Yves here. I’m surprised that this article doesn’t put more emphasis on tenants’ rights. I am not familiar with tenants’ legal status in Germany, but as a matter of policy, Germany has supported affordable housing costs (in the real sense, not the US fake policy branding sense) in part to enable manufacturers to pay more moderate pay and keep their goods competitive. In other words, Germany put its finger on the dial so the property rentiers didn’t hurt industrialists. And historically, most people have rented and rents have been modest by advanced economy standards. But I am totally in the dark as to the particulars of the relevant policies and laws work. Can knowledgeable readers pipe up in comments?
In communist New York City, we have rent stabilization (which is NOT the same as rent control) in which owners of regulated apartments can increase rentals only as determined. The philosophy is that the rent increases are meant to reflect rises in landlords’ costs. In reality, they tend to lag inflation when inflation is high, and then landlords are allowed to catch up when inflation is low. One feature is that if a tenant is current on his rent, a landlord cannot refuse to offer a lease renewal. My building has a lot of rent stabilized tenants (and trust me, even with regulated rent increases, these are not screaming bargains, but they are somewhat lower than market rents), and there are many long-term tenants, including ones who’ve made significant improvements. So rent stabilized tenants do have property rights. And there is a specialized housing court which is pretty pro-tenant (as in they have seen lots of landlord bad tricks). Mind you, while this is good as far as tenants’ rights go in the US, I have no doubt readers can offer other suggestions.
By Jo Richardson. Originally published at The Conversation
Research by the Resolution Foundation has confirmed what many young people already sensed; that for them, the private rented sector in Britain is less a stepping stone, and more of a trap. The research predicts that up to a third of millennials will live in private rented housing from the day they’re born, until the day they die.
Many aspire to own their own home, pay off the mortgage and have an asset against which they can leverage the support they may need in their old age, or pass on to their children. But this traditional dream is becoming increasingly distant, as more of the UK’s housing stock is owned by organisations or landlords with multiple properties.
What Went Wrong?
Home ownership is increasingly the preserve of those with wealth, or older people who bought at a time when housing was cheaper. Some of the wealthy don’t just own their own home, but also others, which they collect the rent on to buy more properties.
While owner occupation, as a proportion of market share, has not changed dramatically, very recently (it has been around 62% for a couple of years) the private rented sector has grown at the expense of the social housing sector.
Social housing – that’s homes owned by local councils or housing associations, rented out at significantly less than the market rate – has become rarer. And there’s more so-called “affordable” housing – usually a set proportion of up to 80% of the market rate – which in many cases just isn’t affordable for those on lower incomes.
In continental Europe – especially countries such as Sweden – there is a different approach. The level of owner occupation is much lower, while the private rented sector is better quality, more affordable and more secure for renters.
What Could Work?
There are plenty of policies which could improve the situation for “generation rent”:
1. Cap rents in the private rented sector and regulate landlords, so that properties must meet quality standards; this is the case in countries such as Sweden, but the differences between markets means comparisons are nuanced and complex.
2. Reform tenancy law and enforce better protection for tenants against “rogue” landlords. There are stories about landlords undertaking “revenge” evictions against tenants who have complained. There are examples of poor or no repairs, hazardous and unhealthy conditions to live in, but the legal redress for tenants is slow, costly and limited.
3. Invest government money to build more social housing, and keep it in public ownership for those who can’t access the private market. At the moment, “personal subsidies” do not provide long-term assets of bricks and mortar, but instead go into welfare payments which, through rental payments, can ultimately boost profits for private landlords.
4. Disrupt the flow of public housing into private hands by halting the Right to Buy, which allows eligible social housing tenants to buy their home with a discount of up to £108,000 (£80,900 outside London). The Local Government Association refers to a “firesale” of social housing, with over 55,000 homes sold under RTB in the last six years.
5. Put more housing into the hands of communities by establishing co-operatives and community land trusts (CLTs), which have the power to decouple housing cost from market value, and link rent cost to earnings, with the uplift in value retained by the community co-operative – not wealthy private individuals. There are over 200 examples of small scale urban and rural schemes in England – such as East London CLT – learning from embedded projects, such as Champlain Housing Trust in Vermont, US. The relaunched Community Housing Fund will go some way to boosting activity here.
Why Things Won’t Change Tomorrow
The UK can’t just set out tomorrow and become Sweden by placing more stringent regulations on rent levels, tenancy security and quality of housing. The UK’s political and economic systems are materially different, and this manifests in the flavour of its housing markets.
In his 1995 book, Jim Kemeny highlighted how, in England, the housing private market is protected from competition through the suppression of social renting. Neo-liberal policies which promoted private commercial interests over social ones were the bedrock of this paradox, and this remains the case now more than ever.
Pendulum politics, resulting from our democratic process, means short-termism is the only political game in town. Reforming the housing market, fixing the private rented sector and building more genuinely affordable housing need a longer term approach.
Then there are voter dynamics to consider: for example, Right To Buy appeals to people already in the social housing sector who wish to own. The policy is often leveraged as a political at election time. But it benefits the few, rather than the many, and it disproportionately disadvantages young people who are in the private rented sector and cannot benefit from Right To Buy.
Older people, those who own their own homes, or wish to buy their council or housing association home, are more likely to engage with the current democratic system and vote. Until more and more young people use their ballot card, their voices will be marginalised.
There are too many vested interests in the political system to maintain the status quo. The people who can change the system – British MPs – have too much to lose. Just over 120 MPs – that’s almost one in five – declared on the register of interests that they rent out one or more homes or private properties. There is too much at stake for them to seek more regulation and fewer profits – turkeys won’t vote for Christmas.