Ludicrous and nonsensical were two of the politest terms used to describe the reactions from Britain’s landlords, to a proposal from the Labour Party that private tenants should be able to buy their rented homes at heavily discounted prices.
Shadow Chancellor John McDonnell only gave sketchy details of the plan when he was interviewed by the Financial Times, but he suggested a legal right to purchase their home could be extended to millions of private tenants.
McDonnell said the idea was first mooted by his party leader back in 2015, when Jeremy Corbyn ran for leadership of the Labour Party. He said ‘reasonable’ prices would be set at well below the open market price and the policy would be targetted at landlords who let their properties fall into disrepair.
This made the proposal sound like some sort of benevolent nationalisation of millions of properties, including hundreds of thousands of buy-to-lets. It also left many economists and housing professionals scratching their heads and wondering how it would work.
Right to buy has roused strong opinions on all sides of the political debate
Patrick Mooney News editor of Housing Management & Maintenance magazine
Counter productive
But the suggestion drew a swift and highly critical response from the Residential Landlords Association, who said its impact could be counter-productive leaving many thousands of people without a home.
David Smith, Policy Director for the RLA said: “Labour’s proposal would effectively kill off a large part of the private rented sector denying a home to many thousands of people.
“If there was to be any chance of this becoming law, there would be a mass sell-off of properties in advance.
“The RLA is all in favour of landlords selling to sitting tenants, but it must be entirely voluntary. Anything else amounts to a form of compulsory purchase.”
Misunderstanding the market
A similar message came out of the National Landlords Association, who claim the proposal is a demonstration of Labour’s misunderstanding of the housing market.
Chris Norris, Director of Policy and Practice at the NLA, said: “To suggest that private landlords should be selling their properties to their tenants at a below market rate arbitrarily set by politicians is ludicrous.
“Landlords had to pay market rates themselves. It’s only right that, if and when they decide to sell it, they can do so at market rates. If Labour does indeed wish to fix the housing crisis, they should focus on encouraging the Government to build more social housing, which is what the housing sector is lacking.
“John McDonnell’s assertions that landlords are looking for a quick buck and don’t maintain their properties shows a serious lack of knowledge about how the vast majority of landlords run their businesses. These good landlords should not be punished for the sins of the few who fail in their obligations to provide tenants with a decent home.”
The context
Some 4.5 million households live in the private rented sector in England, almost one in five of all households. By comparison, 4 million live in the social rented sector and 14.8 million are owner-occupiers. The majority (84%) of private renters were satisfied or very satisfied with their current accommodation according to the latest English Housing Survey bulletin.
The Right to Buy has existed in the local authority sector since 1980, with tenants qualifying for very large discounts on the purchase price linked to the length of time they have lived in the property. Discounts are up to £82,800 in value or up to £110,500 in London. Almost two million council homes have been sold in the last four decades.
It has roused strong opinions on all sides of the political debate. One of the main grievances of councillors has been that they have only been allowed to use a fraction of the receipts, to pay for the building of new council houses.
This in turn has greatly reduced the supply of low rent housing across the country. In many instances councils have leased or bought back homes from their former tenants, often at much increased prices.
Ending austerity
While critics of the McDonnell plan say it could cause chaos in the private rental market, leading to a collapse in housebuilding, a spokesman for the shadow chancellor said it was part of a “programme to really end austerity, eliminate in-work poverty and drive up living standards across the UK economy.”
Chris Norris, Director of Policy and Practice at the NLA, was clearly not convinced by the shadow chancellor’s explanation.
He concluded his comments with: “McDonnell’s assertions that landlords are looking for a quick buck and don’t maintain their properties shows a serious lack of knowledge about how the vast majority of landlords run their businesses. Good landlords should not be punished for the sins of the few who fail in their obligations to provide tenants with a decent home.”
Vigorous campaigners
Coincidentally the two landlord organisations have just announced their intention to merge, creating a single body representing just over 80,000 private sector landlords. It will be called the National Residential Landlords Association.
Announcing their merger plan, they said one of its main drivers was that it would allow them to campaign “with even more vigour for landlords.” Perhaps without meaning to, John McDonnell appears to have given them a good reason to pursue this objective.
The merger has already been endorsed by both boards and is now being put to a vote of their membership this month. If approved, the new organisation is due to be launched on the 1st January 2020.
Patrick Mooney is editor of Housing Management and Maintenance magazine
