Following heated discussion regarding a possible mansion tax, Ed Miliband recently announced a proposed intervention by a Labour government in the private rental market.
The proposals are, in summary, minimum three year term tenancies (although this would presumably only bind the landlord and not the tenant who would be able to serve notice at any time), capped rent increases (there has been discussion of annual rent increases being capped at the average rise in market rents) and a ban on agents’ fees on lettings.
These proposals represent a radical change. The Housing Act 1988 (and subsequent associated legislation) profoundly deregulated private residential tenancies. Under this regime there are limited tenant protections and in effect six months’ security of tenure for tenants. This marked the culmination of a progressive wave of deregulation in this sector from rent controlled tenancies to a more flexible form of tenancy.
These proposals give rise to a number of questions aside from commentary on the possible impact on the private rental sector market. Presumably there will need to be an ability to grant shorter term lettings – how will these exemptions be drafted so as to prevent the spirit of any legislation being circumvented while allowing flexibility in the market?
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Imposing a cap on rent increases seems problematic in that some areas are more desirable than others and therefore the intensity of state intervention in the market may be much more profound than first thought. When thinking through the issues it is apparent that questions beget more questions, the outcome of which is likely to be extremely complex legislative provisions.
As with all questions relating to the supply of housing, the fundamental issue seems to come down to a question of supply and demand – should the state seek to intervene in the market or focus its energy on deregulation on the supply side to reduce the shortage of housing? That is ultimately a question for electors.
Edward Burton is an associate at private wealth law firm Maurice Turnor Gardner LLP
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