Miliband’s rental market proposals: the right answer?

Ed Miliband wants to reform the rental market … what’s not to like?

Milband’s proposals are, at present, a bit sketchy but consist of three strands:

  • Longer tenancies (three years) with the tenant given two month’s notice if a) they are anti-social or behind on rent b) the landlord wants to sell
  • A ban on letting agents  charging tenants high fees to tenants
  • Putting a ceiling on excessive rent rises by creating a cap – some reports say this will be in line with average rental rises.

Longer tenancies? Good idea.  And uncontroversial – the industry has been considering (and in some cases implementing) this already. Nothing to see here folks, move along.

Mind you, there’s nothing to stop a landlord putting the place up for sale if he really wants you out, and then re-letting. They’ll lose some money, of course, but if rents are booming they may think it’s worth the risk.

And tenants still have to do six months’ probation – there’s not much to stop the landlord getting rid of them at this point if they think it’s in their financial interest.

As with any regulation the issue of who polices it all is important – cash-stapped councils? Yeah, right.

Fee controls? Again fairly uncontroversial – it’s daft that you can be hit for hundreds of pounds to ‘renegotiate’ your rental contract after a 6 month tenancy. No doubt some agents will find a way round this – but still, this is a good start.

Rents Price cap? The most controversial.  If pegged to average rental prices, the cap will presumably have to take account of regional variations? Though are even regional catchments granular enough?

More to the point, if this is being done to stop soaring rents, where’s the evidence? The LSL Index for March says:

“Rents rise at slowest annual pace since January 2010 – up just 0.9% in twelve months to March. Average rent across England and Wales now stands at £741 per month, after 0.2% monthly fall.”

ONS data also shows very modest annual increases:

Private rental prices paid by tenants in Great Britain rose by 1.0% in the 12 months to March 2014, unchanged from a 1.0% increase in the 12 months to February 2014.

Private rental prices grew by 1.0% in England, 1.3% in Scotland and 0.6% in Wales in the 12 months to March 2014.

Aside from that, there are legitimate concerns about supply – if, for example, interest rates rise significantly and landlords can’t cover mortgage costs with rent rises then they may be forced to sell, which defeats the whole purpose.

So Ed, by all means regulate to make tenancies more secure … but more work is  needed on the detail of this rental cap thing before it can be deemed sensible or effective.

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