As we enter the worst recession in 300 years, renters’ incomes will be squeezed with chances of meaningful wage-increases remote for most. As such, all concerned with safeguarding and improving renters’ quality of life should turn their attention to minimising the cost of living where possible.
Given housing costs are renters’ greatest expense, how rent is determined should be scrutinised closely with rent reduced as much as possible. In addition to benefiting renters as individuals, reductions in rent would serve to fortify aggregate demand during the recession1.
Competing definitions of affordability
In 2011, the coalition government introduced a definition of affordability which provided a rented property would be classified as ‘affordable’ if it cost no more than 80% of the local market rent.
The definition was absurd.
It is impossible to calculate whether something is affordable if the formula you use takes no account of the renter’s income and essential outgoings. In response, various well-intentioned actors, including the Labour Party came up with their own definitions² of affordability focusing on renters’ income and ability to pay.
The limitations of a focus on ‘affordability’
Any suggestion that market forces should not be the sole determinant of renters’ housing costs should be broadly welcomed. However, limiting demands around housing costs solely to those of ‘affordability’ has served to tacitly legitimate the landlord and renter relationship, a relationship that is, at its core, inherently exploitative.
The principle that landlords should profiteer from renters has become locked-in as ‘something that goes without saying’, all calls for affordability demand are that landlords’ profiteering should not be so great as to cause renters excessive hardship. Crucially, a focus on ‘affordability’ for the renter has meant the landlord’s side of the relationship has avoided scrutiny.
Scrutiny of how landlords justify the rent they charge exposes the inherent unfairness of the landlord and renter relationship
1) ‘Supply and demand’ might explain rent levels, but explanation does not equal justification!
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Housing costs for renters should be based on the actual cost of supplying the home, not what the market can bear. Sometimes, because of the layout of the plumbing in certain properties, it is impossible for water companies to provide individual water bills for each household. When this is the case, the landlord of the building will receive one water bill for the entire property and then invoice each household for their portion of the bill.
It is unlawful for landlords to make a profit from the re-sale of water in such circumstances as it is recognised it would be morally abhorrent to profiteer from something so necessary to human survival when the water company has already done so.
Given shelter’s own importance to human survival and given that everyone involved in the construction of the home has already been paid for their work and materials, there is no compelling reason why re-sale of shelter should be treated differently.
2) Landlords’ costs of supplying a home, outside of initial acquisition, are negligible compared to the rent they charrge.
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45% of landlords own their renters’ homes outright without a mortgage. For such landlords, the ongoing cost of supplying a property to a renter is limited to the costs incurred keeping the property in a good state of repair and fit for human habitation (£73.17 per month on average for a three bedroom home). In comparison, the average rent on a three-bedroom home in Manchester is £895.00 per month.
3) It is unfair for landlords to expect renters to cover the cost of initial acquisition of the home through their rent, unless ownership is transferred in exchange!
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As an alternative to pointing to the free market price mechanism, landlords sometimes use their Mortgage CMIs as justification for the rent they charge. It is unfair for them to do so. If landlords want somebody else, i.e. renters, to cover their costs in acquiring ownership of the home, as a basic point of fairness, ownership of the home should be transferred to the ones doing the actual paying in exchange.
Currently, landlords have their cake and eat it, at the renter’s expense.
Moving beyond affordability
If challenges to housing costs focus solely on ‘affordability’ a systematic investigation of landlordism, and subsequent exploration of pathways that could lead to greatly reduced housing costs for renters, such as nationalisation of the private rented sector, become foreclosed.
It is unclear why, historically, supposedly progressive actors have been content only to ask for ‘affordability’ on behalf of renters. There may have been a lack of courage in challenging landlordism head on, or perhaps a latent ‘protestant work ethic’ type notion that it is virtuous for housing costs to be at least a bit of a burden for renters.
Whatever the historic reasons, we are now in extraordinary times, merely asking for affordability is not good enough.
1 This argument is made here in relation to rent suspensions but can equally be applied to reducing rent.
² Housing charity Shelter state a rented property should not be considered affordable if housing costs are greater than 35% of net household income: https://blog.shelter.org.uk/2015/08/what-is-affordable-housing/ Manchester City Council came up with a more convoluted formula based on the average income of residents in the city: https://secure.manchester.gov.uk/info/100007/homes_and_property/7638/manchester_housing_strategy/2
7 replies on “The renters’ rights movement must look beyond ‘affordability’”
Thank you Tom. So informative. I do not have a background in or much knowledge of this. You set out an example of average maintenance costs v private rent in Manchester. So is the answer straightforward nationalisation (with compensation) for landlords? Controversial and problematic for Labour! Or should each property be assessed and a rent fixed, including a “reasonable” incentive for the property owner?
Hi Samantha, thanks for commenting.
I don’t think renters should have to spend time working to pay their landlord an incentive in perpetuity when we can just remove the landlord from the equation.
The formation of the NHS was controversial and problematic, anything worth doing normally is! if Labour shy away from bold and radical reform and just offer a reactive ‘less bad’ alternative to whatever the tories are proposing they will rightly fall victim to pasokification.
I think Labour could take the public with them by first taking privately rented ex-council housing back into public ownership – I think that would be regarded in the same way as train re-nationalisation. Especially for properties where the state is effectively paying the Landlord’s mortgage for them through UC or Housing Benefit.
The emancipatory potential of significantly reduced housing costs should excite all on the left – by making a one off investment you make things like the 4 day week (and beyond) suddenly feel a lot more tangible.
Hi Tom, This is good stuff; Fair Rent Act now ! A key fact that needs incorporating is that Angela Merkel is to the left of most of the Labour Party in supporting controlled rents; where pension funds bring a secure mutually benefitting circle and economic stability by reducing cycles of speculative Boom and Bust; rent controls are a key aspect of German economic stability driving speculative investment properly towards RandD and manufacturing and creative wealth generation; out historic low levels of investment can be attributed partly to the grotesque return on rent and the lack of proper security in what is a basic right of “The Common”; where it is arguable medieval serfs had more rights of tenure than the modern PRS; where profitable sections are hived off often to tax evading landlords and Councils and Housing Associations are left with the rump of often sink properties and estates deprived of proper investment this past 40 odd years. Property is profitable on long term stable returns; there is no significant place for the private sector here. We have won stability reports from the Bank of England in the past re private sector mortgage debt; over 8 trillion last time I looked driven post 2000 by landlords on high rental returns who were than bailed out in 2008 when property portfolios of Northern Rock HBOS and Alliance and Leicester should have been nationalised for council housing. This must not be allowed to pass again in any future bank bail out which a deep Brexit recession may precipitate; one mortgage and no more ! Nationwide BS is now the largest lender to the PRS ; we need to end this practice, so that the BS movement are not funding private landlords and transform housing to the German model.
Can someone explain to me how the Private Rented Sector is not feudalism ?
Tom Lavin is a socialist committed to the destruction of capitalism the free market, democracy, meritocracy and liberty. He wants to imprison the proletariat in a society completely dependent on the state for every need and is intent on the destruction of amongst other things, the private rented sector which supplies homes to some 15-20 million people. He has no answer as to where the evicted he’s is responsible for as landlords leave the sector being forced to sell, go to, as there is no affordable social housing available in the UK. Yet he continues to attack, vilify and assault the PRS as that is his only significance and in his mind, value to society, the destruction of a perfectly valid and working system. Hey why not, socialists have destroyed and failed throughout history and all have failed and destroyed the lives and societies they’ve purported to be saving, all because he’s too piss weak to compete in a merit based society. He’d rather destroy it than be found out.
Beautifully worded and highly accurate Jamie.
What Mr Lavin conveniently fails to recognise with his ideological left-wing fantasies is that the Private Rented Sector has been a highly significant contributor to the creation of housing. One of the EHS reports puts forward figures to show that over the period it covers, the BTL sector is responsible for 83% of additions to usable housing stock. So Mr Lavin, without private investment from landlords there would be a great deal less housing available for all! As it is the sector is being attacked by Central & Local Government, so-called ‘charities’ and pressure groups of which have been or still are involved and the general media. As a direct result there is less activity that produces new, refurbished and converted stock, as well as ensuring better efficiency of that already available.
You Mr Lavin are part of the problem! Of course you don’t worry about that as long as you make a name for yourself.