Labour plans for private landlords

David Lawrenson of www.LettingFocus.com thinks Labour’s plans to force private landlords to sell to tenants – a sort of “private tenants right to buy” are unworkable – and they must surely know it.

Labour Plans for Private Landlords

Just when you thought it could not get any worse for private landlords and the private rented sector in general, a new threat appears.

The latest crazy idea being reheated and replayed down at the Labour Party HQ is a scheme to force private landlords to give first dibs to sell to their tenants at an enforced discount from the market price of those properties. It’s been called the “private tenants right to buy”.

How much discount? John McDonnell hasn’t worked that out yet.

Seizing private property and not paying market level compensation! Well, it is both scary and interesting.

But then again, McDonnell and Corbyn come from a Marxist background, as do many of the Momentum people who have taken over a big chunk of the Labour Party, so this kind of thing is to be expected, I guess.

It would be interesting what the UK courts would make of this. There would certainly be legal challenges.

Some people may equate this with nationalising companies like the water companies and the railways.

How would they pay for that, some ask? Would it not be very expensive to compensate shareholders?

Well, in the cases of nationalising utility companies, the government could simply drive down the share prices to zero by forcing the likes of the water and railway companies to lower prices for rail fares and water and sewerage. With bugger all profit now showing, this would tank the company share prices, possibly to zero and it would suddenly become very cheap for the state to buy them, possibly costing the state nothing.

Labour Plans for Private Landlords – Rent Controls Too!

Doing something similar in the private rented sector, would mean forcing private landlords to charge unfeasibly low rents via the imposition of rent controls. This could indeed force many landlords to sell, but there would be very little effect on house prices because only 20% of stock is in the private rented sector. The effect would be negligible.

So that particular “drive down prices to force sales” tactic would not translate over from the corporate world.

But that’s not the only problem this idea would face.

Rent controls are very hard to control anyway and where they have been tried in other places and at other times, many folks find work arounds.

And the reality is that most tenants could not afford to buy anyway, even at a discount, which is why they rent in the first place. Der!

Also, what would current mortgage lenders – those banks and other lenders with buy to let loans outstanding – have to say about this idea? Expect legal challenges from them too.

Finally, the emerging but growing Build to Rent investors would almost certainly disappear overnight, if there was even the remotest chance their properties could be seized at less than market value at some future point. So, the new build housing stock pipeline would fall off a cliff. Not a good outcome.

Labour Plans for Private Landlords – Win Votes

But never mind the practicalities and the likely adverse outcomes of “private tenant right to buy” for the total housing stock, it is all “good vote winning stuff” that plays out well with folks whose intelligence levels means they cannot think about the wider consequences of policies.

We are indeed in odd times in the UK right now.

But the reality is that this idea, for all the reasons given above, would simply not fly because it would do nothing for the total housing stock and the challenges it would face are just too great.

The more pragmatic people in the Labour Party can surely see this. But there are votes in proposing such daft policies – and that is enough in these sad, strange times for our country.

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We advise a range of organisations too to help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.

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