COMMENT Who would have thought that shadow chancellor and fan of Marx, John McDonnell, would be channelling Margaret Thatcher for the Labour Party’s policy attack on the private rented sector?
The essence of the policy is that private renters should have the right to purchase their property from their landlord at a discount. Pretty much exactly what Thatcher ushered in during the big council house sell-off of the 1980s.
McDonnell’s policy would not only destroy the investments held by many small landlords, it would also halt in its tracks the burgeoning build-to-rent sector, which is creating thousands of new homes across the UK. As if the spectre of rent control wasn’t enough, then the threat of state sequestration of assets should definitely send landlords running for the hills.
Real lack of understanding
McDonnell says the policy would be a way of stopping landlords making a “fast buck” at the cost of their tenants. However, this proposal shows a real lack of understanding about how the majority of landlords run their businesses – and especially landlords such as ourselves and the major build-to-rent developers, which offer transparency, security and customer service.
Yes, there are criminal landlords out there, but nowhere near enough is being done to police these individuals. A novel political move would be to announce meaningful resources to enforce the considerable weight of existing legislation already aimed at the PRS.
The vast majority of PRS landlords offer safe, quality homes to satisfied renters, a fact lamentably overshadowed by a criminal minority and overlooked by headline-seeking politicians. Honest landlords should not continually be punished for the shortcomings of those who fail in their obligations to provide tenants with a fair deal.
The buy-to-let sector has already been significantly subdued by the tax changes that George Osborne introduced when he was chancellor. What McDonnell now suggests would kill it altogether.
It would also compromise the viability of major developments aimed at providing good-quality, well-regulated, competitively priced homes aimed at people who want or need to rent rather than buy. A manipulation of market forces usually has unintended consequences.
Indeed, the sale of public housing in the 1980s was a contributory factor to today’s housing crisis. As properties which were sold off were not replaced, it resulted in a decline of affordable homes for rent (where people could live while saving for their first purchase). The consequent severe contraction in social housing forced poorer, more vulnerable tenants into the PRS and often straight into the clutches of criminal landlords who thumb their nose at statutory obligations with apparent impunity.
To propose right-to-buy in the PRS is facile. It would see developers and landlords walk away from the sector rather than risk their assets being sold out from under them. Such a scenario would exacerbate the housing crisis, not alleviate it. It would reduce the availability of rental properties; drive rents up; and force more households to share homes.
Additionally, McDonnell’s policy would actually encourage dubious property speculation. If rental properties could be bought cheaply then it would not be difficult to organise mass buying through a network of bogus tenants.
From a macro perspective, the increasing Japanification of the developed economies is already calling into question the wisdom of owning your own home.
A prolonged period of minimal interest rates and low, or negative, economic growth can erode the value of homes, while the debt payable on it (in the form of a mortgage), remains predicated on the price paid when the home was purchased.
So, this maybe isn’t the best moment to be encouraging a whole new raft of homeowners to take on onerous debt.
Home ownership is no panacea. While grappling with an ageing population living in unsuitable owner-occupied homes, renting offers choice, flexibility and support.
When my parents suffered a broken boiler on Boxing Day it was fixed in two hours because their landlord has a comprehensive out-of-hours service. That is what landlords of scale can and do deliver. It is frustrating that the benefits of renting are downplayed in an effort to make political capital.
If McDonnell and his colleagues do indeed wish to fix the housing crisis, perhaps they should focus their attention on plans for more social housing; incentivising improvements to existing private housing stock; and making sure that statutory authorities are resourced to drive criminals out of the private rental sector. But this takes a little more thought than simply snatching one person’s asset and handing it to another.
Tracey Hartley is head of residential at the Howard de Walden Estate