Labour pledges to reform rental sector

Labour pledges to reform rental sector

Ed Miliband has announced plans for longer tenancy agreements and rent increase cap if the Labour Party wins the General Election next year.

In a policy designed to be one of the most eye-catching elements in his campaign to tackle the "cost of living crisis", the Labour leader has pledged to make it more difficult for landlords to evict tenants or raise rents.

Miliband’s policy has three main points:

1. There will be three-year tenancy agreements beginning with a six-month probationary period allowing landlords to evict a tenant if they are in breach of their contract. This would then be followed by a two-and-a half-year term in which tenants would be able, as they are now, to terminate contracts after the first six months with one month's notice.

2. There will be a ban on what Miliband will today call "excessive rental increases". Labour says it will be guided by the Royal Institute of Chartered Surveyors, which is examining options for a new rent benchmark. This could be linked to average rent rises or inflation or a combination of the two.

3. Labour will ban letting agents from charging tenants fees for low level services, such as simply signing a tenancy agreement. They will instead have to ask landlords for fees.

The announcement met with a mixed reaction. The Association of Residential Letting Agents (ARLA) said Labour’s ‘rent pledge’ will increase rent prices and reduce the quality of properties across the UK.

ARLA managing director Ian Potter, said: “I am deeply concerned that Labour has today announced a series of ill-thought through proposals which will have an adverse effect on tenants in the private rental sector. The proposals show a real lack of understanding of the rental market. Under their pledge, people struggling with the cost of living will be under even greater pressure.

“The challenge we have today is an unregulated market and a worrying lack of supply. By pledging to transfer fees to landlords and by introducing three-year tenancies, which will require a legal presence, rents will increase as landlords and agents seek to achieve returns. Fees are not arbitrary or unnecessary; they represent a business cost that Labour has failed to recognise.”

Despite Miliband claiming the Royal Institute of Chartered Surveyors (RICS) was involved in developing a new rent benchmark, RICS also criticised the proposals.

Jeremy Blackburn, head of policy and parliamentary affairs at RICS, said: “It is always important to consider all options which could potentially expand the supply of private rented homes, and to explore any that might make a positive impact on the sector and drive up property standards.

“However, RICS is not developing proposals on rent benchmarks for the private rented sector, and we do not recommend that a government introduce a ceiling on rent increases.

“Labour is right to talk about 'generation rent', but arbitrary caps are not a solution.” 

However, Alex Hilton, director of Generation Rent, backed the plans. He said: “Short tenancies and eviction-on-demand give landlords a brutal grip over their tenants’ lives. Renters will finally be able to make the building they live in their home and the street they live in their community, which will radically change how it feels to rent privately. Tenants will also, for the first time in generations, be able to assert their rights over repairs and maintenance without fear of eviction.

“The banning of letting agent fees to tenants is a long overdue measure. Millions of pounds a year are chiselled out of renters’ pockets by an industry that has so far shown no limits to its willingness to exploit people.”