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Rents are falling, in real terms. So why does Ed Miliband want state intervention?

2 May 2014

In recent weeks, I have found myself defending Ed Miliband as much as attacking him. I do believe that his election would be a calamity for Britain, but that doesn’t mean I think he is an idiot pursuing a stupid strategy. On the contrary, I think what he is doing is bold, coherent, radical and chimes with the emerging populist mood. I also think that it is working – as things stand, he is on course to become the next Prime Minister. I look at this in my Telegraph column today.

The rent control policy announced yesterday embodies this bold populism. Britain has a problem with buying houses – one created, in my view, by government policy to keep interest rates nailed to the floor during an economic boom. But low rates also make favourable terms for buy-to-let, and rents have been falling in real terms even in London. The below graph gives some idea of how things have been getting better:-

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Bizarrely, Miliband has audaciously claimed there is a massive rental problem that can only be resolved by state intervention. So he will tell landlords to offer three-year contracts, and put a cap on annual rent increases. He’s inviting voters to blame their troubles on rapacious capitalists, and posing as the bold avenger. Give him a pint of beer and he’d be Nigel Farage. I don’t mean this as an insult – all parties are under threat from UKIP. It’s a good thing that in our democracy they are forced to respond. Miliband is doing so by embracing leftist populism. Farage has shown you can win back abstainers, if you persuade them you have an agenda to really shake things up. Miliband is showing such voters that he would do some shaking too. And I, for one, believe him.

Miliband will be calculating that the populist wave sweeping Europe may help him. This wave will help ‘give me my country back’ parties next month: the True Finns, Geert Wilders, Ukip in England and the SNP in Scotland. If you shake your fist at the establishment, there are votes in it. And does this win elections? Ask Bill de Blasio, the Mayor of New York, or French President François Hollande.

Right now, Ed Miliband is wondering if a leftwing populist agenda could work in a national election, and so is Elizabeth Warren in the US. Warren, who has just released a new book, will probably invite her party–the Democrats–to reject Clintonism and nominate her as their presidential candidate.

I have spent the last 15 years bemoaning the absence of ideas in politics – well, I can’t complain about Ed Miliband. He’s able to draw on a vast knowledge of political theory, and his idealism certainly contrasts with cynical Tory policies like the ‘pensioner bonds’. Ideas are back in British politics.

It just so happens that Miliband’s ideas were tested to destruction in the 1970s, and they won’t work any better now. I’m not sure you can get a worse policy then rent control – it makes tenants into supplicants, creates massive shortages and long waiting lists. I have friends in Stockholm who have been on this waiting list since the day they turned 18, and still have no flat. No wonder that it was a Swedish economist, Assar Lindbeck, who said that

‘rent control appears to be the most efficient technique presently known to destroy a city – except for bombing’.

But Miliband’s 70s revival policy is not an anachronism. Quite the reverse. The crash has brought this back in vogue – for a minority. But Miliband just needs a minority, 35 per cent of the vote, to triumph. He will calculate that radical policies like rent control will appeal as a break form politics as usual. He might be right.

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Show comments
  • Wombeloid

    Let’s go back to cheese subsidies! I seem to remember Shirley Williams was behind that. Only this time could they be applied more widely? Especially to French ones.

  • Grouchy Oldgit

    British housing prices rise faster than inflation due to insufficient housing to meet the needs of the population. Only lasting solution is to build more homes.

    A further issue is the distribution of housing by tenure type. I suggest that owner-occupation and non-profit rentals comprise the bulk, with private rentals filling the gaps, eg corporate, short-term, those choosing to rent more than their basic needs.

    Owner occupation is optimal for most that can afford it (nb: ownership costs include maintenance which can be substantial for the many older properties).

    Those unable to own their home can be housed by either public/non-profit or private sectors.

    For decades the bulk of non-homeowners lived in council housing, a system that worked well until decimated by Thatcher’s right to buy legislation.

    Right to buy effectively means a public-owned asset is sold at heavy discount (ie: loss to public funds) to a “lucky” (ie in public housing with sufficient funds to buy) minority.

    Naturally, private landlords are for-profit enterprises that seek to maximize profit. Relying on the for-profit sector to house the less well off results in a flow of wealth from poor to rich, ie exacerbates inequality.

    Council tenants had security of tenure and a sense of home almost akin to ownership, eg being able to redecorate according to their taste. Private tenants, including a growing number of families with kids, enjoy no such dignity, paying far more than council tenants, living under constant threat of eviction, and in many cases being unable even to hang pictures on the walls.

    Council/non-profit rentals should be let at “realistic” rents that cover their costs.

    In many cases private rents are paid partly or wholly by the taxpayer, thus public funds are increasing the wealth of private landlords.

    For a long time the odds have been stacked against those forced to rent privately. Miliband’s proposals go some way towards redressing the balance. Landlords that don’t wish to rent under these terms will liquidate their properties, thus increasing supply (and reducing price) for new owner occupiers.

    However, Miliband’s proposals are a short-term band-aid, NOT a solution to the housing crisis. That requires a significant increase in housing supply, ie a large scale building programme plus councils having powers to encourage/bring unoccupied dwellings into use, eg increased taxation or compulsory purchase of empty properties. It also requires a substantial expansion of council/non-profit housing stock sufficient to accommodate all who need it.

  • HookesLaw

    Miliband was eating fish and chips to promote his man of the people image. I wonder where he got that bit of chicanery from?
    He wants to control rents because it is a free money dog whistle bribe to dumb voters. The fact that it will restrict supply is ignored by him. If rent control is so good why not control all prices – and then incomes? Why not indeed; Ed is a crypto-marxist. And of course it is the life’s work of loony Kippers to deliver this moron as PM.

  • MichtyMe

    If rent control is so bad for the housing market then what about land control?

  • Greenslime

    He is desperately trying to distract those daft enough to listen to state-sponsored schemes which promise utopian redistribution. He’s not waving, he’s drowning.

  • CharlietheChump

    Why does Millband want state control over everything? It makes him and his kind shiver with delight and anticipation and the certainty of jobs for the brothers and sisters.

  • you_kid
  • Des Demona

    Ummmmmm…….. no, rents have not been falling in real terms, just because they are below the CPI. Good grief.

    They have been rising slower than the CPI but still above average earning increases –

  • Inverted Meniscus

    Ed Miliband would like to regulate what we say, think and do, how we chew gum, how we spend our money, where we go on holiday, what we spend on holiday, what we read, what we watch, who we vote for and for all I know, the colour of our hair. What in all the world of sports surprises you about him wanting to regulate rents? This utterly preposterous, unworldly, unprincipled imbecile is a Marxist and regulating the lives of lesser mortals is what this idiot and the rest of the Labour Party do.

    • Andy

      Exactly, but he is the son of a Marxist scumbag who, as the Daily Mail quoted, ‘hated Britain’.

  • LadyDingDong

    Never underestimate the opportunism of the Labtard Muppets, or overestimate the stupidity of the 35% of the electorate likely to vote for them. This isn’t about policy, it is to support a narrative that the state can control everything and that by voting for Miliband wages go up and prices come down. Economic illiteracy of the highest order but everyone over at the Guardian and the BBC believes it.

    • Holly

      Cheaper energy bills, Cheaper rents with longer tenancies, Guaranteed jobs for the young, the rich hammered to pay for it all.

      Never having to think, or do anything independently, as the Mili-crew will cater for our every whim.
      The less you have the more you’ll get….
      Socialist utopia.
      Can’t wait.

    • Mike Barnes

      I don’t see why it’s stupidity to vote Labour. It’s self interest, the same reason lots of people vote.

      Pensioners don’t vote Tory for the good of the country, they do it for the goodies. Pensioner bonds Fraser mentioned, protected pensioner benefits, artificially high house prices protecting their nest eggs etc etc.

      • LadyDingDong

        If Einstein defines insanity as doing the same thing again expecting a different result I am perfectly entitled to define voting Labtard as stupidity.

        • you_kid

          That’s right, Lady DD – you and I are the last ones standing who truly despise socialism.
          Only socialist will argue that the free maket was only free when it suits them and when it does not revert to UKIP style protectionism. Yes, that’s right – UKIP are the biggest socialists in British post-war politics.

        • GraveDave

          Lib/Lab/Tory tards, you mean.

      • HookesLaw

        House prices are not artificially high – not long ago they fell dramatically.
        ‘UK house prices have fallen by 5pc in real terms over the last ten years when inflation is taken into account, dispelling fears of a house price bubble’ … so you need to try harder.

        House prices are governed by market conditions not governments. Likewise rents. As soon as Miliband starts to control rents he starts manipulating voters.
        Pensioner bonds are perfectly legitimate and a not unwise way to help people – old and vulnerable people – on fixed incomes at the end of their lives. A 1yr bond would earn a massive 2.8% and a 3 year bond – a 3year commitment – 4%. You can get children’s bonds – so why are you picking on pensioners?

        With any luck even you might be a pensioner one day. The fact that Mr Nelson thinks that helping old people this way is cynical as opposed to long overdue speaks volumes for his mindset.

      • rubyduck

        In my humble (pensioner) opinion, pensioners who vote tory (and a huge number don’t) do so because they prefer to see things done properly.

        • GraveDave

          The Tories always did look good on paper .But then so does the Queen.

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