Tuesday, 30 September 2014

Labour’s London mayoral candidate would also use bonds to build homes

Livingstone: I’ll cap private rents

Ken Livingstone will cap private sector rent levels in London if he wins the fight to become London mayor.

In an exclusive interview with Inside Housing about his housing plans, Mr Livingstone, who last week won the Labour Party nomination for the 2012 election, said he would regulate rents as a means of solving the crisis over the rising housing benefit bill.

Speaking on the sidelines of the Labour conference in Manchester, Mr Livingstone said he rejected alternative plans for tough new caps to housing benefit levels. Cuts announced in June’s emergency Budget will mean local housing allowance paid to tenants across the country will be capped from April 2011. From October 2011, rents will also be set at the 30 per cent of local rents rather than the median.

He said: ‘The cap [to benefit levels] is wrong. Even Boris [Johnson] has expressed concern about it because it will cause tens of thousands of people being displaced to the outer boroughs where there is no housing. Tenants should not be paying more on the rent than it costs to have a mortgage on the same property. I would cap the rents. We want to have rent control.’

Mr Livingstone said his housing policy would be characterised by house building. He plans to use the bond markets to raise money for more affordable homes rather than relying on central government for cash.

He said: ‘We would not need to have government funding. We could borrow money on the bond markets to fund housing. There would be no problem with raising money internationally because we have a flow of income from the rents.

‘We just need the government to get out of the mayor’s way. The mayor needs to have the power to say that all councils should make a commitment to build a certain number of homes.’

Mr Livingstone also attacked current mayor Boris Johnson’s record on house building, predicting he would only have built two thirds of the 50,000 homes needed in London by next year.

Vincenzo Rampulla, public affairs officer at the National Landlords Association, said: ‘It would be foolish to say ‘I’m going to cap the rents of people who can only just about afford to provide that housing’. He said the consequence of Mr Livingstone’s plan would be fewer homes available for rent because landlords would pull out.

Duncan Shrubsole, director of policy and external affairs at Crisis, said: ‘One of the many reasons the housing benefit bill has risen so high is the steep increases in rents. But the underlying reason for the rise in rents is the shortage of housing and it is that which we really need to address.’

Readers' comments (15)

  • Why do all these daft non-announcement of deadbeat Labour micro celebrities need any publicicity?

    "Clapped out mad lefty rants in ernest, again, this week"

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  • Sidney Webb

    And so the support for progressive solutions widens into the mainstream. Cap the rents to save the benefits - what a wonderful idea.

    Next, commit to building sufficient affordable rented homes so that the scope for private sector parisites is consigned to history and house prices are stabilised at affordable levels. Remove the commodity approach to housing - another wonderful idea.

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  • In the quote from Ken in this piece, apart from in the headline itself, I cannot see where he says "control private rents" but perhaps he did.
    If he did, let's look at the consequences.
    Post WW2 the private rented sector was almost half all housing stock. Part of the reason it fell to 8% by 1988 was due to the very sensible increase in council house provision (good) but part of the reason was rent controls on the private sector.
    Control the price of any service or product and the available supply of that product or service will diminish. Recalling my first year economics at Uni I think it was the great economist Marshall (but I may be wrong) who came up with this annoying little truism along with his pesky demand and supply curves. I'm not sure if anything has changed in the real world to make Marshall's theory redundant.

    There are plenty of progressive ideas out there - and I like the bond market idea proposed by Ken. Also, has anyone joined up the "build to let" Private Rented Sector Initiatives to attract city money to build houses for private let.
    Perhaps there is a way some of this could be used for social housing and intermediate housing too?
    If that was done, the govt could even justify giving those behind the schemes the stamp duty and other tax breaks they keep asking for without it looking politically awful.

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  • Err...surely the regulation of private sector rents, in London or anywhere else, would require primary legislation. Last time I checked we had a Conservative Government. Who are not going to pass such legislation and have no intention of so doing. Has the Newt finally left the planet or am I missing something here?

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  • Chris

    Err ILAG - the legislation exists and has done for many years, governments have not used it out of fear of repressing the private rented sector whilst cutting back the social sector - this has been the policy that prevented you or I from qualifying for any of the drasticaly reduced social housing stock, forcing us into our own respective forms of the private sector. Insidious how these right-wing government opperate isnt it?

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  • Alpha One

    ILAG and CW, the powers of the MofL are quite wide, he effectively has much free reign over the capital, he wouldn't need primary legislation to cap the rents, he could introduce a law that applied only to London.

    To an extent I find myself agreeing with mad old Red Ken, cap the rent and you cap the benefit. However, it doesn't resolve the problem of propelling people out of state assistance.

    By taking away 30% of the HB they would get you are forcing them to find work, give up smoking, drinking or drugs and stopp frittering away their cash on big screen TVs. You are making many realise they need to work, and that is better for the economy.

    If labour can socially engineer so can the tories.

    I'd suggest that any cap on private rents must go hand in hand with benefit reform, so that people won't be forced back to work before they are ready, but will not be able to rely on HB forever.

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  • Sidney Webb

    Alpha - if rents are capped then benefits will automatically fall with the effect of making rents easier to afford through the wages available, thus removing the financial barrier to employment mentioned. Better still, for those already in work the rent reduction will not only reduce benefit dependency but present real value from incomes as the taper mechanism (if it is to be made more generous as outlined by Osborne today) allows more to be retained by the worker.

    I'm heartened that more and more people are coming over to agree that utilising the rent cap is the way forwards.

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  • PSD, back to pesky Marshall and his demand and supply curves, the argument, "If rents are capped, benefits will fall" works well if the supply of property to let does not diminish in line with the reduced price being paid.
    If lots of supply is withdrawn then you have a problem of more homeless people.
    And whilst I don't share the general fear put about by some representatives of private landlords and many in local govt that 80,000 or so LHA tenants will be made homeless as a result of caps on Housing Benefit, one cannot deny that reducing the price of anything (in this case rents) will result in some withdrawal of supply.

    On a more general but linked theme, following the latest broadside from the Coalition to cap total benefits payable, local authorities need to think of new ways of engaging with the private rented sector as a housing solution but I am not seeing much evidence of this.
    Local authorities may not like the PRS much but there is a right wing govt in power and that means they are going to have to engage with it and bring it up from the footnotes in their housing strategy papers.

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  • Sidney Webb

    Fair points David - but if the landlords do pull the plug if they are forced to reduce rents, where would you expect those properties to go? Mothballed would not produce a return. Non-benefit sector - I'd suspect other properties of the same rent level being preferably located would be let first. Sold - not a great prospect currently, but would provide some cheap property for the lower end of the purchaser market.
    I think the cap would need to be draconian to have a major effect, and even then the most likely effect is a flood of property for sale, and some of the purchasers are likely to be investors with a longer term business plan.

    However, I have mentioned before the dire need to build affordable homes so must conceed your primary fear as grounded.

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  • Hi PSR,
    Your analysis is correct and I fully agree.
    By the way I don't think that the caps being proposed by the coalition will produce 80K + homeless households. I have said on here at another post that I question the survey that produced that conclusion (small sample size, bias of respondents). In a nutshell I don't think anything like that volume of private landlords will quit letting to HB tenants.
    That said, the caps proposed will have an impact in Westminster and some parts of other boroughs where some private landlords will withdraw - much less than 80K but hard to say without some good research exactly how much it will be.
    My point was a more of a general one - that harsh rent controls on say all private sector rentals - HB and non HB - would have serious issues for supply.
    Actually another issue for private landlords letting to HB tenants is that actually they prefer HB tenants who are permanently on HB because it is the going into and coming out of work that b****s up the payments made under LHA.
    So, not exactly in line with the Back to Work ideals of the Conservatives, is it?
    Clearly, what govt needs to do is sort out the system of HB payments so private landlords are not put off letting to those people at the lower income levels who are likely to be in and out of work (and hence coming on and off HB)
    As an expert in the PRS, the way the interface with the private rented sector from local govt works irritates me because there is so much more that could be done to improve this end of the housing system but I'm afraid many in the govt and local govt just don't "get it"
    Now we will have a situation where expensive boroughs will be spending resources trying to recruit private landlord supply in cheaper boroughs while the cheaper boroughs spend cash trying to defend their turf.
    What a waste of taxpayers money but when I pointed this out to central govt they said they were happy with local boroughs making local arrangements.

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