Critics claim Labour party’s promise to bring in new rent caps could stifle the emerging private rented sector (PRS)
At the weekend, party leader Ed Miliband announced a number of pledges ‘to address house-building levels and falling home ownership’, including a new exemption for first-time buyers in England and Wales from paying stamp duty when buying homes below £300,000.
Miliband also said he wanted foreign buyers to face higher taxes when buying homes and bring in a ‘local first’ policy to ensure properties were advertised in the UK before being promoted overseas.
However Labour’s bid to stop tenants being ‘ripped off’ with the introduction of an inflation-pegged cap on rents and new three-year tenancy agreements, has provoked the most reaction.
Responding to the news, the British Property Federation (BPF) warned that Labour’s ‘overly-prescriptive approach to rent increases’ might deter investment in the housing sector.
Melanie Leech, the BPF’s chief executive, said: ‘Ultimately what will help tenants best is more investment in housing.
‘This additional investment [from pension funds and other institutions] will be vital to tackle the housing crisis, and we would urge the next government to do all it can to encourage it, rather than chase it away with an overly-proscriptive approach to rent setting.’
Jeremy Blackburn, RICS Head of Policy, agreed: ‘[Labour’s] rent control proposals risk undermining the PRS by failing to take a holistic look at inflation, market value and the living wage across the whole of the UK.
‘Capping rent inflation through three-year fixed tenancies is likely to impact investment into the existing quality of homes in the PRS and could force smaller landlords to exit the market – limiting supply at a time when the UK faces a chronic shortage of homes across all tenures.’
Institutional investors could be discouraged by intervention in the rental market
Rhian Kelly, CBI director for business environment, added: ‘Labour is right to focus on increasing housing supply, as the UK needs to build 240,000 homes a year by 2025 to meet demand and add more garden cities to provide the communities our country needs. This work should be led by a new national infrastructure commission.
‘[But] Institutional investors, which are critical for building new homes, could be discouraged by plans to intervene in the rental market in this way, as it will add uncertainty - private rental market regulation must strike a balance between adequately protecting tenants and not overburdening landlords or property managers.’