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!Tweet
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.Tweet
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!Tweet
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