The politics of longer private tenancies

Originally published on June 2 on my blog for Inside Housing.

When it comes to the private rented sector are we all Chavistas now?

Back in 2014, when Ed Miliband’s Labour proposed a standard three-year tenancy with limits on rent increases, Conservative party chair Grant Shapps was quick to accuse it of ‘Venezuelan-style socialism’.

Flash forward four years and the Conservatives have stolen Labour’s policy at the last two elections and announced plans of their own for three-year tenancies – and if they are not quite proposing limits on rent increases they are not ruling them out either.

Even two years ago it would have been unimaginable for them to propose anything like the proposals announced by housing secretary James Brokenshire on Monday and first reported in the Conservative-supporting Telegraph on Saturday night.

Indeed, far from increasing security for private renters, Conservative-led governments had spent the years since 2010 attempting to undermine it for social tenants.

The Localism Act 2011 allowed social landlords to introduce fixed-term tenancies and the Housing and Planning Act 2016 mandated them for all new council tenants.

Back then any notion of security for tenants was dismissed as some form of welfare dependency.

But that was before the last election and before the Tories woke up to the Rentquake and the need to do something to appeal to private renter voters.

The current regime of assured shortholds was introduced by Margaret Thatcher’s Tories to (as they saw it) free the rental market from years of state control.

And Thatcher biographer Charles Moore was quick to reassert this position in his Telegraph column: ‘Mr Brokenshire says it is “deeply unfair” when tenants have to “uproot their lives” at short notice. Surely this is true only if they are suffering from a contract which was not entered into freely. Short notice can be convenient for both sides.’

This is of course nonsense. The power imbalances between landlords and tenants are such that few contracts are entered into freely.

Monday’s consultation paper recognises both that and changes in the market since 1988 that mean 38 per cent of private tenants have dependent children.

However, the plan in the consultation is not quite the one trailed in the papers about tenants having a ‘right to demand’ a longer tenancy.

For starters, the consultation does not commit the government to introducing three-year terms by legislation – this is merely one of three options alongside financial incentives and education to induce behaviour change.

Read James Brokenshire’s speech to Policy Exchange and the MHCLG press release carefully neither says that longer tenancies will be mandatory – the speech talks about ‘a new longer tenancy model’ and the consultation paper is about ‘overcoming the barriers to longer tenancies’.

As envisaged in the consultation, the three-year tenancy would include a six-month break clause for both landlords and tenants and only continue if both are happy. After that tenants would be able to leave with a minimum of two months’ notice.

This arrangement does not exactly sound watertight: in effect, landlords would retain the option of a six-month tenancy if they choose; and the new framework would also allow them to give notice within the fixed term if they want to sell the property.

Potential exemptions for students and short-term lets also sound ripe for exploitation.

Even the plan as reported had been subject to Labour criticism that the security of a three-year tenancy is meaningless unless the landlord is prevented from hiking up the rent to get the tenant out.

The consultation paper does not completely rule this out but it argues that ‘the historical evidence is clear that rent controls do not work’.

It proposes that rents should only be able to increase once a year and that the landlord should be ‘absolutely clear’ about how they will rise when advertising the property.

However, it also highlights the dangers of default rent increases: ‘A capped rent rise within longer term tenancy agreements may lead to some tenants experiencing rent rises they might not otherwise have had.’

Critics within the private renter movement argue that three-year tenancies do not go far enough and that England should follow Scotland’s lead and end Section 21 no-fault evictions.

Hailed as ‘a new dawn for Scotland’s private rented sector’, the new system offers tenants security whilst also allowing landlords to recover their property in prescribed circumstances.

It also enables local councils to apply to have an area designated as a ‘rent pressure zone’ and cap rent increases.

However, critics  argue that evictions will continue and that the new system creates a series of loopholes that can be exploited by landlords and makes them mandatory grounds for eviction.

These include cases where the landlord wants to sell, refurbish or live in the let property and also where they want to let it for non-residential purposes.

In Ireland, where four-year tenancies with annual rent reviews linked to inflation were introduced in 2004, the government has since tightened up the system with ‘rent certainty’ for tenants and fewer grounds for possession for landlords.

In truth, power imbalances between landlords and tenants will be there in any system – even in the tough legislative regime of the 1960s and 1970s landlords found loopholes to exploit.

It’s probably too soon to come to any firm conclusions about the Scottish system – but England’s proposals for three-year tenancies still look timid by comparison even if they are introduced as the default by legislation.

This in turn raises the question of how Labour will respond to the Tory plan. Its current policy is to ‘make three-year tenancies the norm, with an inflation cap on rent rises’ but also to look at giving the London mayor the power to give renters in the capital additional security.

The government plan does not go so far, and the outcome remains to be seen in a consultation that runs until the end of August, but it still borrows key elements of Labour policy.

So will the party content itself with pointing out the obvious loopholes of the Conservative plans – or toughen up its own policy?

Now that the Tories have joined their Venezuelan comrades, it’s clear that no party can afford to ignore the rights – or the votes – of private renters.