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Economy

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Currencies

Asia markets tentative ahead of Opec meeting

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

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Banks

Barclays: life in the old dog yet

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Categorized | Property

Labour to take on private landlords


Posted on April 30, 2014

©Getty

Ed Miliband, Labour leader

Private landlords are the latest “vested interest” to be targeted by the Labour party, with Ed Miliband set to promise longer tenancies, more stable rents and an end to up-front lettings fees.

The Labour leader, launching his party’s election campaign for local and European elections, will promise to tackle what he calls “the terrible insecurity of Britain’s private rental market”.

The move is the latest element of the opposition’s campaign on the “cost of living”, which has seen salvos against banks, energy companies, betting companies, pension providers, housebuilders and transport firms. But critics warn the move could undermine attempts to create a more professional private rented sector.

    Mr Miliband will say: “The next Labour government will legislate to make three-year tenancies the standard in the British private rented sector.”

    “Tenants can’t be surprised by rents that go through the roof.”

    The announcement comes amid a historic shift in Britain away from home ownership and social housing towards private rented property with 4m households now living in the sector.

    The trend has been driven by rising house prices and the sell-off of council houses since the 1980s under Margaret Thatcher’s Right to Buy scheme – as well as an influx of buy-to-let investors.

    “Generation rent is a generation that has been ignored for too long,” Mr Miliband will say. “Nine million people are living in rented homes today . . . a Labour government will take action to deliver a fairer deal for them too.”

    Labour will promise to end the typical £350 fee which people pay agents to secure a tenancy.

    It will also enforce new three-year contracts which landlords would not be able to break simply for the sake of getting a higher rent. Instead they would only be able to end the contract – with two months’ notice – if they had a good reason such as rent arrears, antisocial behaviour or breaches of the agreement.

    Party officials said the policy did not amount to a crude Venezuela-style rent cap.

    Landlords and tenants would have to set initial rents based on market value, with a rent review no more frequently than once a year.

    At that point landlords would be prevented from raising rents any higher than an “upper ceiling” set in place by legislation. That cap would be based on a benchmark such as average market rents.

    But Marnix Elsenaar, head of planning, at law firm Addleshaw Goddard, said the move could make undermine attempts to attract institutional investors into the incipient “build-to-let sector”.

    “Much of the attraction for investors is a lack of restrictions around planning use or rent levels,” he said. “Rent caps would severely undermine the potential to get the investment we desperately need in the sector.”

    An increasing number of professional property developers are moving into the lettings business. The former Olympic Village in Stratford, east London, has been converted into rented housing run by Get Living London, which offers longer-term tenancies and inflation-based rents.

    Delancey plans to develop a tower full of rented flats at Elephant and Castle in south London.

    Meanwhile, start-up Essential Living has vowed to shake up the capital’s lettings market, dominated by small amateur landlords. Martin Bellinger, its chief operating officer, said landlords needed to offer the “flexibility” of both short and long-term leases.

    “At a time when everyone is falling over themselves to support a professionalised rental sector, proposing rent caps would be absolute madness. It will kill off institutional investment in one fell swoop,” he said.

    Ian Potter, chief executive of letting agents’ membership body Arla, said the typical high street agent was not charging excessive amounts. Any tenancy of more than three years would need a legal deed to be signed in the presence of a solicitor, involving complicated and expensive legal fees, Mr Potter said.