10 May 2018
More and more regulation
It is almost forty years since Mrs Thatcher won her surprise electoral victory in 1979 and modern memories of her great reforming ministry are, to say the least, mixed. Not all her reforms are recalled with affection and others have become so normalised that we have forgotten that we ever lived in different conditions.
The process of renting a flat or house in 1979 would seem bizarre to modern young homeseekers. The wait for the London Evening Standard to first appear on the streets, the frantic perusal of the Accommodation to Let columns, the frantic telephoning in the hope that the offered room would still be available. It rarely was, though just sometimes an invitation to inspect the space was forthcoming, followed by a journey to Tooting or Tufnell Park immediately after work. To find the rooms had gone anyway.
Mrs Thatcher changed all that, or at least, Nicholas Ridley and John Patten did, when in 1987 they drove a bulldozer through decades of residential rental legislation and introduced the concept of the Assured Tenancy. Before this change, tenancies were effectively for life, and often transmittable to tenant’s children, at rents which were almost fixed. Not quite fixed, but for a landlord to try to raise rents was a tortuous process involving multi-layers of bureaucracy and often requiring substantial expenditure to improve the property. Most rented properties certainly needed improvement. Decades of low rents meant the landlord spent as little as possible, with the additional hope this would make the tenant leave so the landlord could sell the property. Local authority tenants also had remarkably secure tenancies, but other than buying their homes under the new right to buy legislation, had no hope of taking control of their own housing destinies.
The Ridley legislation for private residential lettings applied only to new lettings. The old protected fixed tenancies remained. There were two fundamental changes; the fixed term tenancy giving the tenant security of tenure for the term of the letting, and only that. If the term was six months, at the end of that the landlord could get his property back, or enter into another fixed term with the same, or a different, tenant. And, secondly, the rent was whatever was agreed between landlord and tenant each time, but also fixed for the term.
The change to the market was immediate and profound. Landlords had seen tenants leaving as an opportunity, often the only opportunity for decades, to get their properties back, and to sell them. Now they knew they could let them for a term but get them back should they have a bad tenant, or need to sell. A let flat suddenly became an investment rather than a liability. It became worthwhile to modernise and improve flats as tenants became willing to pay more for better accommodation. The number of owner-occupier homes began to fall as some occupiers realised that they needed the flexibility of renting – or the lack of stress of trying to pay a mortgage. Rents effectively fell in many places as competition cut in.
It is fair to say that until recent years the let residential market was a major success for all concerned and a great advertisement for deregulation. But there are few politicians who can resist the urge to meddle. George Osborne began the trend whilst Chancellor of the Exchequer by changing the rules on tax relief for private landlords. A minor change but it caused the withdrawal of a number of hardworking and entrepreneurial space providers. Mr Corbyn and his New New New Labour would like to change things a lot more, by introducing “fair” rents (rents less than market), complete security of tenure, and sanctions on “bad” landlords. This would take the housing market back to the pre 1980’s model, and, whilst it might benefit those who happened to have security of tenure at the relevant point, it is unlikely to help anybody else.
The role of the centre of politics is to incline gently towards the noisy fringe. Labour have tilted the nervous Mayites their way, so now the Tories must show that they too can interfere with markets, make life fairer, and be the tenant’s friend. Mark Prisk, Conservative MP for Hertford in the high rent outer suburbs of London, and a former Housing Minister (after a year in the job, he was fired in 2013), says that local councils last year received 105,000 complaints from tenants in private rented accommodation. Of these, he says with a disappointed sigh, six in ten councils did not prosecute a single landlord. You might think that says a lot about the propensity to complain of tenants, but Mr Prisk thinks councils should start cracking down on bad landlords.
The Tories have one eye on the tenanting electorate in marginal seats and the other on that Labour new policy paper on housing which proposes intervention before, after, and possibly during breakfast, to push down rents, increase supply, and to make local councils the main providers of social housing – “housing for the many” (never waste a good strap line). Local authorities will become providers of low cost mortgages, and also investors in local housing schemes, and tenants’ right to buy their council owned homes will be “suspended”. This policy is led by John Healey, a Yorkshire MP and one of the stars of Mr Corbyn’s shadow cabinet; he was minister for housing in the last year of Gordon Brown’s government.
On the government side, the Department of Housing comes complete with a revolving door. Last week it span and out came Sajid Javid on his way to the Home Office, as in marched a new Secretary of State James Brokenshire, (“dutiful but dull”- a favourite of Mrs May) with the support of Dominic Raab, who arrived in January after the exit of Alok Sharma, the fifth housing Minister since 2010 (don’t worry, this article is not tested at the end). Messrs Brokenshire and Raab, especially the latter, have pro-market reputations, but have promised to crack down on “rogue” landlords, and generally to continue the recent government policy of ever forward – creeping intervention in the market, including registers of multiple ownership and banning landlords from incorporating companies to hold their properties.
An immediate challenge will be a new set of proposals published by the cross party Housing, Communities, and Local Government Committee of the Commons, chaired by Clive Betts, rather surprisingly with a Labour majority of members (and no Liberals, oddly for something that Liberals usually have a particular interest in). But we do meet again our new friend Mr Prisk. The HCLGC, as we must call it for reasons of space, if for no other, is also not keen on landlords, whether rogue or otherwise, and wants a lot more doing for tenants. They suggest enhanced protection from eviction and rent increases, a special purpose housing court, a housing ombudsman who will “provide tenants with the support they need when challenging inadequate standards in their homes” (not plumbing and decorating skills).
The HCLGC has no statutory authority to do anything, but being interparty carries a lot of moral influence, especially on a government that is stretched to the gunnels with other problems and has no majority in the Commons. So it is likely that some interventionist legislation will soon be making its way onto the statute books – and the supply of housing to let will mysteriously contract. And Mr Corbyn’s opportunity to introduce a proper socialist housing policy will grow ever nearer.