The proposed 'rent control' idea put forward by Generation Rent is as follows:
- Have a rent control at 50% of the annual council tax rate for that band of property but as the monthly rent. For example, annual council tax = £1000, therefore rent controlled level = £500 per month
- Allow landlords to charge higher rent than the rent control figure, however any excess to be subject to a 'surcharge' of 50%. For example, if the above were true and actual rent were £600 per month, then the landlord here would hand over £50 per month as the surcharge and retain £550 per month
The 'surcharge' would go towards social housing and if I understand correctly would also to help those that find themselves in negative equity as a result of the inevitable bubble bursting...would this include landlords I wonder? I would imagine not.
I know the examples given by Generation Rent were applicable to London and the Chelsea example was eye-watering with something like £31k attributable to the surcharge!
By the way...surcharge = tax just in case anyone had any doubt
I just did a quick look at a three of my properties (I do not have any in London) to test this rent control idea. It seems that I could put the rent up a bit in one area, was close to but over the rent cap in one area with a small surcharge to pay and a massive surcharge in another where the banding seemed a bit odd quite frankly (and no I have no intention of asking the council to put me in a higher band)
In other words - it doesn't really work. Yes, I know the idea is to try and set rent controls against some standard or other and probably to drive down rents in apparently unaffordable rental areas. Therefore, Generation Rent do not really want it to 'work' from my perspective; I get that.
Council tax valuations were last looked at in 1991, so there will be quite a lot of properties wrongly classified and so incorrectly banded today.
I do like the comment that Landlords would be free to lobby Government and councils to add more council tax bands or put council tax up. That part actually made me laugh out loud I have to say, I do not think landlords asking for tax rises is that likely but who knows...maybe it would be a necessity if this plan were adopted.
I think it's a bit of blunt instrument to be honest with you and when we use blunt instruments in medicine, we tend to have gaping wounds, scars and botched operations resulting in infection and even death with the patient. In this case, the patient is us...
It matters not really I would say, as regardless of colour or persuasion, pretty much all of the major political parties are addicted to the housing market tax drug anyway...so anything that threatens to crash the market is financial suicide to tax revenues really.
If such an idea to introduce rent controls were to work, it would have to be one that created a 'soft landing' rather than a 'crash landing' as I suspect this one might.
Sadly, tenants are getting a crash landing every month. In London, median rents are now 51% of earnings. We’re campaigning for the least radical policies that will actually solve the problem. But if something isn’t done soon, I imagine you will get mass rent strikes in the next parliament. Tenants really can’t be squeezed much more for much longer. The New Era Estate is an example of people reaching breaking point.
Thanks for the comment. The New Era Estate is not a good example of the general picture; it is good example of a new landlord as a minority seeking to hike rents significantly in a short time period and I don’t like that either. A ‘living rent’ that you are campaigning for at 35% of earnings is not a ‘typical’ industry affordability measure, 40% is considered more typical (as with mortgage lending) and one that I would use. Granted, that still implies that in London some are paying above this level; although some will be by choice to some extent, or at least have some options open to them. The problem is that we as a nation stopped building social housing in the numbers required and this gap has been filled by an array of private landlords. It has been going on for years, which has exacerbated the problem as we see it today. What we now have is a campaign aimed at the private rental sector, when really the problem lies in not building enough houses in general and social / affordable ones in particular. My crash landing comment relates to the impact a reduction from 51% affordability to 35% would have on the landlords on a sweeping basis. This would take down not only a large number of landlords but also home-owners due to a house-price crash and that is why I see it as a blunt instrument. In reality it would lead to a large set of harmful economic and social issues. I would be more supportive of a rent rise index linked to earnings or median rents in restricted areas. If we could encourage landlords to invest into these areas with tax breaks for accommodation upgrades that would help also – carrots and sticks. These proposals would be more targeted, a ‘softer landing’ but of course less sensational.
Thanks for the comment. The New Era Estate is not a good example of the general picture; it is good example of a new landlord as a minority seeking to hike rents significantly in a short time period and I don’t like that either. A ‘living rent’ that you are campaigning for at 35% of earnings is not a ‘typical’ industry affordability measure, 40% is considered more typical (as with mortgage lending) and one that I would use. Granted, that still implies that in London some are paying above this level; although some will be by choice to some extent, or at least have some options open to them. The problem is that we as a nation stopped building social housing in the numbers required and this gap has been filled by an array of private landlords. It has been going on for years, which has exacerbated the problem as we see it today. What we now have is a campaign aimed at the private rental sector, when really the problem lies in not building enough houses in general and social / affordable ones in particular. My crash landing comment relates to the impact a reduction from 51% affordability to 35% would have on the landlords on a sweeping basis. This would take down not only a large number of landlords but also home-owners due to a house-price crash and that is why I see it as a blunt instrument. In reality it would lead to a large set of harmful economic and social issues. I would be more supportive of a rent rise index linked to earnings or median rents in restricted areas. If we could encourage landlords to invest into these areas with tax breaks for accommodation upgrades that would help also – carrots and sticks. These proposals would be more targeted, a ‘softer landing’ but of course less sensational.
Thanks for the comment. The New Era Estate is not a good example of the general picture; it is good example of a new landlord as a minority seeking to hike rents significantly in a short time period and I don’t like that either. A ‘living rent’ that you are campaigning for at 35% of earnings is not a ‘typical’ industry affordability measure, 40% is considered more typical (as with mortgage lending) and one that I would use. Granted, that still implies that in London some are paying above this level; although some will be by choice to some extent, or at least have some options open to them. The problem is that we as a nation stopped building social housing in the numbers required and this gap has been filled by an array of private landlords. It has been going on for years, which has exacerbated the problem as we see it today. What we now have is a campaign aimed at the private rental sector, when really the problem lies in not building enough houses in general and social / affordable ones in particular. My crash landing comment relates to the impact a reduction from 51% affordability to 35% would have on the landlords on a sweeping basis. This would take down not only a large number of landlords but also home-owners due to a house-price crash and that is why I see it as a blunt instrument. In reality it would lead to a large set of harmful economic and social issues. I would be more supportive of a rent rise index linked to earnings or median rents in restricted areas. If we could encourage landlords to invest into these areas with tax breaks for accommodation upgrades that would help also – carrots and sticks. These proposals would be more targeted, a ‘softer landing’ but of course less sensational.