Miliband’s landlord proposals are not welcome

Leader of the Labour party Ed Miliband has proposed a policy on residential landlords and rent controls where landlords would have to issue minimum three year tenancies and rent increases would be controlled within that period.

But, as David Lawrenson of LettingFocus pointed out: “Does Ed Miliband realise that most mortgage lenders do not allow landlords to issue tenancies of over 12 months' duration? Just thought it should be mentioned, in case the Labour leader had not realised it."

Lawrenson said that following his firm giving evidence to the London Assembly's Housing and Regeneration Committee in December 2012, a few of the larger lenders were shamed into reversing their policies on this, but some still do it.

He added: “None of the councillors at that meeting were aware of this restriction but they acted on what we told them, forcing Lloyds Banking Group and the Nationwide to reverse their restriction and allow landlords to do this.

“It is not unusual for government - central or local - to lack an understanding of the private rented sector. Even if one did not like landlords much, it seems rather harsh to force them to do something that puts them in breach of their mortgage terms and conditions.”

Legal view

Paul Walshe, partner at Moore Blatch Solicitors, a law firm specialising in landlord and tenant disputes, warned that Labour’s proposed landlord regulation risks damaging the private rental market and reducing standards.

Walsh said: “The proposals could dampen the currently healthy rental market with thousands of landlords exiting and not being replaced. That risks creating a supply shortage, which in turn either drives up rents or, if prevented by government legislation, drives down standards."

He said that history shows government intervention in controlling rents only damages investment in the market and referred to the Social Policy Section’s briefing to Parliament in January 2014: “It is widely accepted that rent controls, coupled with security of tenure, made private lettings a relatively poor investment in the 1970s and 80s and that this contributed to the decline of the sector.”

Good tenants have nothing to fear from the current regime, insists Walsh. The most recent English Housing Survey indicates the average length of tenancy is 3.8 years.

“However, a key strength of the present system is that landlords know they can get their properties back once the fixed term ends if their circumstances change or if they have tenants that don’t pay. The substantial cost and time it takes to bring a possession claim based on unpaid rent and the fact that tenants can delay possession by reducing arrears below two months mean that many landlords are rightly fearful of taking possession action.

“The current regime gives them certainty that, if the fixed term has ended, they can get their property back. Labour’s proposals threaten that certainty and, coupled with restrictions on rent will create a disincentive for private landlords, who make up the majority of the PRS, to invest in the sector.

“In a free market rental levels reflect supply and demand. If rents are too high the solution is to increase supply not to suppress rents below market value. That only drives landlords, whose yields are already strained by the swathe of regulation on the PRS, away from the market reducing supply even further.

“Fewer properties and lower yields is equally bad for tenants as it reduces choice and standards if landlords can’t afford to properly maintain properties.”