The Green Party has promised to abolish the landlord system. At a meeting in Bournemouth, party members passed a motion that would seek to formalize the policy of “effectively abolishing private landownership”.
The motion said the landlord “brings no positive value to the economy or society” and that “the relationship between landlord and tenant is inherently extractive and exploitative”.
Party activists support making all rental agreements long-term tenancies that can only be terminated by the tenant. Tenants will also receive a right of first refusal, a “discount on their gross rent” and access to government-backed financing when the landlord sells. Council will be given a second purchase option.
The plan is now official Green Party policy in England and Wales.
Under the terms of the policy, the Greens will impose more regulation and tax on private renting, making it harder for landlords to make a profit by imposing rent controls, ending buy-to-let mortgages and imposing national insurance on rental income. As the name of the bill suggests, these policies are designed to shrink the share of the private rental housing market.
Putting aside how wrong it is to assume that all rental agreements or landlords are exploitative, almost one in five (19%) households live in private rented properties, according to the latest UK Housing Survey, making it the second largest housing type. It is estimated that there are 4.6 million private renting households in the UK, of which 2.5 million are landlords.
The industry is younger and more racially and nationally diverse than in other tenures. This will have a catastrophic impact on the lives of these tenants, landlords and the entire country’s housing sector, which is already in a state of crisis.
Not only that, but this goes to the heart of the lending and brokerage industries. It’s worth remembering how damaging even rent control (let alone ending BTL mortgages) was when it was tried in other places like Berlin.
Germany has introduced a five-year rent cap on new construction, assuming the residential space is first occupied and rented after October 1, 2014, effective around 2020 for all apartments built before 2014. During the first phase of the scheme, which came into effect in February 2020, rents for 1.5 million apartments were frozen at June 2019 levels. In November, when phase two begins, landlords are obliged to reduce any rent. The rent exceeds the new limit by 15%. Any future contracts must adhere to the cap.
A study by the German Institute for Economic Research found that rents fell by 11% in the market for new apartments built before the deadline compared with the still unregulated new construction market. But the entirely predictable and foreseeable problem is that the cap has made the city’s housing shortage worse: the number of rental classified ads has dropped by more than half. Landlords began occupying apartments, selling them or simply leaving them vacant, hoping the courts would overturn the new rules.
Viewing these policies as tenant-friendly ignores the well-documented knock-on effects on the housing sector. These policies risk exacerbating the housing shortage; with one in five UK households relying on private renting, the exodus of landlords will increase demand for the remaining properties in the sector. As investment capital dries up, standards for remaining properties may decline.
You might think these proposals are unlikely to become law, but they deserve continued attention from buy-to-let professionals.
The Green Party of England and Wales has continued to grow in membership and representation and currently has 150,000 members, including 4 MPs. As visibility and support in key areas such as London continues to grow, its housing policies may begin to spark wider political debate.
Some of these ideas may also influence future government decisions. Chancellor Rachel Reeves is reported to have considered similar proposals to apply NI to rental income. If such measures go ahead, they could impact landlord profitability and prompt some investors to review their portfolios. For lenders and investors, remaining alert to this policy development is a wise move to manage market and regulatory risks.
Mark Michaelides is CCO of specialist mortgage lender Molo
