Labour’s rental policy
Labour have just announced plans on how they will tackle issues within the rental market if they are elected in 2015. This is in response to a significant decline in home ownership within the UK – a trend which is forecast to grow significantly over the next decade.
These plans include the promise of three major changes: longer tenancies, more stable rents and an end to upfront lettings fees. Under these proposals, three year tenancies would be standard within the UK private rental sector (currently 12 months is standard). Each three year tenancy would have an initial six-month probationary period during which landlords would be able to evict a tenant if they are in breach of their contract. This would then be followed by a two and a half year term in which tenants would be able, as they are now, to terminate contracts after the first six months with one month’s notice.
Uncertainty for tenants who are looking for a long term rental option is a real obstacle to renting being seen as a genuine alternative to home ownership, so this is a point that needs to be addressed. However, I’m not convinced that imposing a standard longer tenancy length is the way forward. Each tenancy should be negotiated at the start, allowing landlord and tenant to agree on a case by case basis, how long they’d like the tenancy to be for. If a standard longer term is imposed, it will heavily impinge tenants who want the flexibility that renting offers. It would also affect landlords who are renting for the shorter term. It must be remembered that many buy-to-let mortgages don’t allow landlords to commit to long term tenancies anyway, so offering the property for longer periods may not even be possible unless this is addressed.
Whilst a rent review would be conducted every year under these proposed plans, there would be an upper ceiling which would cap how much the rent can be increased by. This would most likely be based on average market rent figures, inflation or a combination of the two. My concern is that the rent caps could be capped below market rent. If so, this is likely to deter investment in the rental sector, reducing supply or making landlords less incentivised to keep properties in good condition. This has been the effect in cities such as San Francisco and New York. It’s investment in this sector that the UK desperately needs, so it’s imperative that any proposals do not deter investors.
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