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Labour plan to cap rental increases

Posted by Warren Fyfe on April 26, 2015 in Warren Fyfe Site
Terraced houses in Liverpool

Labour says rents have gone up by an average of £1,200 since 2010

Private landlords would not be able to increase annual rents by more than inflation for three years under Labour plans to give tenants more security.

If Labour form the next government, Ed Miliband said he would act immediately to curb “massive” rent hikes which have forced some people out of their homes.

New tenants in England would have the right to find out what predecessors paid to help negotiate the “best deal”.

The Conservatives say rent controls “destroy investment in housing”.

Critics warn capping rents could reduce investment in new housing.

As the last full week of campaigning before the 7 May election gets under way, a clutch of polls suggested there remains little to choose between the Conservatives and Labour, with most experts still predicting a hung Parliament with no party winning outright.

A Survation poll for the Mail on Sunday has given the Conservatives (33%) a four-point lead over Labour (29%) while an Opinium poll for the Observer has the Conservatives on 34% and Labour on 33%.

A You Gov poll for the Sunday Times put Labour (34%) two points ahead of the Conservatives (32%).

Housing is a key election battleground, with all the major parties promising to build hundreds of thousands of new homes over the next five years to address what campaigners say is a chronic shortage of new housing stock.

‘Generation rent’

On Sunday, Mr Miliband will set out Labour’s policies for helping “generation rent” – the millions of people who the opposition say have been priced out of the housing market in recent years and are trapped in short-term, often insecure rental agreements.

Labour have already announced plans to extend the typical tenancy agreement from a year or less to three years following a probationary period of six months. Estate agents will also be banned from requiring fees from tenants before they move in.

Key priorities

Labour

Main pledges

  • Responsibility “triple lock”: fully funded manifesto, cut the deficit every year, balance the books as soon as possible in next Parliament
  • Extra £2.5bn for NHS, largely paid for by a mansion tax on properties valued at over £2m
  • Raise minimum wage to more than £8ph by 2019
  • No rise in VAT, NI or basic and higher rates of income tax
  • Access to childcare from 8am-6pm for parents of primary school children
  • Freeze energy bills until 2017 and give energy regulator new powers to cut bills this winter

Labour policy

Policy guide: Where the parties stand

But the Labour leader said he wanted to do more to stop the estimated 4.5 million households renting privately from being “ripped off”.

He is pledging to cap rents during the course of the standard three-year tenancies so they cannot rise by more than the CPI measure of inflation, which is currently 0%, while allowing flexibility for them to be reduced.

While market rates will still apply at the start of a contract, tenants will have a legal right to know what the previous tenant paid, which Labour says will put them in a stronger position to negotiate and make substantial rent rises between contracts less likely.

Labour says three-year tenancy agreements should become the norm, with landlords having to give two months’ notice before asking a tenant to leave and only if they have a “good reason” to do so. The rent cap would not apply to those who have agreed shorter contracts with their landlords, such as students or business people needing flexibility.

The party claims rents are, on average, £1,200 higher than they were in 2010, with some tenants in London facing double digit rises in a single year.

‘Decent deal’

The UK rental market is far less regulated than its European counterparts, Labour argues, with one shadow minister recently comparing the London market to the “Wild West”

Confirming that Labour would legislate for the changes in their first Queen’s Speech, Ed Miliband said action was needed to help those “struggling to meet the costs of putting a roof over their head”.

“Some are having to move all the time, ripping up the roots they have laid down at work or with friends, even having to change their kids schools,” he said.

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Analysis by BBC political correspondent Iain Watson

With house prices reaching record levels in south-east England in recent years, more and more families are renting from private landlords.

It’s estimated that nearly four and a half million households in England currently live in private rented accommodation. That’s double the number a decade ago – and now accounts for one in five of all households.

Ed Miliband has already said he would give tenants more security by introducing three-year tenancies. Landlords would have limited grounds for regaining possession during this time – but tenants could still leave by giving a months notice.

Now the Labour leader is going further by pledging to freeze rents in real terms for the duration of the three-year tenancy.

Rents would still be set at a market rate initially but landlords would have to tell prospective tenants what they had charged previously to help in negotiations. Both the British Property Federation and the Association of Residential Lettings Agents have warned that rent controls could reduce investment in the supply of new rented housing.

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“Labour has a better plan. The security of three-year tenancies for all who want them with rents capped, so they can fall but not rise by more than inflation. The rights they need to negotiate a decent deal with landlords and stop rip-off letting fees.”

Labour is also warning “rogue” landlords that they face losing tax relief enabling them to offset 10% of their annual rental income against falls in the value of furniture and appliances.

If properties are not adequately maintained, Mr Miliband said landlords would not be able to claim all of the so-called “wear and tear allowance”, arguing they should not be “subsidised for providing accommodation that fails to meet basic standards.”

He added: “This is a plan for a stable, decent, prosperous private rental market where landlords and tenants can succeed together.”

Buying assistance

Conservative communities minister Brandon Lewis said Mr Miliband was “re-launching a policy that descended into chaos when it was first announced”.

“Rent controls never work – they force up rents and destroy investment in housing leading to fewer homes to rent and poorer quality accommodation.

“The only way to have affordable rents is to continue to build more homes.”

The Conservatives have placed increased home ownership at the heart of their housing plans, pledging to extend the Help to Buy Scheme to 2020 and extend the Right-to-Buy scheme to up to 1.3 million tenants of housing associations.

Under their plans, housing association tenants would get the same discounts to buy their homes as council tenants currently enjoy.

The Liberal Democrats are promising young people still living with their parents a loan to help pay for a deposit on a rented home of their own.

Article source: http://www.bbc.co.uk/news/election-2015-32468997#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa

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