For months, Labour MPs and activists have been waiting for Ed Miliband to announce a sequel to his energy price freeze: another popular market intervention that demonstrates how the party would tackle the living standards crisis and that creates a powerful dividing line with the Tories. In the form of his new policy on private rents, Miliband may have just provided it.
At Labour’s local and European election campaign launch in Redbridge tomorrow, he will pledge to cap rent rises and to extend the standard tenancy period from six months to three years. Alongside this, he will commit to banning letting agent fees, forcing landlords to bear the cost and saving the average new household £350.
Under the plan, modelled on Ireland’s recent reforms, an “upper ceiling”, based on a benchmark such as inflation or the average market rent in the area, will be placed on rent increases to prevent “excessive rises”, and tenants will automatically win the right to remain in their property for at least two-and-a-half years following a six month probation period. 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.
It is one of Miliband’s most politically astute interventions to date. In the form of Help to Buy, the Tories have emphasised their commitment to expanding home ownership (although the policy will ultimately achieve the reverse), but they have had little to offer the large and growing number who are either unable (with or without state subsidy) or unwilling to buy. As Miliband will note in his speech tomorrow, there are now nine million people and 1.3 million households renting privately. There are a huge number of votes to be won from offering them a better deal.
A senior Labour source earlier denied to me that the party had embraced “rent controls” (since the market will still determine the starting level) but Miliband shouldn’t run scared of the term. A YouGov poll of Londoners earlier this month found that 55 per cent support rent controls with just 19 per cent opposed – and little wonder. Renters are currently paying an average of £1,020 a year more than in 2010 and those in private accommodation have fared worst. In 2012, rent payments represented an average of 41 per cent of their gross income, compared with 30 per cent for social renters and 19 per cent for owner occupiers.
The beauty of the policy, in this era of fiscal constraint, is that it won’t cost a penny of government money. Indeed, by limiting rent rises, it will reduce costs to the state by lowering housing benefit payments. By embracing predistribution (seeking more equal outcomes before the government collects taxes and pays out benefits), Miliband has found a way to reduce inequality whilst sticking to his tough deficit reduction targets.
Miliband isn’t promising a reduction in rents, as some in Labour would wish, but he is promising the security and peace of mind that comes with knowing how much you will owe your landlord in three years’ time. As he will say tomorrow: “These new longer-term tenancies will limit the amount that rents can rise by each year too – so landlords know what they can expect each year and tenants can’t be surprised by rents that go through the roof.
“This is Labour’s fair deal for rented housing in Britain: long-term tenancies and stable rents so that people can settle down, know where the kids will go to school, know their home will still be there for them tomorrow.”
So keen are the Tories to kill the idea at birth that CCHQ rushed out a non-embargoed press release at 5:16pm, with Grant Shapps denouncing Miliband for proposing “Venezuelan-style rent controls” and caving in to Len McCluskey. But this stock leftie baiting won’t resonate with an electorate crying out for relief from the ravages of the market (and with no interest in where Hugo Chávez stood on the issue). As in the case of the energy price freeze, the Tories may denounce Miliband for “bringing back socialism”, but they will soon discover that “socialism” is more popular than they think. And having performed the largest-ever state intervention in the mortgage market, through Help to Buy, they will struggle to attack Labour on libertarian grounds.
The Conservatives’ aim is to present rent controls as ineffective as well as illiberal. Shapps said: “Evidence from Britain and around the world conclusively demonstrates that rent controls lead to poorer quality accommodation, fewer homes being rented and ultimately higher rents – hurting those most in need.” Yet as Labour sources are pointing out, in Ireland, where longer-term tenancies and predictable rents were recently introduced, the private sector has grown, not shrunk. Forget Venezuela, Germany, New York, France and Spain all benefit from imposing limits on the market.
“Generation rent is a generation that has been ignored for too long,” Miliband will say tomorrow. But no longer – and it is Labour that will reap the political benefits.