Peter Franklin is an Associate Editor of UnHerd.
I’d like to express my gratitude to Lord Frost. Specifically, I’m thankful for his op-ed in Friday’s Daily Telegraph — in which he lays into the Government’s proposed reforms to the private rented sector.
It’s not that I agree with him. Quite the opposite, in fact. But this is an argument that the Conservative Party needs to have with itself — so I’m glad it’s out in the open. Indeed, it should form part of a wider debate as to who it is we exist to represent.
“Everyone” is the easy answer, but that’s a cop-out. In the real world, interests come into conflict — sometimes irreconcilably. Therefore we have to pick sides — just as we did over Brexit. In respect to rental reform the choice is this: do we prioritise the rights of landlords or do we uphold the right to have a home — even if it’s rented?
The reforms introduced by Michael Gove last week come down on the side of the many not the few. In the associated white paper, the Government pledges to abolish no fault evictions, curb unjustified rent increases, end blanket bans on renting to families with children and to make it easier for renters to have pets. The aim is make tenancies more secure and to allow tenants to feel less like guests in their own homes.
It should be said this falls short of the rent controls that some campaigners are calling for — but, nevertheless, Lord Frost is outraged. Gove’s white paper is an “anti-market measure” he insists. And while he admits there are bad landlords, he rejects any regulatory solution as another step “down the collectivist road.”
The first thing to say in response to this that the market-versus-regulation framing is misleading. The reality is that markets wouldn’t exist without regulation — they are the products of an ordered and civilised society. Over the decades and centuries, we’ve come to take a more exacting view of what a civilised society looks like, which is the main reason why we’ve also become a more regulated society. Or are we to regard every social and environmental reform — from the child labour laws to the Clean Air Acts — as another step towards socialism? Surely stopping landlords from evicting their tenants for no good reason falls under the heading of “civilised” not “collectivised”?
But what about the unintended consequences of these reforms? Frost complains that the white paper would leave landlords with less control over their property. And he’s right, the balance of power is undoubtedly shifted towards the tenant. Wouldn’t this therefore mean that landlords compensate themselves by putting up rents? No — and that’s because tenants are already being charged what the market can bear. After all, it’s not as if profit-maximising landlords have been charging less than the going rate.
OK, but what if a heavier burden of regulation causes some landlords to exit the sector? Wouldn’t that reduce supply to the housing market? Again, the answer is no — not if they sell to another landlord or to an owner occupier. The only problem would be if investors decide to sit on their assets instead of renting-out or selling-up.
Lord Frost predicts that the “next step, sooner than you think, will be a ban on leaving houses vacant for more than a few months.” This conjures up a nightmare scenario for ordinary home owners who need to live elsewhere for work or family reasons, but it side-steps a real problem that government does need to tackle — which is when professional property investors leave homes needlessly empty or building plots endlessly undeveloped.
It may even be the case that companies can pump up their balance sheets by restricting supply to the market and inflating asset prices. However, there’s an obvious solution: taxation. If left unused, land-based assets should be heavily taxed and the proceeds used to build houses elsewhere.
No doubt such a policy would be condemned as another “anti-market measure”. Yet taxing land makes much more sense that taxing labour or productive investment. Nothing useful would be disincentivised, only idle speculation. The land itself would continue to exist — and because it can’t be offshored, it wouldn’t be lost to the country.
Of course, I’m not claiming that tighter regulation and heavier taxation would have no impact on the rental and property markets. It would undoubtedly act to disincentivise inward investment — but, in this case, that would be a good thing.
Though we need to build more houses, property prices are a function of both supply and demand. We therefore need to get building while also freezing-out the speculators. The rightful purpose for every new dwelling is to provide a family with a home, not an investor with a sure bet. Perhaps the latter should man-up and learn how to invest in real enterprises instead?
Reducing the pressure on property prices — and therefore rents – is also just what the economy needs right now. Most urgently, there’s the cost-of-living crisis, to which escalating housing costs have made a major contribution. In the not-so-longer-term there’s the looming threat of recession. Unless we can restore consumer confidence, not to mention business investment, then it’s hard to see how we avoid a protracted downturn. All the more reason to stop greedy landlords from bleeding the economy dry.
Lord Frost upholds the principle of property rights, by which he means the freedom to “use your property as you wish.” I too believe that the right to own is the foundation of a free society — but only if home ownership is widespread.
And that’s why we must make a choice. The Conservative Party must stand for the first-time buyer not the buy-to-let landlord, for family formation not property portfolios, and for the property-owning democracy not rentier capitalism.
I realise that this is more of a conservative agenda than a libertarian one, but I don’t apologise for that. Even libertarians should be able to see that a future in which young people are elbowed off the housing ladder by cash-rich investors spells trouble for the centre-right. Either there’ll be a backlash from the Left or the rentiers will win — solidifying their advantage over a dispossessed majority.
These are the new roads to serfdom, and we must avoid them.