A blog about planning, planning law and planning policy

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The information on this blog is not intended to be advice, legal or otherwise. You should not rely on it and I do not accept liability in connection with it. If you do have a planning law question on which you would like advice, seek legal advice from a suitably qualified solicitor. Specific advice should be sought for specific problems.

Miliband’s private renting reforms – adverse impact on the housing market

Ed_MilibandA few days ago the Labour Party announced proposed reforms of the rented housing market. In short there are three reforms. 1 – landlords would no longer be able to charge tenants the agents’ letting fees. 2 – rent increases would be limited – ceiling yet to be decided. 3 – the standard tenancy would be three years.

It seems to me that 1 is sensible, 2 could be very problematic and 3 is going to have a serious impact on the housing market.
I am going to share something from personal experience. About 23 years ago I moved from London with my family.  Having found a buyer we couldn’t immediately find a house to buy, so we rented in our target area and searched.  We took a six month tenancy, the shortest available, and found somewhere to buy.  More recently, we sold that house last summer, and we did not immediately find a suitable house.  Friends of friends were going away for a year and rented their house to us for six months, on the normal terms which enable the tenant to continue subject to giving one month’s notice, and the landlord to terminate on two month’s notice.  We have found a house to buy within the six months.

What we did is very common.  Estate agents were entirely familiar with what we did on both occasions and strongly recommended it.  What we did, along with many others, unlocked the housing market.  It puts buyers who do it in a strong position. Given the current shortage of housing, that is important.  It is also practical, avoiding the need for long chains of buyers and sellers.  But there is absolutely no way that we would have taken a three year tenancy in either situation, and nor would our most recent landlords have rented to us for three years.  (As it is, they decided to come back after only six months, and the terms of the tenancy ensured they could have their house back.)  Creating a three year norm would also require rent review provisions rather than allowing supply and demand to regulate rents.

These proposals are likely to reduce supply of rented housing, as landlords and potential landlords (those who are thinking of buying to let) realise that their tenants will no longer include those moving house.  With these proposals, there is not likely to be much increase in buy to let properties as landlords and potential landlords weigh up the likelihood of Labour winning the next election.  They may sell up into the owner occupied sector, which may be helpful in increasing the supply of housing for sale, but will make that market less liquid.

It is vital that we have a thriving market in housing for sale, with a good supply of houses coming onto the market and buyers able to be flexible.  The current lack of supply is driving prices up.  Our nation is heavily driven by the desire to own one’s own house, and whilst that may not necessarily be a good thing (other successful economies do not tie up so much personal finance in the family home), it is the way we are.  A thriving market in housing to rent, which means having a good supply, is also vital, especially to the market in housing for sale.  Good supply means there is plenty of competition, so that prices are naturally regulated, even driven down.  But rent controls and three year minimum periods will limit the market.  If rents cannot reflect the market price, who would be a landlord?  With fewer properties available, the price ought to rise, but the rent restrictions will prevent that, making being a landlord even less attractive.  If the minimum terms is three years, people like me will not be renting.

thedavidbrockblog is about planning law and policy, one of the aims of which is to secure a good supply of housing and avoid homelessness. I have posted about these proposed rent reforms as they seem to me to run counter to those (originally Labour party) aims.

1 comment to Miliband’s private renting reforms – adverse impact on the housing market

  • wendy

    (If the minimum terms is three years, people like me will not be renting.)

    You say other successful economies do not tie up so much personal finance in the family home but at the same time you want to use the rental market as a short term bridge when selling and buying so as to be in the optimum position when a good property arises.

    You do not acknowledge that some can never buy and need the security of not only reasonable rent but a decent length of term especially when there are children attending school involved.
    This was the gap council housing filled I suppose.

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