A new Labour government would introduce indefinite tenancies

Longer Tenancies:

Labour has changed tack, from previously promising compulsory 3-year tenancies (as well as rent controls) to going the “whole hogâ€� and committing to “indefinite tenanciesâ€�. This would use the German model for residential tenancies in the private rented sector (PRS) in England. But has Labour done its homwork? See below…

Labour’s Shadow Housing Secretary John Healey has pledged
that a new Labour Government would give extra protection from eviction for private
tenants in England by offering them legally binding “indefinite tenancies�.

The new tenancies according to Mr Healey would be based on the
same rules as those currently operating in Germany.

In an official press release Labour says:

“The change would revolutionise the private rental market.
German tenancies last, on average, 11 years, compared to around 4 years in
England. The German system is also widely seen to act as a brake on rent
increases, given that landlords may use the changeover of tenants as an
opportunity to hike rents. Tenants themselves are still be able to choose to
leave the property after a period of notice.�

Labour claims that in England, landlords or their agents
make the decision to end almost one in five tenancies (18%), a figure disputed
by many experts in the industry who claim that the percentage of tenancies
ended by landlords in less than 10% and most of those for rent arrears.

At present, says Labour, “…tenants can be evicted without
any reason being given, and despite having done nothing wrong. One in three
private renters – 1.6m households – have dependent children. Under the German
system, tenancies are effectively open-ended with a tenant only able to be
evicted on tightly defined grounds, for example if they don’t pay the rent or
commit criminal behaviour in the property.�

Mr Healey says:

“People shouldn’t be living in fear of losing their homes. The
insecurity of renting is a power imbalance at the heart of our broken housing
market, where tenants are afraid to report problems in case they are evicted,
and families with children are forced to move at short notice.

“Many landlords provide decent homes that tenants are happy
with, but the Government is allowing rogue landlords to take advantage of good
tenants. Renters deserve better.�

What Labour does not say:

What Labour does not say, with its ideas for secure
tenancies, is how it would deal effectively and speedily with evictions? so as
not to drive private landlords from the market.

For example, persistent delays in paying rent or serious
arrears, with our existing slow and cumbersome county court system, can take landlords
months and sometimes over a year to evict non-paying tenants, while they run up
thousands of pounds in arrears.

There are major
differences with Germany

The German tenancy system is quite different from England
and Wales, with tenants’ responsibilities being much more onerous.

Yes, German tenants have more security of tenure, but they
also have far more legally binding responsibilities for the condition of the property
in terms of maintenance. In this respect the German residential tenancy is more
akin to an English commercial insuring and repairing lease, where the tenant is
legally obliged to maintain the property in a “tenantable condition� and could
face hefty bills at the end of the period if this is not done.

This is what was said in a 2014 report produced by the London School of Economics (LSE) and commissioned by Camden Council, on international renting comparisons and rent stabilisation:  

Germany: the example
of good practice?

“Germany is currently seen, especially by foreign commentators,
as the best exemplar of rent stabilisation. Nearly 50% of households rent privately.
Most have to make significant investment in the dwelling through bathroom and
kitchen furniture and equipment, making it more obviously their home but also
increasing the costs of moving.

“Rent increases within the tenancy are linked to specified
indices. Initial rents can be set up to 20% above comparable rents in the area
(in some cases up to 50%), giving comfort to the landlord in case of unexpected
changes in costs not covered by the index. Security is indefinite but eviction
procedures are relatively well defined. Importantly, general inflation has been
very low and real house prices had been falling since the 1980s in many areas.

“However, since 2008, and indeed earlier in some cities
(notably Munich), the situation has changed. Landlords have faced unexpected
costs, particularly because of stricter energy efficiency requirements. House
prices have been rising rapidly with commensurate increases in
owner-occupation.

“The atmosphere in terms of eviction has become more toxic.
Most importantly it is becoming increasingly difficult to access private rented
accommodation in cities with buoyant markets. As a result, political pressure
is growing for stronger rent controls in major cities (an important factor in
the latest elections). Concerns are also growing about how any increase in
controls might make it harder for working households to find accommodation and
could constrain investment.�

Has Labour done its homework here, and taken into account the effects on the rental market when strict measures are taken to introduce more control over market forces?  The German experience would tend to support previous evidence and arguments that wherever and whenever strict tenancy controls have been introduced, it tends to work against tenants in the long-run by increasing rents and reducing choice.

Labour commits to indefinite tenancies for private renters

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