To the astonishment of most households, the political parties fighting the general election seem to have discovered a magic money tree. Whether this tree – should it exist at all – actually bears fruit after votes are cast on 12 December, remains to be seen.
Indeed the backtracking and qualification on statements already made – “I did not actually make that promise… what I actually said was…” – has already begun and the campaign is not even at the halfway stage.
One instance of particular interest to this author was the “ah, but” from Labour on its previously stated intention to give private tenants the “right to buy” the properties they rent with prices set not by the market but by some government quango.
Although there are still a few days before publication of the official manifesto, Labour appears to have shifted its original idea, allowing all tenants the right to buy, to apply only to those landlords with more than two properties. This seems aimed at placating individual and family owners and focusing on large-scale investors.
However, even this revised policy would instantly destabilise the whole housing market. Equally it is unclear how the government could guarantee that any tenant would be able to gain a mortgage on a property whose value has been decided arbitrarily. What would the real value of any property be if the government can intervene and price it on a whim?
Unlikely to benefit tenants
More precisely, what Labour fails to grasp is that it has been quite a task to persuade the financial institutions to invest in private residential property development and management in the first place and this reluctance is one of the reasons why the UK still does not have the scale of mass-rental private markets they do on the continent. Their input is still relatively small therefore restricting the forced sale of privately-rented homes to institutional landlords – apart from being bad policy – is unlikely to benefit the majority of tenants.
In the UK the rental housing market is basically divided between private landlords and social housing. In Scotland at the last count, 84 per cent of privately-rented stock was held by the former. On the whole these landlords do a good job in putting a roof over the head of people who either cannot obtain a mortgage or who, for various reasons, prefer to rent than buy.
Clearly this county requires a lot more social housing but there is also room for a third option – a “commercial-affordable” rental market which offers long-term, quality rented accommodation at a market price people are prepared to pay while producing a viable return for investors. This is only achievable through economies of scale and that needs the involvement of the financial institutions.
The other day I listened with interest to a senior Scottish politician who told BBC Radio 4’s “Any Questions” that in Britain too much post-retirement wealth is tied up in property rather than pensions, whereas in Europe the opposite is the case. I cannot think of a better way of bringing this culture here than by encouraging the pension funds to invest in providing the public with a wide choice of rental property options that give a real and affordable alternative to owner-occupation.
It almost goes without saying that if these investments were seen as being at risk of a forced sale to tenants, pension funds and other institutions just would not want to know.
When the right to buy policy was proposed a couple of months ago, shadow chancellor John McDonnell said: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy. You (the government) set the criteria. I don’t think it’s complicated.”
In reality, it is unbelievably complicated. Over the past two decades politicians have introduced welcome regulation which has boosted the safety and wellbeing of people living in private tenancies. So my advice to them is to stick to what they are good at – and leave the market to take care of the rest.
- David Alexander is MD of DJ Alexander