Kevan Carrick: Too much control 'will scare off investors in housing'

Last week we learned of Labour Party leader Ed Miliband’s change of policy with a proposal to control rent increases and to extend occupation by up to three years

Kevan Carrick
Kevan Carrick

Last week we learned of Labour Party leader Ed Miliband’s change of policy with a proposal to control rent increases and to extend occupation by up to three years.

The Royal Institution of Chartered Surveyors (Rics) was alleged by Labour to be setting a rent benchmark but the party had got this wrong and Rics responded with: “It is always important to consider all options which could potentially expand the supply of private rented homes, and to explore any that might make a positive impact on the sector and drive up property standards.

“However, Rics is not developing proposals on rent benchmarks for the private rented sector, and we do not recommend that a government introduce a ceiling on rent increases. Labour is right to talk about ‘generation rent’, but arbitrary caps are not a solution.”

As an institution with a Royal Charter, the first duty of Rics and its members is to act in the public interest, that is not to put any “vested interest” first.

When I first joined the property profession in 1964, there was little control on rents or protection of the tenant from unscrupulous landlords. The supply of housing was underpinned by many pension funds and financial institutions investing in residential property to rent.

Inevitably, cases of excess occurred, the worst examples by one particular landlord coined the word Rackmanism, which still stands for unreasonable and harsh behaviour by a landlord.

The response from government was a sequence of rent control and protective tenancies. This rash of legislation in Rent and Housing Acts interfered with the market and saw politicians using the worst cases of excess as political point-scoring, which resulted in housing becoming a political pawn.

The impact was the withdrawal of pension funds and financial institutions from the housing market. For some years afterwards, governments heavily invested public-sector money into social housing, to the point that it became a large financial burden on the State.

In an attempt to attract new private-sector funding into the housing market and to increase the supply of homes to rent, the strictness of the Rent and Housing Acts were relaxed with the introduction of shorthold tenancies – tenancies with no security of tenure and at a rent that the market was prepared to pay. This has operated reasonably well over the past few years but as increased demand for rented homes has emerged, caused by the shortcomings in financing house purchases, some have taken advantage and excesses have emerged.

The solution is not to strangle the freedom of the market place. To do so would, in my opinion, push us back to relying on State finance to finance housing, which we cannot afford. Steps have being taken to combat potential excesses.

For example, a tenant’s deposit is paid at the outset of a tenancy and is protected in two ways. First, it has to be invested in an independent manner so that it can be returned to the tenant on leaving the property – in the past it was too easy for an unscrupulous landlord to hangon to it.

Secondly, a landlord cannot unreasonably withhold the return of the deposit unless the tenant has misbehaved by not paying the rent, incurring costs for which the landlord becomes responsible or causing damage to the property which the landlord has to repair.

My plea is to not put us back to the 1960s with Rent and Housing Act-style controls but to operate in a more fair and caring manner that will encourage the supply of more housing and investment in housing. Let us be more innovative to address the excesses and achieve a healthy housing market for all to enjoy.

Kevan Carrick is a partner at JK Property Consultants LLP, the policy spokesman for RICS North East, a member of the RICS Dispute Resolution Panel and chairman of Northern Dispute Resolution

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer