Ed pledges to cap rent rises, extend standard tenancies & scrap fees

(136 Posts)
thevelvetoverground Wed 30-Apr-14 22:57:39

"At Labour's local and European election campaign launch tomorrow, he will pledge to cap rent rises and to extend the standard tenancy period from six months to three years. As well as this, he will commit to banning letting agent fees, promising to save the average new household £350."

www.newstatesman.com/politics/2014/04/milibands-pledge-cap-rent-rises-smart-politics

WetAugust Thu 01-May-14 11:42:51

Meant to say...

But Milliband's blunt stick way of going about this is stupid.

He could stop mortgage tax relief on 2nd properties. landlords can claim mortgage interest as an expense - stop that. He could stop the allowances for wear and tear - they rent should cover that. He could add a purchase tax for 2nd properties and should certainly abolish any council tax relief for holiday homes. He could increase the capital gains tax on BTL proerties when they are sold.

There's lots he could do.

Iseenyou Thu 01-May-14 11:51:12

Yes, wetaugust, I think the 3 yr tie in will put off particularly the 'hobbyists' (and I think you are right that is what they are - doubt that they make that much money really over the medium term). So they may indeed sell (and stop buying new properties, as well). But that is good news for would-be owner occupiers - it should cause prices to fall a bit, or at least slowdown the increase.

And a reduction in the number of rental properties won't make rentals go up if it is matched (as it should be) house for house by a reduction in the number of renters as the renters buy the properties. In effect it will just shift properties from rental to owner-occupied. The only way that doesn't work is if the properties are bought as second homes, not for letting; or just left unoccupied (as can happen. Owners don't want the hassle of tenants but hold on to the property for the capital gain. Probably not that common, but is reported to be happening in London particularly by foreign investors).

specialsubject Thu 01-May-14 11:56:22

ah, I see how the Scots do it now - tenants don't pay the agency fees. In England (as someone has said) both sides pay for the same work. So it looks like landlords will end up paying more. That may mean cheaper properties become not worth renting, so will be sold.

quote:' Landlords will only be able to terminate contracts with two months' notice if the tenant falls into arrears, is guilty of anti-social behaviour, or breaches their contract; or if they want to sell the property or use it for their family. Crucially, they will not be able to end tenancies simply to increase the rent.'

seems fair enough, IF the eviction clauses actually work and are robust. There are professional rogue tenants who keep their arrears just below the level to prevent eviction - if this comes in many landlords will want bigger deposits to protect against this.

In my area (nice place, lots of facilities, work, lovely countryside - but oh dear, too far to commute to London) the market rate for an immaculate two bed semi is just under £500 pcm. Charge more, no tenants. Property not immaculate or not as well located, charge less or no tenants. Increase the rent, tenant leaves. That is market forces and how it should be.

those who pay a fortune for a dump have only themselves to blame.

TV programmes lie. As do politicians. I don't trust promises from any of them.

Iseenyou Thu 01-May-14 11:56:38

I agree WetAugust - he could, and that would be far more effective to shift properties back into owner occupation.

But I suppose this has the political advantage that it is a measure that can be presented as 'good news for renters' rather than criticised by Cons as 'a vicious and unwarranted attack on those poor unfortunate people, who just went into buy to let to try and get a pension and now they're about to retire and Labour wants to tax them more and destroy their plans, this is what Labour do if you try to better yourself. etc.'

The 'Venezuela' response in a way shows that - it is much harder for Cons to attack this measure, without appearing totally out of touch with renters.

specialsubject Thu 01-May-14 11:57:47

ps wear and tear allowance is only for furnished properties, not all rentals.

do get facts right before doing the anti-landlord whine.

morethanpotatoprints Thu 01-May-14 11:58:27

I don't see how it will force people to sell their houses tbh. maybe down south it is bad but here most lls own the homes out right and invested for the future not to make a quick profit.
Even without a profit there is no need to sell, its only those who got a buy to let mortgage and I'm not sure that's much of the rental property market, not here anyway.
Most stay long term as they have dc settled in schools and as long as they are good tenants the lls don't want to have to keep finding new tenants.

Iseenyou Thu 01-May-14 12:08:27

It sounds as though it works well where you are morethan. In London less so, as rents are just so high and the insecurity is a problem here as well - lots of posts on other threads here about how difficult is to move a family on 2 months' notice.
I think btl is a significant part of the rental market in London and South East but I admit that's just my assumption! That's one of the things about this debate, it does rely on assumptions and that may not be correct.

However: even if lls don't have a mortgage, if the returns fall beyond a certain point some (not all) lls will sell because they can get a better return on the capital elsewhere. Not the hobbyists, but professional landlords. Specialsubject makes an interesting point - it may be the cheapest properties that are most likely to be sold because of these changes if they are currently the least profitable.

Isitmebut Thu 01-May-14 12:53:13

Wet August …we agree on something.

Until we start building more homes annually than the roughly 115,000 average over the last 20-years, whether social or not, this country has to rely on the private rental market to provide to homes to those that cannot, or will not buy, as in the rest of Europe – so to put fear of big government regulating after 2015, when our Mortgage/funding levels could be trending upwards can only discourage the builders, the investors and the agents NOW projecting forward, is politically irresponsible at best.

The cost of renting abuses have to be addressed, but the fundamental facts are that THE PRICE of a home and INTEREST RATE FUNDING cost are key to the viability of private renting, so if big government wants to impose their own formulas on landlords, they will just sell, reducing the stock of properties to rent.

This is what Labour left on supply/demand, and ‘controls’ to discourage the current rental stock isn’t the answer to the current cost of renting.

england.shelter.org.uk/campaigns/why_we_campaign/the_housing_crisis_landing/the_housing_crisis

Iseenyou Thu 01-May-14 13:05:58

I don't understand that Isitme (the second bit).

The amount of floor space will be the same. it is just that landlords will not get such a good return on renting out that floor space (to cut to the chase) so some will sell it. Assume they sell the floor space to owner occupier rather than another landlord. That means less floor space available to rent, but correspondingly fewer renters, as that floor space will now have been sold to an owner occupier thus taking that person out of the renting market (don't think I'm explaining this very well, but basically it has no effect on the housing stock if landlord sells to someone who owner occupies - same amount of housing, same number of people to live in it. The only way this doesn't happen is if people leave properties unoccupied, which can of course happen).

That is a very good point about new building though - hadn't thought about the discouragement to new building. But returns at the moment haven't prompted enough new building in London (which is where the huge shortage is) anyway, and some of that new building is being marketed directly to overseas investors (other threads!) So what I'm trying to say is that there is no evidence that the current system encourages enough new building anyway. The brakes on new building are not well understood, I think. (not lack of finance, because money to buy is there - see London!; not planning restrictions because there is lots of land with planning permission not being built on. Not poor returns because we're told btl has huge yields - (though does it really?) Has anyone ever properly been able to explain why there is not enough building?)

WetAugust Thu 01-May-14 14:02:13

do get facts right before doing the anti-landlord whine.

Where on earth do you get the idea I am anti-landlord. I am looking at a few possible BTLs for myself next week confused

I am merely commenting on the possible effect that Ed's big idea would have on the property market.

We don't know the detail but already we're getting things said like 'you can only move to terminate the rental if the landlord seeks to sell the property'. That's far more protection that a tenant currently has.

This uncertainty, coupled with more stringent mortgage eligilibty could kill the property market stone dead.

And I do believe we have a housing crisis in this country and I believe it's country-wide. There are just as many vacnat repossessed small terraces up north than there are unaffordable properties down south - probably more.

A young couple I know, both professionals, have had to return to leave rental to return to live with the parents as they simply could not service �800pcm for a house and have any hope of ever getting on the property ladder. That's when you know there is a crisis.

But if your nett population is increasing by 220,000 each year, as ours is, it's hardly surprising that something as scarce as housing is virtually unaffordable.

So are we going to build sufficient to house next year's nett 220,000 and the year after's?

Beastofburden Thu 01-May-14 14:10:10

But it still leaves the provision of rented homes to the private market. I would have hoped that Labour would have been thinking about building more council houses and flats. Especially as more 1 and 2 person homes are what's needed in social housing stock, apparently. Why would we want to pay rent through our support of the housing benefit system, when the same taxes could be spent on actually building homes for social housing?

It's weird, as individuals we aim to buy our own places and stop renting, but we dont want the government to do the same.

Isitmebut Thu 01-May-14 14:19:40

Iseenyou …. The ‘floor space’ that I am concerned about, hence gave a Shelter perspective that I found and provided, which has probably got worse, is that on the private rental properties available to rent and the affect on the rental sector should they sell.

I had read recently that major institutions like pension funds were looking to become Landlords, so that type of BTL interest WOULD stimulate more targeted building, but they will drop interest to provide if they think governments will cap anything, especially if the landlord is ‘institutional’ and seen as fair game.

“Labour's 'rent cap' row: how renting has grown, in charts”

“The charts and tables here show how property ownership is changing, who is renting – and for how much.”

www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10800343/Labours-rent-cap-row-how-renting-has-grown-in-charts.html

“The subjects of renting and buy-to-let spark anger like few others and Labour's latest suggestion – that rent increases could be capped and minimum lengths of tenancies introduced – has added fuel to the controversy.”

“What are the facts behind Britain's growing army of renters? This graph, from the February 2014 English Housing Survey, shows that since 2005 ownership has been in decline relative to renting, which started to climb in 2000.”

“For the first time, according to this year's data, people renting from private landlords outnumbered social renters.”

dreamingofsun Thu 01-May-14 14:24:36

currently we charge our tenant a bit less than the market rate. if this comes in, when her next tenancy is signed we will increase the rent by as much as possible to take into account the fact that it won't rise during the tenancy - ie she will be paying more at the start than she would normally have done.

this assumes we continue as LL's though. If once we looked at the fine detail there was no way of evicting a bad tenant - ie someone who didn't show some respect to the propery - then there would be no point in continuing to a LL as it wouldn't cost in.

i'm sure in an ideal world there would be loads of good quality council stock built, ideally somewhere that didn't affect the greenbelt and everyone could live happily ever after. But where is all the money going to come from, apart from massive tax hikes i guess.

Isitmebut Thu 01-May-14 14:26:55

Beastofburden ... the government has run out of money for homes or nuclear power stations, we had our chance to plan/build in the decade to 2007 but spent money on other things.

I believe the coalition is allowing local authorities to borrow to build, but I don't know what the conditions and/or uptake is to-date.

We need the Private Sector to build for now and recent home starts were at pre late 2007 financial crash levels.

Miliband says "we'll build 200,000 new homes", but the detail is missing, like HOW?

Isitmebut Thu 01-May-14 14:29:02

"200,000 new homes A YEAR ...I forgot to add.

dreamingofsun Thu 01-May-14 14:33:46

isitme - he probably got confused with the 0's. Or he's just saying that now and hope everyone forgets if they get into power

Beastofburden Thu 01-May-14 14:38:57

isitme it is ridiculous, though, that we have money to pay rents via housing benefit every year but can't build houses. If the government cant increase borrowing a bit and set that against future reductions in housing benefit, who can? <shakes head>.

There's such a difference between the modest, one-house landlord who will need to move back in again one day (the "numpties" I guess) and a business. A business might cope with this as long as eviction for non-payment and trashing etc works well. But a private landlord will stop renting if they fear never getting their house back again. I know Ed hasn't specifically said this yet, but the flavour is there, that it might become compulsory to renew leases after three years even if you actually want out. That's going to reduce the stock a fair bit, I think.

Isitmebut Thu 01-May-14 14:47:50

Dreaming …. Funny enough Miliband has mentioned that 200,000 figure for a while now and that is the ballpark figure we need, but so far all I have seen him do is THREATEN the large home builders with taxes, just as they start to make a decent profit and increase building after the uncertainties of a financial and economic recession.

Local Authorities building is a major part of the answer but we need the will and the brains to finance the borrowing , (partially?) covered by the expected rents – taking advantage of the current record near low interest rates. BTW I was gob smacked recently to hear there is a massive shortage of bricklayers, as they’ve gone off and done other things.

“Britain is facing a housing disaster as it is one million homes short, warns new report”

www.dailymail.co.uk/money/news/article-2589483/Britain-facing-housing-disaster-warns-new-report.html
“Britain is now one million homes short of meeting its housing needs – a decade on from the flagship Barker Review of Housing Supply.”

“The 2004 report by Kate Barker, commissioned by the then Labour government, found that 210,000 homes needed to be built each year to prevent a housing crisis.”

“The economist also set a more ambitious target of ‘improving the housing market’ and making property more affordable by building 260,000 homes a year.”

“But a follow-up report shows that an average of just 115,000 homes a year have been built since then – meaning the country is 953,000 homes short of one target and 1.45million short of the other.”

“The chronic shortage of homes has locked many youngsters out of the housing market with 3.35million 20-to-34-year-olds living with their parents – 790,000 more than when the Barker Review was published.”

I like how they did things in Quebec. If you were taking over a rental property and found out from the leaving tenant the amount they were paying in rent, this was the rent you paid. The LL couldn't up the rent to the new tenant. Also there were restrictions on how much the rent could be increased yearly (I thnk it was no more than 5%), and it had to be justified in detail by the LL.

For instance we paid 2700/mth rent on a place and as the LL had done significant works in maintenance, over 60k worth, and fixed our bathroom, she put up the rent. By 2%. As that is all she could justify. The bulk of the work was exterior maintenance which didn't affect our quality of living, and the bathroom was done on the cheap as the toilet was falling through the rotted floor and could not be put off.

Another scheme for people renting social housing was they paid in accordance to their earnings. If you had low income, you paid low rent, when you started earning well, you could stay in your social housing, but paid more rent. I like this scheme rather than the HB pit of despair the UK has dug for itself.

Isitmebut Thu 01-May-14 14:59:44

Beastofburden....I partly answered your question re the need of the government to build and I suspect housing was a major part of the 'infrastructure' Osbourne was talking about when 'probing' the Government Bond Market investors re appetite for a 50-year dated bond, when our 10-year yields were under 2%.

I don't know how far that got, but we need to use our current credit standing in the world (where we have ONE AAA rating out of the three main agencies, looking positive for upgrade) to borrow SPECIFICALLY for home building at the lowest interest rate we can - before Miliband takes us the French route to debt prosperity, which never worked and since reversed having been downgraded twice.

I suspect some local authorities have been more receptive (and understand the concept of *Collateralized Debt*) than others.

The global institutional investors currently buying dodgy European credits/bond again, would love it, whether partially government guaranteed or not. IMO

teaandthorazine Thu 01-May-14 15:16:54

those who pay a fortune for a dump have only themselves to blame

I'm not anti-landlord (as I said in my previous post, I'm pretty happy with mine, and only once in my twenty-year renting history have I had even a slight issue with a ll) but, specialsubject, your comment above is all kinds of wrong.

I live in the south east. It costs a fortune to rent here. Thing is...this is where I grew up. This is where my family and friends are. Where my elderly parents are. Where my son goes to school. Where I (and my dp, when he finishes his pgce and moves here) work. I work in the NHS, in a deprived part of south london. My dp will be a primary school teacher. Our life is here.

I'd like to think I make a contribution to society, living here, and I'm even arrogant enough to suggest that if all of the people like me and dp left, all the teachers and nurses and midwives and firefighters and shop assistants and cleaners and postmen and police, just because we'd be fools to 'pay a fortune for a dump'...well, the place would be pretty fucked, wouldn't it?

It's not enough to say, just move. It doesn't help anyone to say, you're an idiot for paying high prices. I wouldn't give a toss about not living near London. But London would, eventually, give a toss about living without me, and lots of others like me. Telling people that they're stupid for paying high rents is missing the point in spectacular fashion, and sounding pretty smug about it too.

Isitmebut Thu 01-May-14 15:28:45

Beastofburden ... the reason for going the Collateralized Debt route is we still have an £108 billion a year budget deficit, heading for £1,500,000,000,000 (£1.5 trillion) of national debt by 2015 - so as we are already paying around £32 billion of annual interest on the current £1.3 trillion, we need to look at other solutions.

By borrowing the 'Collateralized' way, the debt is 'off UK balance sheet' as in effect, the institutional investors that buy the Local Authority bonds FINANCING social home building, where the tenant RENTS pay the annual bond coupon/interest - assumes the balance sheet 'risk', even if there isn't much risk.

For the more astute amongst you, you might point out that this is similar to the Sub Prime crisis in America that triggered the over leveraged financial crash in 2007. lol

Hence the brains needed to ensure this borrowing, on nowhere near the scale as the $trillions in America that banks loaned to HOME BUYERS who only needed a pulse to qualify, so default rates grew - is better handled as the interest is paid here by those renting, not owning - therefore on any tenant default, the Local Authority at least still owns the home and the interest may get paid by Housing Benefit.

Given myself a headache now, going to lay down for while. lol

tiggytape Thu 01-May-14 15:54:35

I can imagine that any such move would be popular but could have huge unintended consequences:

- Initial rents would rise dramatically and almost overnight.
If you tell a LL that by law, he cannot raise the rent above certain limits for the life of the tenancy, it makes sense to set the rent nice and high to start with so as to minimise income lost from not being able to raise the rent later.

- Less rental properties available.
Some LL will calculate that if they cannot raise rents as required and have to suffer even more legislation and compliance, they do not want to rent the property out at all and will sell

- Price Fixing
If the rents cannot be increased more than the local "average" for the area, it isn't unthinkable that LLs will start charging more initially to drive up the local average and so pave the way for future rent increases for existing tenants.

Meddling in private pricing policy, doesn't usually succeed in any aim to cap prices but only serves to ruin supply or cause a whole host of new problems instead.

specialsubject Thu 01-May-14 16:03:55

no, I am not smug. I don't share your opinion. Not the same thing.

plenty of people move their lives for financial reasons. Some even get a better quality of life for it.

there are plenty of good properties for rent in this country. Renting a dump for a fortune because it is so damn essential to live in a particular area does not make sense. Complaining about it makes even less sense. Yes, there are bad landlords renting wrecks - so why not demand higher minimum standards from landlords? Can't see any sign of that.

now, I entirely agree that London is building a big problem because essential services workers are being priced out - but that is not the fault of the landlords. It is a long term issue, caused by lots of factors; selling off council houses, huge salaries for pointless jobs which inflates prices, foreign millionaires using the place as a tax shelter and many many others. I think London is grossly unsustainable and I wouldn't live there if I could. Perhaps if many others got out, there would be accommodation to spare - then ratholes would not have tenants?

I don't have the solution, but the endless 'screw the landlord, rich bastards' attitude annoys me as you can tell. Can't see anyone complaining about those who provide their mortgages, possibly because they don't have the visibility of a landlord.

I would not have a BTL if I could find an alternative home for my hard-earned money. But with inflation permanently high and savings rates so low, there are limited alternatives.

dreamingofsun Thu 01-May-14 16:05:53

tiggy - i agree. ref price fixing - this could also have an effect on housing quality - if LL's can only charge a certain level of rent, the way to balance the books would be to cut maintenance, hence reducing the quality

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