Ed Miliband will announce today that he will cap increases to housing rent in the private sector if Labour comes into power, in a move reminiscent of the 1970s state intervention in markets.
Miliband aims to end “excessive” rent rises by introducing an “upper limit”, he will tell an audience at Labour’s local and European election campaign launch.
There are currently 1.4 million landlords in England, according to the National Landlords Association, and an estimated 345,000 in London.
Their income from renting out their properties would be under threat under Labour’s plans, which could also deter them from investing in property and providing homes at a time when housing stock is in desperately short supply.
Carol Pawsey, lettings director at Kinleigh Folkard & Hayward, told LondonlovesBusiness.com: “The changes, should they be implemented, could very well prove disastrous.
“Many buy-to-let investors have chosen to invest in the property market over other investment options due to the returns available, and many have rental yields which need to be met.
“Capping the rental increases they can expect each year could inspire many to look elsewhere when investing their money. And with the number of tenants in the market expected to rise over the next few years, we really need more landlords coming into the sector, than leaving.”
Miliband also plans to change the standard tenancy contract to a minimum three-year period.
He will say: “The next Labour government will legislate to make three-year tenancies the standard in the British private rented sector to give people who rent the certainty they need.”
But Richard Lambert, chief executive of the National Landlords Association, believes Miliband’s measure could actually reduce certainty and create instability in the housing market.
He said: “The proposal for a three-year default tenancy is unnecessary, poorly thought through and likely to be completely unworkable.
“Private individuals put in the region of £20bn into providing housing for rent last year.
“Fundamentally changing the structure of tenancies will create uncertainty amongst these landlords and the lenders which provide the finances underpinning housing in the UK.
“Were these proposals to become government policy it would strike a devastating blow to investment in housing of all tenures and further constrain supply at a time of real housing crisis.
“We are concerned that the proposals will actually increase the insecurity of tenure for renters.”