In the Daily Telegraph this morning, Boris Johnson explains how Ed Miliband policies will throttle the rental market. Boris begins: !It was in 1989, as communism was imploding across the world, that the Vietnamese foreign minister gave a press conference in which he discussed the most fatuous mistakes of his fellow revolutionary socialists. For sheer bone-headed stupidity, said Nguyen co Thach, there was one policy that stood out. It was more destructive than American bombing, he claimed. It was worse than the B52s and did more long-term economic damage than the napalming of the jungle.“The Americans couldn’t destroy Hanoi,” he said. “But we have destroyed our city.” Overcrowding was worse than ever; buildings were collapsing or in an advanced state of disrepair – and new ones were no longer being built. What was this policy? It was rent controls – exactly the policy that Ed Miliband announced yesterday in a classic attempt to get a headline while proposing diametrically the wrong thing for the economy.
The story of rent controls has been the same everywhere they have been tried. Until they were abandoned, rent controls in Seventies Britain led to a catastrophic fall in the number of rented properties available, and they did nothing to stop unscrupulous Rachmanite landlords. Rent controls accelerated the woeful degradation of much of New York’s housing stock, and in so far as there has been a boom in New York property, it has taken place in housing not subject to rent controls.
The Swedish economist Assar Lindbeck has said that rent control is “the most effective technique presently known to destroy a city – except for bombing”; and the reason he has come to that conclusion is that experience has shown that it is an idiotic way to tackle the problem of high rents.
Everyone is familiar with the struggle of Generation Rent. Even readers who are owner-occupiers will have friends or relatives who have seen their rents rise to eye-watering levels. No one could fail to have sympathy with their plight. But if we are to have any chance of solving the problem, we must understand what has really caused it.
In London – where more and more people are being driven to rent at ever higher prices – two factors have come together to produce a crisis. The first is the sheer popularity and success of the city. London is the most dynamic urban economy in Europe, with a growing population and an enormous demand for housing. And that demand has been exacerbated, secondly, by the total failure of the previous Labour government – in which Ed Miliband served – to build enough homes. Don’t just take it from me. As Miliband admitted himself in 2010, after he had been (rightly) kicked out of office: “We refused to prioritise the building of new social housing”. Or as Ed Balls put it: “Labour was wrong…We were late in recognising the importance of building more homes, and more affordable homes.”
One of the Labour members of the London Assembly, Tom Copley, has even called for the party to apologise for its failure to build more homes. As you might expect from Labour politicians, they are in fact understating the scale of the disaster, or their role in it. In the 13 years of the Labour government, housebuilding plunged to its lowest level since the Twenties. They saw the number of available affordable homes fall by 200,000; and indeed – this is the statistic that should really make them hang their heads with shame – they built fewer council homes in 13 years than Mrs Thatcher did in one year of her premiership.
Nor were things any better for those looking to buy on the open market: under Labour, the number of first-time buyers collapsed to the lowest levels since the Seventies; and perhaps no wonder, when you consider that Labour has always been suspicious of home-ownership – and the feelings of pride, autonomy and independence that go with it. In short: Labour failed dismally to build enough homes during the long years of the boom – and it is that failure we Tories have been trying our utmost, and with increasing success, to rectify.
In London, we are well on target now to deliver a record 100,000 new affordable homes over the life of this mayoralty; and there are more homes being built – just look at the cranes – than at any time since the early Eighties. These homes are for social rent, for part-buy-part-rent, for market sale and for market rent. For years now, we have been working to get the big pension funds and insurers to use their billions for the good of this country – by funding the building of tens of thousands of good new homes, for private rent, on brownfield sites. We are finally getting there. We have about 13,000 new rental homes in the pipeline – and the fear is that if their rents are unfairly controlled, these investors will just walk away; construction will halt; and we will be back to the inertia of the Labour years.
Now I suppose you might not care much about killing off new supply; you might think it would be a fine thing just to clobber existing landlords, force them to hold down rents. The result, alas, would be the exact opposite. All experience, in Britain and around the world, has shown that rent-controlled landlords let their buildings decay; and far from holding down rents, the three-year freeze would simply encourage landlords to whack them up sharply at the beginning and the end of the tenancy. This policy means higher rents, fewer homes, and general dilapidation. Like so much of Miliband’s agenda, it means going back to the Seventies.
It is not the way forward for Britain. The way forward is to build hundreds of thousands of higher-quality homes, including for market rent; to insist that landlords conform to the London Rental Standard in maintaining their properties; and to help people – as we are – with their rental deposit, interest-free. With the pressures now on the housing market, it is mad to pursue policies that would actively throttle new building and throttle the rental market, and if Miliband won’t listen to me, he should pay attention to his ideological kinsmen in formerly commie Vietnam. This isn’t a new policy. Lefties have been there, done it, and they know it is a disaster.”