You might object to economics behind Labour’s plans to cap increases in rent and regulate private landlords, but the politics is pretty straightforward. Ed Miliband’s party wants to court young voters, a demographic that’s found itself locked out of the housing market by ever-rising house prices.
Rents have increased above inflation for most of the past 20 years and the number of households renting privately has almost doubled in the same period. There are now 1.6 million buy-to-let investors in the UK, but much of the generation after them can scarcely afford to buy even one home.
But would Miliband’s plans really help renters? What he’s proposing is ‘stable’ three-year tenancy agreements, during which time rents cannot rise faster than inflation. He also wants to ban letting agent fees for renters and create a database of landlords, so that ‘rogues’ can have their tax relief cut.
There are a couple of problems with these plans. Firstly letting agents’ fees will surely just be passed on to landlords, and therefore back to tenants in the form of higher rents. More problematic is that landlords, aware they will not be able to increase rents above inflation for three years, will surely price that into their rents – and introduce massive increases when the three years are up.
Most worrying of all, though, is the potential impact on the supply side. Making being a landlord less profitable could deter builders from creating as many homes. ‘Institutional investors, which are critical for building new homes, could be discouraged by plans to intervene in the rental market in this way, as it will add uncertainty,’ said the CBI’s director for business environment Rhian Kelly. On the other hand it could cause some buy-to-let landlords to sell up, putting more houses back into the sales market, which wouldn't be such a bad thing.
For those sick and tired of renting, Labour says it wants to make the route to buying a house easier. Miliband says he will scrap stamp duty for first-time buyers on homes under £300,000. This will be welcome for some but, as with the Tories’ plans to extend right-to-buy, will simply increase levels of demand – with the perverse potential to drive prices even higher.
It’s abundantly clear that what’s really needed most is a greater supply of houses. And to Miliband’s credit he is also planning ‘the biggest house building programme for a generation,’ constructing one million more homes in the next five years, and says he wants to force developers to use land they are sitting on. The Tories, for their part, are also promising 200,000 new ‘starter homes’.
Relaxing some of planning regulations that currently act as a break on housebuilding probably wouldn't hurt either. Only if they can deliver on these promises will either party begin to address the root causes of the problems faced by ‘generation rent’.