Hands Off The House Market Please Too Much Political Interference
Oct 30, 2014
I would much rather see the broader housing market find it's own level without too much outside interference. It will do perfectly well without it and probably be all the stronger for it and the wider economy will definitely benefit from leaving well enough alone.
In the past Government interfering with or manipulating the house market for either economic or political gain has caused many problems. Political parties of all persuasions and colours have dabbled with engineering the house market from time to time, frequently with adverse outcomes.
Ed Miliband is the latest Politician to tinker with the house market in a long line of sometimes misjudged political interference in the house market. So, is his idea of banning agency tenant fees, three year contracts and rent caps good for tenants and do his numbers add up?
The concept of longer leases would generally be seen as not unreasonable by Landlord and Tenant alike, recognizing however that the majority of tenants do not necessary want longer contracts with the majority seeking a term of one year. The rent cap on lease renewals (as opposed to new lease arrangements) again would not be seen as unreasonable by Landlord and Tenant alike, especially as a landlord will want to sidestep any rent voids.
That leaves the banning of letting agency fees to a tenant, with Mr Miliband believing that this will single handedly bring down rents. It won’t.
This proposal is unbelievably misinformed because the costs a letting agency passed on to a tenant are there for a reason. The costs have to go somewhere, so if the landlord has to pick them up then guess what, the rent level will increase to cover this additional cost. The tenant will not benefit from this political interference.
These costs are typically for inventories (without which arbitration of disputes would be in tatters), references, guarantors, and credit checks and they are unavoidable.
Even Shelter who have in the past lobbied against fees charged by agents to tenants, stated in a report last year, “If letting agencies do not absorb the costs they currently charge to tenants, landlords may be justified in increasing rents to reflect their additional costs.”
Currently, we have George Osborne’s Help To Buy scheme fuelling a boom in the sub £500,000 sector. I fully understood and backed the initiative on new homes (employment factors etc.), but I do not think he should have widened the scheme to the second hand market. The warnings of an overheated market were there by September last year. Nor do I think that Messrs.’ Cable and Miliband should push forward with their mansion tax plans, because in financial terms alone they will lose far more than they think they can gain. Indeed it has already had an adverse impact on the market outside of London in the over £2.0m. sector and Government tax revenues from the sale of such property outside of London has been diminished in 2012 and 2013.
Furthermore, any such tax would be unfair because it would not be geared to income or spending and it would be indiscriminate. For example it would undoubtedly harm elderly folk relying on cashing in on their house value in order to fund their care in later years.
House price increases from the proposed widening of the HTB scheme have already occurred, perhaps priming a new housing bubble and doing little to address the real problem of a lack of supply of new houses.But will the current house price increases be sustainable?
Misjudged political interference in the house market is damaging. Hands off please.
John Holden - Chairman and Managing Director