Rent Controls

 

Cross-posted from Peter Dombi’s website Our Broken System

Since Ed Milliband’s statement last week on housing, the issue of Rent Controls has returned to public debate. Those who seem to think that Free-Market economics should be used to run everything have inevitably risen up with a vengeance, and accused the Labour Party of following a Socialist agenda more akin to the government of Venezuela. This is of course poppycock.

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Germany: Where Rent Controls contribute to a superbly managed housing market. Picture © Doris Antony

There are many different ways that Rent Controls can be implemented, and a discussion of what works and what doesn’t work  is too complicated to go into here. However in principle, the idea that a central arbitration body should objectively decide whether a certain level of rent is fair or not, is clearly a very good way of doing things. Far better than the system we have now, where an uncontrolled market means rents rise faster than incomes, and ordinary people can be made homeless just on the whim of some greedy landlord. It’s also worth remembering that for every argument or example put forward by the anti-’s of how it can’t work, there is just as potent  an argument or example of how it can. It’s also worth noting that they always avoid mentioning Germany, which has got one of the most stable, fair and affordable housing markets in Europe, and which has Rent Control!

Fundamentally the arguments about Rent Control are not about the practicality and workability of the policy. They are an ideological battle-ground between those who blindly believe in Free-Market economics at all costs, and those who believe some level of government intervention is required, if the wealthy and the privileged aren’t to be allowed to systematically exploit the poor and the disadvantaged.

Rent Control can be badly implemented, and there are examples of that, but if done properly it can ensure ordinary people have affordable secure tenancies, while giving landlords sufficient return to justify their efforts and encourage investment. Also, and highly significantly, the constraint on rising rents also acts as a constraint on rising house prices, which means that homes stay more affordable for those who want to buy. It also stops house price bubbles, the like of which was a significant factor in the recent financial crisis. In summary, do we treat homes as a basic human need, which should be fairly available to all, or are they just a means of financial investment for property speculators and buy-to-let landlords? If you think the former then Rent Controls are the way to go.

For a fuller account of how Rent Controls could be implemented here, read this excellent article in the New Statesman:

For a very detailed comparison of the German and British housing markets, and how Germany has been successfully employing Rent Control for decades, read here:

 
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