In today’s politics update we look at a new report condemning rent controls, short-term lets, local licensing and the latest Grenfell Tower fire inquiry.
European Think Tanks attacks rent controls
The European Policy Information Center (EPiCenter), an initiative of nine think tanks from across the European Union and free market think tank and publishing company Timbro have published a new report: “Rent Controls – How they damage the housing market, the economy and society.”
The summary says:
- Rent controls have caused housing shortages and queues. 93% of Swedes live in areas with housing shortages with the average queue for a rental apartment in the capital 11.3 years – reaching 30 years for heavily subsidised apartments.
- Regulating rents skews incentives, which has led to a rapid conversion of rental apartments into co-op flats. The regulation also pushes excess demand into the property market, raising prices and incentivising renters to buy out their apartments for sub-market rates. As a result, the share of rental accommodation in Stockholm has fallen by a third since 1990.
- Rent controls have channelled excess demand brought about by low primary rents into the subletting market, pushing up rents for secondary tenants. In Stockholm, these tenants pay rents twice as high as the primary tenants.
- The regulation has enabled a black market for rental contracts with an estimated annual turnover of 110 million euros. One in five young tenants in Stockholm admit to having paid illegally for a rental contract.
- For companies, the regulation has led to recruitment difficulties. Many growing companies report employee housing as a major obstacle to recruiting qualified foreign workers. In one survey, a fifth of companies claimed that housing shortages made recruitment more difficult during the previous year.
- The system fails to achieve its primary policy aim: egalitarian economic outcomes. Large apartments in the most attractive housing sub-markets receive the greatest indirect subsidies. In Stockholm, the households occupying rental apartments larger than 180 square metres had an average income equivalent to the top 100th income percentile.
One in 50 homes in London is a short-term let
New research from London Councils suggests one in every 50 homes in the capital is let on a short-term basis.
The organisation, which represents all 32 boroughs and the City of London Corporation, found 73,549 listings for London homes on online letting platforms such as Airbnb in December 2019.
Calling for improved regulation of the short-term lets market, London Councils warns that the growth in short-term lets deprives the capital of much-needed permanent accommodation – something the RLA has been vocal on.
Boroughs are concerned that the proliferation of short-term lets means less housing supply for permanent residents while driving up prices in the private rental sector – worsening the affordability of housing in the capital.
London Councils warns also that short-term lets are also increasingly associated with spikes in crime and anti-social behaviour. Boroughs also report growing numbers of complaints from local residents about short-term lets used as ‘party houses’ and bases for prostitution and drug dealing.
Cities such as Paris and Barcelona have implemented mandatory registration schemes for short-term lets, impose heavy fines on rule breaches, and invest significant resources into monitoring the market and enforcing standards.
London Councils also points to the recent announcement by the Scottish government that councils north of the border will be able to introduce licensing schemes for short-term lets from 2021.
The body is calling for similar measures, including mandatory registration of short-term lets and stronger powers for local authorities to protect housing stock and clamp down on irresponsible property owners.
Response on Liverpool licensing question
Maria Eagle MP (Labour, Garston and Halewood) has received a response to her written questions asking:
- Why the application for Liverpool City Council to be re-designated as an area for selective licensing of landlords was turned down by MHCLG
- What the evidential basis was for MHCLG not including the provisions of section 80(4) of the Housing Act 2004 in refusing Liverpool City Council’s application to be area for selective landlord licensing.
The Housing Minister, Esther McVey MP, responded: “Liverpool City Council made an application for selective licensing under the condition of low housing demand across the whole city.
“The evidence provided by the local authority was carefully considered against all the relevant statutory conditions, including those contained within section 80(4) of the Housing Act 2004. The application did not meet the statutory tests because it did not sufficiently evidence the existence of low housing demand in every ward in the city, nor that every ward would become an area of low housing demand.”
MPs debate phase one report of Grenfell Tower fire inquiry
MPs yesterday held a general debate, without any vote, on the phase 1 report of the Grenfell Tower fire inquiry.
- Shadow Housing Secretary, John Healey MP, spoke of there having been a “failure to match the legal responsibility that landlords or block owners have for the safety of those blocks with the financial responsibility for ensuring that they, not the leaseholders, pay for that.” He went on to call on the Government to “bring in financial help for hard-pressed leaseholders billed by landlords for essential interim safety measures such as waking watches.”
- Addressing the responsibilities of landlords, Mr Healey, citing a previous report by the HCLG Select Committee, said: “if a landlord ultimately will not keep the properties up to scratch, a local authority should have the power to take over those properties and make them good. If the principle can apply for individual properties, it can apply for tower blocks when something this serious and urgent is required.”
- Sir Iain Duncan Smith MP (Conservative, Chingford and Woodford Green) expressed concerns that since the fire, people in a privately owned block of flats in his constituency “have faced massively increased insurance costs” even before an assessment had been made that the cladding on the property was safe. He went on to ask the Secretary of State to consider “whether insurance companies, and others, should have been charging leaseholders those extra costs until it had been confirmed that there was a real threat?”
- Robert Jenrick MP told the House that there are now “only 10 buildings in the private sector that have not begun the process of remediating, which means drawing up a plan and beginning with or contracting workers who can come on site and take away the cladding.”
- Karen Buck MP (Labour, Westminster North) accused the Government of failing to understand that “there is not a binary division between private blocks and social housing blocks.”
- Nickie Aiken MP (Conservative, Cities of London and Westminster) called for legislation that “gives local authorities powers to go in and look at the fire safety of all tenures—not just social rented but also shared ownership.”
- Yasmin Qureshi MP (Labour, Bolton South East) spoke about the fire at The Cube student accommodation in her constituency in November. She argued that: “It is clear that the building regulatory system is broken, and has failed the residents of Grenfell, The Cube and other buildings.”
- Helen Hayes MP (Labour, Dulwich and West Norwood) called for all landlords to be “robustly regulated, whether in the social or private sectors, with swift access to redress for tenants and penalties for landlords who are found in breach of their responsibilities.”
- Tim Farron MP (Liberal Democrat, Westmorland and Lonsdale – HCLG Spokesperson) told the House: “Smaller, often privately rented buildings in places such as south Cumbria can be, potentially, lethally unsafe, with their residents living in fear of what might happen or—more likely—in ignorance of the risk they are in.”
You can read the full transcript of the debate here.