It Is Time For Rent Controls To Help The Most Deprived Coastal Communities

A government shouldn't be afraid to intervene to help the most vulnerable. It shouldn't shy away from putting the national shoulder to the wheel to legislate for solutions to help those most challenged local communities who are trying to turn things around. It the political purpose of our national past - to fix and repair - and not to walk away. If creating fair value rents, a form of rent control, is necessary to do what is right, it should and must be part of our present national purpose too.
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Sometimes markets go wrong. They break. They are dysfunctional or erratic. If you believe in the potential and capacity of markets, it is necessary also to recognise their limitations.

There is a strong British business tradition that supports open markets. But not at the expense of the individual. It is the job of the politician to rule, to govern, to act in the national interest and the interest of its people. That is not the job of the markets. And when the operation of the market damages the people it is right for the government of the day to correct, to remedy and to intervene.

The current government is therefore right to intervene when markets need correction in the national interest and the interest of its people, as is happening in pensions, in banking, in water and in electricity.

Housing is another policy area where the markets do sometimes get out of kilter. Property is subject to global capital movements as well as domestic ones. Investment lifecycles can be different from those of the mortgage market. Housing is affected by the money markets and the performance of equities, as well as pensions regulation and savings rates.

That's aside from the fundamental policy role of housing itself - in housing people and providing a safe, secure and affordable platform from which they and their families can thrive.

There is a long and proud history of tacking action in housing across parties and across decades - to boost supply, drive up standards, balance pricing and free up markets to provide choice. From planning to building new social and council homes, from creating sustainable social rents to local housing allowance, to protections for tenants of multiple occupation to safety certificates.

But when to intervene and when not to intervene? How great should be the harm and how unlikely a natural correction? Is the event you are seeking to correct an error, an aberration, a harm - or is it a change, an evolution, a development. If it is the former then intervention may be justified. If the latter, intervention may itself cause a failure of markets to evolve and mature.

The Housing & Finance Institute's latest report, Turning the Tide, has been exploring the most extreme dysfunctional markets within the small most deprived areas. These are primarily coastal areas - those that have very different characteristics from mainstream markets - where housing is an evidenced feature and driver of entrenched deprivation.

The characteristics of such areas include abnormally high levels of private rented housing, low household employment and associated benefit dependency, vulnerability of tenants and poor quality housing.

The Institute's research highlights four councils; Tendring, Hastings, Blackpool and Thanet, who have been working to effect change for many years. The work that has and is being carried out by these councils is inspiring.

The difficulty of their task is immense - and it is made unnecessarily hard. There is market failure of the local housing markets in these areas. There is a multitude of complex legislation that hasn't been co-ordinated or consolidated. There is a relative unattractiveness of these small housing markets due to their chronically deprived condition. This, in turn, results in a lack of new housebuilding and housing investment, further entrenching tired out properties and housing-led deprivation.

In areas of low capital values and high housing benefit dependency, too often tenants and taxpayers alike overpay for housing which just isn't worth the rent being charged. Too often rents are too high because they are underpinned by benefit rent allowances which are excessive for the location and quality of the property.

How to reform housing benefit so that it supports quality and affordability for tenants, while incentivising and rewarding the provision of good quality property, is very difficult. One way forward is the implementation of a time limited period of 'fair rents' to control the rent which can be charged within a specific renewal area.

The rent level set would take into account the quality and condition of the property. Applying a modern fair value rents regime reflecting quality of condition and management of property could have the same economic effect for taxpayers and tenants of adjusting markets where rent levels are defective, and at the same time reward landlords who invest in better quality properties and appropriate management standards.

This would be more likely to incentivise new housing market building and investment. Such an approach could also rebalance the fundamental investment dynamics of spend, yield and return over time, so that the broken market is fixed, returned to normal market operation and a normalised housing market restored.

A government shouldn't be afraid to intervene to help the most vulnerable. It shouldn't shy away from putting the national shoulder to the wheel to legislate for solutions to help those most challenged local communities who are trying to turn things around. It the political purpose of our national past - to fix and repair - and not to walk away. If creating fair value rents, a form of rent control, is necessary to do what is right, it should and must be part of our present national purpose too.

Natalie Elphicke is chief executive of the Housing and Finance Institute

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