Ed’s brave housing proposal

Rent House Showing Rental Property Estate AgentsRent regulation and three year tenancies. That’s Ed’s big housing idea for the private rented sector. It is what the people wanted. Well, quite a lot of people appear to support the idea.

But even before the formal announcement has been made it is apparent that some are vehemently against. The initial voices of outrage were those one might have anticipated. The incorrigible Mr Shapps and the Adam Smith Institute, ably supported by that other cheerleader for deregulated markets City AM were quick off the mark in condemning Labour’s proposals for ‘rent control’ in lurid terms. It is little short of socialism, red in tooth and claw. Assar Lindbeck’s famous quote about rent control being the best way to destroy a city apart from bombing was dusted off and given another airing.

Those in the red corner were supportive of the initiative as a follow-on to Labour’s energy price freeze. Mark Ferguson at Labour List welcomed the move and argued that Miliband needs to stick to his plan in the face of the inevitable criticism – this is a bold move and should be proclaimed as such.

Ferguson finishes his post by noting that a quarter of Conservative MPs are private landlords. Which is no doubt a useful piece of information when interpreting the howls of outrage which will inevitably follow today’s formal policy announcement.

But are rent regulation and longer tenancies a good idea? [Read more...]

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A voyage of rediscovery

street scene (2099)Today’s papers bring us further news of the sickness that afflicts our housing market.

On the front page of the Telegraph is a piece focusing on St Vince of Cable’s warning that the housing market is exhibiting all the signs of overheating and that Mark Carney is considering stepping in on the lending side. He fears we’ll repeat the mistakes of the benighted Brown. The story takes the usual form – there are references to the danger that the market ‘may be heading for a bubble’, never the suggestion that there’s already a problem. There is no real appreciation of the lags associated with these types of macro-relationships. The market has already been given a big push, which hasn’t worked its way through the system yet. And nor, of course, is there a discussion of the difference between a boom and a bubble.

In my view Vince is right to be worried, but I don’t suppose it will have much effect. Yet by the time it becomes hard to dispute a boom is in progress it’s already way too late to act.

Over in Graunland private renting is described as the “social scandal that is being ignored”. And there is a piece about our old friend Mr Fergus Wilson, Britain’s biggest buy-to-let landlord. It reports that Mr Wilson has decided to evict the 200 of his 1000 tenants who receive housing benefit. The argument here is that rents are increasing while benefits are being eroded. Benefit-dependent households are therefore more likely to be in arrears, even before the arrival of Universal Credit. Mr Wilson considers he’d be better off reletting the properties to Eastern European migrants because they are more reliable. [Read more...]

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Tenants uniting?

8949165923_4d16093596For a long time we have thought of the private rented sector as the most disorganised part of the housing market. Most properties were let by small landlords who owned one or two properties. Very few landlords belonged to any form of trade association, although around half let their properties through letting agents. On the demand side, most tenants held six month tenancies and many tended to be young, mobile and poor. Quite a lot of tenants lacked familiarity with their rights or the incentive to enforce them, particularly in the absence of any legal barrier to retaliatory eviction. A few localities had established groupings of private tenants, but such organisations were most notable for their rarity. Information was relatively sparse and circulated with difficulty: so reputation effects, on either side of the market, were weak.

These characteristics present considerable regulatory challenges. The levers for enforcing rights and obligations are weak. The consumerist model is most inadequate in precisely those subsectors of the market where rights are most likely to be violated. Command and control regulation around standards relied upon local authorities for enforcement, and this function was perennially under-resourced.

Yet we are witnessing a reconfiguration of the landscape of private renting that has the potential to completely transform the nature of the game. [Read more...]

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Regulatory possibilities for private renting

Water damaged and moldy basement wallLast Thursday I went up to That London to take part in a seminar on Alternatives to regulation.

I made a brief, somewhat speculative, presentation around the regulation of private renting, in the light of current debates about behaviour change and behavioural economics. Some of the ideas need plenty more thought and working through in more detail.

You can find the text to accompany my presentation below the fold. [Read more...]

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Retoxifying the rentier

caras apretadas1The resurgence of private renting is perhaps the biggest transformation in the UK housing system over the last decade.

Indeed, if you put it into a longer historical perspective it is quite remarkable. In the 1970s, in the face of seemingly inexorable growth of owner occupation and local authority renting, housing commentators seriously forecast the imminent demise of the private landlord. The decline of private landlordism went into reverse under the later Thatcher government, but its revival has been propelled more rapidly since the early 2000s by the engines of Buy-to-Let funding, affordability problems in owner occupation, wage stagnation, high household debt, and poor economic prospects.

The change in the scale of the sector has been accompanied by an equally important rehabilitation of its reputation. The 1960s brought us the word Rachmanism to signify exploitative and intimidatory landlordism. In the 1970s those on the political left contemplated the prospect of the extinction of the private landlord with enthusiasm: the landlord was an anachronism of the Victorian age – profiting from basic needs and misfortunes – that had no place in a modern civilised society. Yet from the 1980s onward there has been a continuous flow of policy statements aimed at rehabilitating and legitimising private landlordism.

The current government has sought to stimulate the sector through a range of funding mechanisms. It has sought not only to increase the scale of the sector but also raise its reputation further by encouraging institutional investors to enter the market. Institutions with valuable brands to protect are not, in theory, going to risk engaging in the sort of poor landlord practices – neglect of physical maintenance, harassment, unlawful eviction – that have been seen as endemic in the sector.

It may look like private renting is therefore very much back in business. But there are problems ahead. [Read more...]

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New housing ideas from One Nation Labour?

street scene (2099)Under the heading A One Nation programme with new ideas to begin turning Britain’s economy around yesterday Ed Miliband outlined six bills that would appear in Labour’s alternative Queen’s speech. It is good to see him offering some policy detail, at last, but to what extent are we being offered new ideas?

The focus of the housing component of his statement was the private rented sector, which in one sense is new. The idea that the political battle to be fought over housing was going to be fought over private renting is one that would have made no sense a few years ago. And whether it is the biggest problem facing the housing system at the moment, given the broader context of poor affordability for a nation of frustrated aspirant home owners, could be debated.

Leaving that to one side, what did he offer? [Read more...]

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Rebalancing towards renting

Rent House Showing Rental Property Estate AgentsOne of the central conclusions drawn from the Global Financial Crisis was that the UK economy was too dependent on financial services and unproductive investment in the property market rather than the real economy. So the economy needs rebalancing.

One of the main issues facing the housing market is that households overwhelmingly aspire to owner occupation, even as the chances of accessing the tenure become increasingly limited. House prices that seem to defy gravity, stagnating incomes, and difficulties in meeting deposit requirements mean that thousands of households have to reconcile themselves to renting privately for the long term. That the whole system is a mess hardly needs saying.

Is addressing the broader economic rebalancing agenda compatible with addressing the dysfunctional housing market? Is it possible to rebalance the economy without persuading households to spend less on housing and invest elsewhere instead? Even framing the question like this implies that households have a choice over incurring large housing costs, which of course is not the case for many people.

Unravelling the dependence of the UK economy on financial services and property investment is no easy matter. It took many years to back ourselves quite so tightly into this corner. How is policy handling the complexities of the agenda?

On the housing side we could argue that things are not going hugely well. Efforts to increase housing supply directly are modest, while efforts to increase supply indirectly by assisting with housing costs – notably the Help to Buy scheme – have been widely condemned as wrong-headed. On the economic side, the government has clearly made some efforts in the direction of rebalancing both sectorally and regionally, but these are initiatives that are going to take years to have serious impacts on the productive capacity of the economy. Whether the government is pursuing the rebalancing agenda with sufficient vigour is debatable.

That brings me to a curiosity. [Read more...]

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Who’s who in the private rented sector?

[Originally posted at the Guardian Housing Network, 25/01/13]

Typical english residential estateThe most striking change in the British housing market over the last decade is the growth of private renting. Last week, Mark Prisk, the housing minister, indicated in the Spectator that further growth is desirable. He wants to make the sector “bigger and better”. But alongside growth is an increasing recognition that we cannot talk about a single private rented sector.

Private rented housing plays different roles in different local housing markets. Thirty years ago, we thought of private renting as accommodating a few distinct groups: those in tied accommodation, the young, the mobile, poor people who did not qualify for social housing, and a rump of lifetime renters on regulated tenancies.

A decade ago, a further group were added to the list: those eligible for social housing who chose private renting to avoid the perceived stigma of estate living. Since then, there have been a number of attempts to identify other groups, such as students and young professionals. [Read more...]

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Housing strategies in challenging times

[On 10/01/13 I gave a brief overview of the context facing rented housing as part of an event called Housing Challenges in Exeter organised by Exeter City Council. This is the text to accompany my presentation.]

Building a StrategyOur housing system faces significant pressures. Short term pressures generated by the fallout from the financial crisis have been overlaid upon longer term problems. These pressures are felt particularly acutely in the rented sectors. Difficulties accessing home ownership boost the demand for private and social renting. Social housing is only able to rehouse a relatively small proportion of those on the waiting list. Difficulties accessing social housing boost the demand for private renting. But in many areas the demand of private renting is such that there are access difficulties here too.

These are challenging times for those seeking to ensure populations are adequately housed.

The other key component of the context is cuts. [Read more...]

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Housing – winding the clock back

[Originally posted at Liberal Democrat Voice, 12/11/12]

Friday 9th November 2012 could well come to be seen as a landmark date in the history of English housing policy. A key change introduced by the Localism Act 2011 came into effect. The Liberal Democrats are part of the Government presiding over the change. Is it a change we can be proud of?

Local authorities can now discharge their statutory homelessness duty by allocating households a tenancy in the private rented sector rather than in social housing. This has been an option for years. But until now to pursue this route the local authority has had to secure agreement from the household concerned. The Localism Act removes this requirement. Households can be sent to a twelve month private sector tenancy without the local authority needing their agreement. This would constitute discharge of the homelessness duty.

Given the housing benefit cap introduced as part of the welfare reform agenda, local authorities in areas of high housing costs face a challenge. There are few, if any, properties in their local private sector that are affordable to homeless households.

So local authorities have been looking further afield to find properties at rents that will be affordable, given housing benefit restrictions. Homeless households could face relocating by hundreds of miles to secure suitable independent accommodation. London boroughs are reported to be in negotiations with authorities in areas including Birmingham, Nottingham, Manchester and Merthyr Tydfil. [Read more...]

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