How foolish of Ed Miliband to try to pervert the free market in housing with his rent controls. There is a slight problem with this analysis, which we have heard ad nauseam from the Conservatives and from the right in general over the past 24 hours. We don’t have a free market in housing and we haven’t had for at least 65 years, when the planning system came into being.
Yes, rent controls would come with the risk of reducing the supply of rental property, pushing up rents and creating a black market in properties sublet at lower than the officially-approved price. But the effect of Miliband’s reforms (which in any case stop short of rent control) would be extremely modest compared with the effect of the market-distortions caused by the planning system. And that is a system which has the full blessing of the Conservatives, and indeed all the main parties.
A genuine free market in housing would mean that anyone could build whatever they liked, wherever they liked. That is what we had in the 1930s when London grew explosively and house prices were low. London has hardly grown at all since 1939, however, because the planners will not allow it to. As a result we have a chronic, artificial shortage of housing.
The Conservatives have long been happy with this state of affairs, because it helps to keep property prices high and the great unwashed out of villages and leafy suburbs favoured by Tory voters. A few Tories who have questioned the wisdom of the planning system, such as former housing minister Nick Boles, have received a rabid response from these voters – he was quickly moved on.
All Ed Miliband’s proposal does is help tenants cope with one problem associated with the chronic lack of housing: landlords who jack up rents mid-tenancy. He would make three-year tenancies the norm, during which time the rent would not be allowed to rise by more than inflation. It is rather like a consumer law preventing package holiday companies jacking up the price between the booking and the holiday.
I am bound to say that three-year tenancies are a good idea, not least because Miliband took the idea from my 2012 book A Broom Cupboard of One’s Own: the housing crisis and how to solve it. And I proposed it in spite of having a rental property myself. If the Conservatives want to stand up for rapacious landlords they will have to find a more convincing way of doing so than by the hypocritical means of complaining that Ed is perverting a non-existent ‘free’ market.
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