Friday, 29 September 2017

The Disappearing Homes Conundrum

I know that the hard-core Homeys like to play the "disappearing homes" card, but Shelter really ought to know better:

But the evidence, summarised in the table below, suggests that old fashioned controls – setting the rent, not just controlling the increase – would force a significant number of landlords to sell their home, as they could make more money that way.

Now, that might be good for middle earners – a glut of homes suddenly for sale might become available.

But this is where the risk comes in for low earners. They can’t afford to buy and increasingly rely on the private rented sector. As landlords sell up, they would be left with fewer places to live. In the absence of a much larger supply of council and social housing, that risks pushing people into homelessness. This is probably not a gamble worth taking.


FFS.

The number of homes available to rent will fall and the number of potential tenants will fall by a corresponding amount. Those remaining tenants will have lower incomes, so rents would fall naturally anyway. Logic and real life evidence tells us this.

Funny how the UK had rent controls of one form or another for most of the 20th century, and 'homelessness' (however defined) wasn't as acute as it is now. I refer the approach as Georgism Lite.
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UPDATE JB, in the comments: I'm not claiming this has a significant effect, or is what Shelter has in mind; but could it be that some homes disappear when multiple-occupancy homes revert back to owner-occupier homes?

Fair point, and that did cross my mind - if former tenants, now first time buyers, buy a home which is larger than the one they were renting. I'd guess that this likely to be the case - people tend to rent the smallest/cheapest they can manage in, but when you buy, you tend to plan ahead a bit and get somewhere bigger for if/when they have children etc. In this case, the net supply of homes for rent would decrease by more than the fall in the number of tenants. But I'm sure the effect is marginal.

11 comments:

Jonathan Bagley said...

I'm not claiming this has a significant effect, or is what Shelter has in mind; but could it be that some homes disappear when multiple-occupancy homes revert back to owner-occupier homes?

Mark Wadsworth said...

JB, fair point, see update.

Ben Jamin' said...

Rent controls, like freeholders not paying a 100% LVT, is an implicit state subsidy, causing the same inefficiencies ie over-consumption of immovable property and its misallocation.

So, in the long term, not an under supply, but an over supply of homes, due to greater demand.





mombers said...

HMOs are fabulously profitable and would be less likely to be sold up than single family units? Nonetheless the trend is for average incomes of remaining renters to go down which exerts strong downwards pressure on rents. In house price booms rents often stagnate as everyone who can gets on the ladder, which is generally higher income renters

Jonathan Bagley said...

"HMOs are fabulously profitable and would be less likely to be sold up than single family units?"
Thanks Mombers. That probably does guarantee that effect re. my suggestion would be marginal.

Mark Wadsworth said...

BJ, bigger picture! Rent controls might be bad for 'housing' in the narrow sense, but by dampening prices, insulate the economy against land price/credit bubbles and busts. Overall effect positive.

Bayard said...

I'm pretty certain Shelter are as Homey as they come: " They can’t afford to buy and increasingly rely on the private rented sector."
Social housing, anyone? Obviously no longer on Shelter's radar.

Before a potential Labour government starts pandering to the middle classes by introducing rent controls, it should be building more social housing and stop selling off the stock that is left.

Rich Tee said...

But for the period 1945 to 1980 the government saw it as its duty to provide social housing, this is not the case now. As Bayard says, the government will have to resume its responsibility for providing social housing. But the old stock has been sold off, and there is limited land space for new stock.

Personally, I am opposed to rent controls, as I do think that the price mechanism is needed to signal where demand outstrips supply. I prefer more secure tenancies, which I understand is already part of Labour policy.

I live in a safe Labour seat so nothing I do at the ballot box makes any difference to the overall outcome.

Mark Wadsworth said...

B, Shelter do seem to have been co-opted by their donors (Berkeley, CBRE, Nationwide etc), same as any political party.

RT, rent controls and Land Value Tax are two ways of addressing the same issue, and I vastly prefer the latter, but anything is better than nothing.

Bayard said...

"and there is limited land space for new stock."

Possibly true in inner-city areas, but not elsewhere. Social housing is needed just as much in the countryside.

Bayard said...

"rent controls and Land Value Tax are two ways of addressing the same issue, and I vastly prefer the latter, but anything is better than nothing."

Rent controls, like any sort of government control, lead to corruption and a black market. LVT, OTOH is almost impossible to fiddle.