Ask the average private renter if capitalism works for them and they’ll probably laugh in your face. They pay 47% of their income in rent, leaving little at the end of the month to put aside for the future. And if they get a pay rise, there’s a good chance that it will be hoovered up either by a landlord who hikes the rent, or the costs of moving if they can’t renew their 12-month tenancy.
Capitalism could be a lot more popular for the growing number of people for whom private renting is their only option, but the current housing market gives it an awful reputation.
First, our economic system should be rewarding productive activities, such as work and investment, rather than speculation on assets with a fixed supply, such as land. Homeowners are getting richer from rising house prices but that has only been possible by denying people access to that club.
The appeal of property as a place to park one’s savings means that those with enough cash to become a buy-to-let landlord can not only live off the earnings of those who need to work for a living, but ties up wealth in assets that don’t create jobs, starving growing businesses of capital.
The government has started waking up to this, and is gradually restricting the tax advantages for buy-to-let mortgages and charging extra stamp duty for home buyers who already have a place to live. These changes should make it easier for private renters to escape the insecurity of their tenure with a home of their own, while telling investors to put their money to work elsewhere.
Second, housing wouldn’t be so expensive if we just built enough homes, but the government is not only dragging its feet but revealing its addiction to continued house price inflation. Its 200,000 Starter Homes will be sold at a 20% discount which will expire after five years, giving that lucky handful of first-time buyers a huge windfall at the expense of the 4 million private renters waiting patiently for an affordable home.
The government has invested £2.4bn through Help to Buy equity loans. The higher house prices rise, the more the Treasury benefits – at the expense of the 4 million private renters waiting patiently for an affordable home.
Third, as long as we’re falling short of the 300,000 homes a year needed to make an impact on rents and house prices, renters will continue to be shaken down by a market that doesn’t even give them a secure home. Landlords get to take possession of their property without giving a reason and giving their tenant only two months’ notice to find a new home. A 69-year-old woman in south London is facing homelessness because the landlord has this power. She is only still in her home thanks to her neighbours who resisted the bailiffs this morning.
With more families and older people living in the private rented sector and desperate for a stable and secure home, the law is overdue for an overhaul.
The Lords Economic Affairs Committee is investigating the UK housing market and Generation Rent gave evidence yesterday, offering our solution for a popular private rented sector. By simply giving tenants the right to compensation if their landlord wants to sell or refurbish their home, renters would have the cost of an unwanted move covered, opportunistic landlords would be deterred from carrying out evictions, and renters would have more confidence to invest long term in their home and their community.
Landlords should also be limited in raising the rent to inflation, to prevent them from using unreasonable hikes to force tenants out. The great thing about this is that most landlords want long term tenants already so don’t raise the rent unreasonably and don’t sell up just because the price is right.
With secure tenancies and certainty over rent, those renters left behind by Help to Buy might not own their home but they’ll have a stake in their local community and might find themselves better disposed to capitalism.
