bland Unsight]

Is everyone using phones and tablets these days? "Rent Roses"..."accordion to the IPHRP"?

Am I the only one who still owns a keyboard?

My malapropisms are 100% mine.

Keep up at the back, my era was on porpoise. Keyboard all the way at this end.

[porca misèria]

Rent controls are wrong.

The only really relevant question is, are they more or less wrong than the status quo? In principle it ought to be possible to devise a scheme that's less wrong than our current situation, though in practice I'd be sceptical.

The right solution to excessive rents is of course to remove all the taxpayer funds that drive them upwards in the first place.

[porca misèria]

Landlord pressure groups have done everything they can to prevent politicians from turning private renting into the good value for money, domestically stable form of tenure it could so easily be.

Have you any idea how long that's been going on?

I was first aware of it in the 1980s, when the unholy conspiracy of Sir Humphrey and the Judiciary scuppered the Landlord and Tenant acts of 1985 and 1987, which tried to fix some of the worst abuses. But of course it goes back far further, and underlying it is the remains of feudal power structures.

[Si1]

Have you any idea how long that's been going on?

I was first aware of it in the 1980s, when the unholy conspiracy of Sir Humphrey and the Judiciary scuppered the Landlord and Tenant acts of 1985 and 1987, which tried to fix some of the worst abuses. But of course it goes back far further, and underlying it is the remains of feudal power structures.

More details please? :-)

[Dorkins]

Have you any idea how long that's been going on?

I was first aware of it in the 1980s, when the unholy conspiracy of Sir Humphrey and the Judiciary scuppered the Landlord and Tenant acts of 1985 and 1987, which tried to fix some of the worst abuses. But of course it goes back far further, and underlying it is the remains of feudal power structures.

Yes the poor state of private tenancy law goes back a long way and is only now moving up the political agenda due to millions of people being forced into the PRS by the high cost of buying and the limited supply of council housing.

[Guest TheBlueCat]

It goes in cycles I guess, but rent controls of that sort always end up with a lot less rented housing being available in the long run. What I suspect most renters would prefer would be for the rules around security of tenure and rent rises to be rebalanced somewhat. Something along the lines of making all tenancies run until the point where the landlord can prove they need the place to live in themselves with rent rises indexed to the prices for new rentals (whether that's up or down) would be a good place to start.

[winkie]

It goes in cycles I guess, but rent controls of that sort always end up with a lot less rented housing being available in the long run. What I suspect most renters would prefer would be for the rules around security of tenure and rent rises to be rebalanced somewhat. Something along the lines of making all tenancies run until the point where the landlord can prove they need the place to live in themselves with rent rises indexed to the prices for new rentals (whether that's up or down) would be a good place to start.

Make BTL a proper long-term business, not an instant access bank account linked to an ATM...

[Ulfar]

They are a lot of things that could be done, they won't be.

Follow Scotland's lead and ban letting agent fees. Currently in the rest of the UK it is in the lettings agents interest to churn tenants. Removing this incentive would help security of tenure.

Change AST minimum length to 1 or 2 years.

[Eddie_George]

Note accordion to the IPHRP.

Source: ONS

That's a real terms fall - which would fit with the real terms fall in earnings, which would fit with the general principle that people pay rent with earnings.

I have an idea. Let the banks lend money to renters to pay their rents!

What's the worst that could happen?

Edited January 4, 2015 by Eddie_George

[Bland Unsight]

I have an idea. Let the banks lend money to renters to pay their rents!

What's the worst that could happen?

They tried that. They called it pay-day lending. (Intermediaries between the banks and the borrowers were needed in order to spare embarrassment.)

[awaytogo]

No need.

Carry on reducing LHA rent limits, aligned to local wages.[/quote)

Yup housing benefit needs cutting and freezing.

[davidg]

They are a lot of things that could be done, they won't be.

Follow Scotland's lead and ban letting agent fees. Currently in the rest of the UK it is in the lettings agents interest to churn tenants. Removing this incentive would help security of tenure.

Change AST minimum length to 1 or 2 years.

It would surprise you that many people don't want more than a 6 month contract, even if they can break it on their side. That's my experience. Maybe it is ingrained psychology. I agree that 3 years should be the typical term though. As for rent controls, yes, where the two parties remain the same and without major renovation works being carried out - say more than 6 month's rent value, then rent should be aligned with the sector.

and phase out HB. Fixing a stuck accellerator by putting the handbrake on is daft.