Tough choices: tenants in private accommodation have been stung with huge rent rises
As ANDREW FISHER explains, the cost of living crisis begins with too many people being unable to afford somewhere decent to live, as private rents increase by 15.8% this year
“Been spending most our lives living in a landlords’ paradise”.
If Coolio was to update his 1990s chart-topper Gangsta’s Paradise, those would surely be the lyrics.
Property website Rightmove has reported London rents are rising at a 15.8per cent annual rate of growth, “the highest ever annual rate of any region”. Rightmove finds rents in outer London are currently rising faster than in inner London – with rents in outer London boroughs like Croydon up 4.3per cent in the last three months alone.
Government minister Grant Shapps thinks public sector wage demands of 10per cent are pushing up inflation and therefore must be capped below that. But he and the rest of the Conservative government are silent when it is private landlords hiking rents by 15per cent or more.
For landlords, life has never been better. Nearly half of British landlords are looking to expand their property portfolio in the next 12 months, according to research by Handelsbanken.
On Wednesday, it was announced that average house prices are rising by 12.8per cent a year, with the average UK house now £283,000 – a whopping £32,000 higher than this time last year. In London, the average house price is £526,000. Often, the only people able to afford mortgages are these ever-expanding corporate landlords.
On the rise: inflation has soared to a new 40-year high
And “London is seen as the most attractive region” for landlords to expand their property portfolios, according to Handelsbanken. So having had the plague of extreme heat and fire, we will now be besieged by a plague of profit-hungry landlords pushing up house prices and rents even further.
The housing haves and have-nots are having very different experiences of the worst cost-of-living crisis in living memory.
The Office for National Statistics confirmed yesterday that Britain’s annual inflation rate had reached a new 40-year high of 9.4per cent. THis was up from May’s 9.1per cent.
Inflation, which stood at 2.5per cent in June 2021, has risen for nine months in a row and the Bank of England is expecting it to peak at above 11per cent when energy bills rise again in the autumn.
Landlords were aided and abetted by former Chancellor and would-be Prime Minister Rishi Sunak’s stamp duty cut in 2020. The stamp duty cut accelerated the trend of larger landlords (who usually manage multiple properties) becoming incorporated as a company. Landlords who hold properties in a limited company can offset 100per cent of their mortgage interest against profits, while landlords that hold property in their own name can offset just 20per cent. There were 41,700 new buy-to-let incorporations established in 2020, up by a quarter on 2019.
The expansion of corporate landlords continues unabated. But while some expand their property portfolios, other people will be made homeless.
This is a real risk because despite pledging three years ago to end Section 21 evictions – the so-called “no-fault evictions” – the Conservative government is still to legislate for this. Housing campaigners Generation Rent have called for an immediate “pause on Section 21 evictions and evictions for rent arrears, because without this action we will have more and more unnecessary evictions putting people at risk of homelessness”.
Housing is a basic human right, and housing policy must be focused on providing homes for the many, not investment opportunities for a wealthy few.
Generation Rent has also recently called for a nationwide rent freeze until consumer inflation has returned to 2per cent. Last year, John McDonnell, the former shadow Chancellor, called for a year-long rent freeze, and in May the Mayor of London, Sadiq Khan, also called for rents to be frozen.
The London Mayor has also been lobbying the government to grant him the powers to control rents in the capital – a power that city authorities around the world, including Berlin and New York, already have in various forms.
This would be a more powerful measure than local schemes for landlord licensing that some councils have managed to implement against huge government resistance. Last year, the government rejected Croydon Council’s application to extend its landlord licensing scheme, and in doing so took away a source of £22million in much-needed revenue for the authority.
Nevertheless, landlord licensing schemes are lightweight regulation even when properly implemented, which many indications suggest had not been the case in Croydon.
Building success: London Mayor Sadiq Khan has increased house-building in the capital, but seeks more powers over the private rental market
The Mayor of London, too, has only limited powers – he can ask for a rent freeze and powers to implement rent controls, but there is no legislation that empowers him to act.
Where the Mayor has been more successful is using his powers over planning to ensure there are more homes built that are genuinely affordable, including council homes.
On this measure, Khan has been a marked improvement on his predecessor, Boris Johnson. Last year, Khan’s team broke their own home-building record, with 18,722 genuinely affordable homes started in 2021-2022, compared to just 7,400 in Johnson’s final year as Mayor.
For too long, housing policy has been deliberately run in the interests of landlords and developers. It has meant higher house prices and higher rents – and consequentially increasing homelessness and housing insecurity.
There’s big money in housing. Policies that build council housing, control rents, regulate housebuilding standards or landlords will always be resisted by powerful lobbies. But it’s not only in tenants’ or potential homebuyers’ interests to take housing policy away from private interests.
Every pound handed over to a landlord in rent or to a bank in mortgage payments is a pound that is not being spent in a local economy supporting local businesses and jobs.
This is why the economist, John Maynard Keynes, called for “the euthanasia of the rentier”, the class of capitalist who reap rent from assets without doing anything economically productive like creating jobs.
Government housing policy has long ago been captured by the interests of developers and landlords. It may be damaging the wider economy, disrupting family life and causing misery for many people, but a few wealthy Conservative Party donors are doing very nicely from it.
As a German visitor to these shores observed 150 years ago, “The Tories in England long imagined that they were enthusiastic about monarchy, the church, and the beauties of the old English Constitution, until the day of danger wrung from them the confession that they are enthusiastic only about ground rent.”
And so it remains.
- From 2015 to 2019, Andrew Fisher worked as the Labour Party’s Director of Policy under Jeremy Corbyn. He is the chair of the Croydon Central Constituency Labour Party. Fisher is also the author of The Failed Experiment – and how to build an economy that works, and in a personal capacity now writes regular columns for InsideCroydon
Some of Andrew Fisher’s recent columns:
- Tories’ Not-So-Famous Five offer little real hope for nation
- ‘No one wants strikes. But I’m happy to stand on the picket line’
- Five years ago, Labour showed how strong policies can inspire
- Tories’ sly stealth tax rises are ‘economically idiotic’ as inflation soars
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The Leasehold Reform (Ground Rent) Act 2022 puts an end to ground rents for most new long residential leasehold properties in England and Wales.
Andrew Fisher should at least be honest enough to admit that lower rents can only parallel lower property prices … and that a policy of reducing or capping property prices may find far fewer supporters than doing the same to rents!
Having said that, I as a house owner have long espoused that more unpopular policy. It is beyond ludicrous that “the average house price in London is £526,000” and any market which allows such appallingly damaging statistics to exist must be regulated by law. If capping property values results in less development of new property, then that in turn must be allowed to discourage the population increases and permission of immigration which are currently placing excessive demand on property expansion.
I would willingly “lose” half the present market value of my home if that in turn led to a market in which my grandchildren could afford to buy their own homes. I remember my father often saying “God doesn’t create new land” as a euphemism for “property prices will always increase with growing population”; but surely the time has come for society to recognise that there is an alternative to the old epithet “supply must increase in response to increases in demand” which is that “demand must frozen to allow supply to cease”.