3 thoughts on “Why ‘second generation rent controls’ are not a solution to the affordability crisis (Part 1)”

  1. Posted 10/03/2014 at 13:42 | Permalink

    An excellent post. Your last point is very important. Those sorts of controls would raise the risk of letting and therefore raise the required return and therefore raise rents or reduce the supply of let property. That is exactly what the security of tenure provisions did when they existed alongside the rent restrictions.

    There is plenty of evidence from the commercial real estate market about the value of different types of rental contract (because, there, there is variety of tenure types). Market fundamentals do in the end establish themselves.

    However, I would be interested to know whether the liberalising of the market in the late 1980s does allow long-term contracts with index-linked rents (or any other provision) or whether such contracts have to be written under the old restricted rent arrangements. If long-term contracts are difficult, then this is something that should be addressed (but through liberalisation).

  2. Posted 12/03/2014 at 00:29 | Permalink

    The rental value of land is the market measurement for the benefits a freeholder or renter receives from living in UK Plc.

    The trouble with renting is, you are paying for the same thing twice. Once to the taxman and once to your landlord.

    Would it not be better if the State collected the value it creates via a Land Value Tax(we already have LVT. Only it is privately collected)? That way, taxes on work and enterprise can be reduced/scrapped, so renters only pay for the same services once.

    This also works for freeholders too. Because they are no longer subsidising landlords, banks and the wealthiest 1% of households, housing affordability increases four fold for a median UK household.

    Anyone who’s total gross household income is 10% or more of their home’s selling prices, is better off.

    For an average household this is around £10,000 net.

    Lord knows why anyone is debating rent controls, or building more homes to add to our existing over supply.

    It’s the tax system, stupid! (not you Kristian. You are very clever)

  3. Posted 12/03/2014 at 14:30 | Permalink

    On the face of it, rent controls look like a bad idea, but…

    People and politicians in the UK (quite dishonestly and insincerely) say that they want a wide spread of owner-occupation. Actually they want nothing of the sort, which is why owner-occupation rates have been falling quite rapidly for ten years.

    But we did have a period with low and stable house prices (i.e. until about 1970) when owner-occupation rates increased steadily. What were they doing which was different?

    1. Rent controls.
    2. Lots of new council housing for low rents.
    3. Lots of new private construction.
    4. Sensible building society rules on loans to value etc
    5. Domestic Rates and Schedule A tax, which between them amounted to a modest Land Value Tax.
    6. High income tax rates on private landlords.

    And it worked, it worked just fine. Rented accommodation was crap, but so what? Houses were cheap to buy so nobody cared.

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