Rent cap: it failed in Germany and it’ll fail us here│James McQuillan

What frustrates me about policies like the ones Labour is coming out with, is that they're attractive to people like me. I'm the mid/late twenties, making <20k a year and would love to find a long-term place to live. Eddie Izzard in a statement praised Corbyn's policies as 'bringing people hope': now I'm all for hope, but there's a limit.

There's practical hope... then there's false hope. I've worked in a fitness industry that sees ebbs and flows of products and people spouting off about the miraculous ability of homoeopathy. And that's exactly what this is: homoeopathy.

What's worse than that is the vocabulary Corbyn used, while seemingly telling the “truth” as many in his congregation wanted to hear, it isn't the truth.

'Cultural cleansing' - Coined by Raphael Lempkin in 1944 (the year is important), to denote the following: "Cultural genocide is the systematic destruction of traditions, values, language, and other elements which make one group of people distinct from other groups." I don't exactly see that happening in London; but I'm fairly certain that if we freak out over mobile phone checks as part of counter-terror policy, then maybe we could.

So, what was it that Corbyn was talking about that led to such a starry-eyed response from Eddie Izzard? Well, he wants to impose caps on rental properties and land rents. All with the ambition of countering 'Forced Gentrification'.

First of all: 'Forced' Gentrification? Gentrification is a response to demand, and according to recent sales of properties in Hackney, those people aren't being forced to buy the houses; they want them.

Secondly, while a rent cap sounds like a common-sense idea, which will curtail soaring rent prices, that too, is the product of wishful thinking. Back in 2014, Shelter suggested that introducing such a thing to the UK would have negative repercussions for landlords and their tenants.The argument may also arise that foreign investors buy up property in London, just to leave it bare. That too is wishful thinking; the Mayor of London, Sadiq Khan (Labour) commissioned a study in June found that, while foreign buyers DID invest in London properties, they consisted of individuals doing so with a mortgage, with every intention of living in, or renting the property; hardly Russian Oligarchs or the fist-shaking 'system's' fault.

The ultimate irony is that during the Labour conference, Clive Lewis suggested that opposition to freedom of movement was 'driven by racism'. And here they are condemning hapless foreign buyers for the housing crisis; hardly the socialist thing to do.

Fans of this motion have also cited Germany's rental cap, one fan going so far as to say it's had one 'for decades'. Now I'm terrible at maths, but I'm fairly sure two years does not come under the category of a decade (education these days).

Germany introduced caps in 2015 in an attempt to combat runaway gentrification, yes. Notice how it was 'runaway' and not 'forced'? Merkel didn't send out death squads like the Conservatives apparently do to orchestrate show-rounds to first-time buyers at gunpoint, while they shakily held out smart-phones to show their parents.

The cap enforced set prices on properties, with the allowance of charging 10% above. Sounds ok at first, and but would it cap it fully? Not really; Shelter's Toby Lloyd suggests that these properties would still see rises in line with RPI (currently at 2.9%) meaning that they'll still increase.

Merkel has already come under flak a few days ago amid her promise to continue with Rent Caps. Despite the fact that they are now potentially deemed as 'Unconstitutional', its original creators (the SPD) have gone so far as to suggest that it's a panacea, a form of homoeopathy:

“The SPD’s view is that if the rental price brake doesn’t work, then we need a second rental price brake. We say: if there’s a lack of housing, we should improve the conditions for building new homes,” - I.E. it's delaying the inevitable fact that there's a housing shortage that needs to be remedied.

Now, this wouldn't matter so much if these caps, or 'brakes' as the Germans so industriously call them, worked – but they don't, as the Germans have admitted to in the past. Rather than control prices, it led to tenants either unaware, or unwilling to stand up to landlords, and increases far above what would be possible in London; the highest rise is 31%. Still sound good? Once something becomes state regulated, any competence goes out the window. 

While we look 'forward' to this, some Germans are regretting it: "Some economists say rent caps are counterproductive. Steffen Sebastian, professor for property financing at the International Real Estate Business School in Regensburg, is decidedly against state intervention in the housing market."

What's suggested instead? Pretty much what we're striving to do here in the UK: build houses. Steffan suggested it, Toby Lloyd suggested it, yet countries like Germany and places in the states like Jersey see it as 'perverse'. However, far from being a disaster, it's not too bad here on that front.

The short answer is this: there is no fast, or clear-cut right answer for this. But what Corbyn is suggesting is neither achievable nor desirable.

 

3 thoughts on “Rent cap: it failed in Germany and it’ll fail us here│James McQuillan

  1. If you click on the link ‘it’s not too bad here’, you’ll find this:

    ‘However, housing charity Shelter said the numbers were still about 100,000 short of what was needed.
    “While it’s certainly positive to see a rise in house-building, we should be under no illusion that these figures are still pitifully low,” said Anne Baxendale of Shelter.
    “Even with this slight lift, we’re still falling well short of the 250,000 homes a year we need to ease the burden of the housing crisis.”

    Sounds pretty bad to me, and yet another example of market failure and the need for more state intervention to pick up the pieces.

    1. Completely agree; I lament not expanding on that point to be honest; while regrettably lower than needed, I feel that a cap would simply delay the urgency behind building more housing to meet rising demand.

      I would agree on the point of state intervention but I’m curious as to how that would manifest.

      I remain pessimistic of Corbyn’s policy as there are far more bad examples than there are good

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