…at least where I live you will. And, who knows, perhaps even where you live soon.
Yesterday, entirely by accident, I discovered that our local council has recently introduced what they call a ‘private rented property licensing scheme’. Given that we intend to rent out our house sometime in the future I took the time to find out more and was disgusted, but not surprised, by what I discovered. The scheme bares a striking resemblance to a Mafia racket.
The council’s scheme requires anyone wishing to rent out their property to purchase a license from the council before doing so. A five-year license costs a minimum of £500. To obtain a license the prospective landlord must convince a council official that he or she is “fit and proper” by disclosing any previous criminal offences, including drug offences, and show that “satisfactory management and financial arrangements” are in place.
If a property is rented without a license, then the council has the legal power to fine the landlord up to £20,000. If a property is rented and fails to meet the licensing standards, then the council also has the power to take over “management” of the property for up to five years. During this time the council will spend the rent monies on carrying out the works required to bring the property up to the standards required by the licensing scheme, and then give the landlord back any surplus of income. The council will almost certainly spend all of the rent monies, of course, and so for up to five years the landlord may be without much or all of his rental income. Faced with this prospect many landlords might decide to sell their property, which they can do but they’ll be very unlikely to find a buyer given that any new owner will also be subject to the Management Order. Once you’re under the grip of a Management Order it’s likely to be a one way ticket to a period of significant financial strain or at worst ruin.
The council is portraying the scheme as a five-year experiment of sorts, but it would take a brave man indeed to bet against it lasting for decades.
This scheme is likely to quickly generate a significant income for our local council given the large number of properties that are being rented out in the area. No doubt its current incumbents are very pleased with themselves for having come up with what seems like a great way to do social good that will also bring them additional income. However, they either do not realise or are in denial of the fact that they are violating a law of economics which says: that which you tax you get less of. By effectively taxing property rental in the borough they will in time drive much of it out. Increasingly less available rental property will mean less people moving into the borough and more people moving out. Shrinking demand will lead to smaller grants from national government, which make up %75 of the council’s funding.
Short-term gain from its property rental licensing scheme could easily equal long-term financial pain for the council, and set in motion a general economic and social decline in the area. This kind of self-destructive short-termism is characteristic of modern democracies. As soon as people get into positions of government power their only thought is to spend as much as possible as soon as possible before the next election. Democracy breeds short-termism.
Judge this government scheme by the actions against people it involves and it does indeed strongly resemble a Mafia racket, but the people behind it would no doubt be appalled to be compared to a violent, criminal organisation – and would strongly object to such comparison. No doubt they would insist that they are the very opposite of the Mafia in every regard, but they can’t have it both ways. You can’t extort money out of people whilst being the good guys. It’s a moral absurdity.
It will probably fall on deaf ears, but for what it’s worth I wrote to our local council and to the editor of the borough’s newspaper explaining that the scheme will ultimately only leave us all worse off and that therefore it should be abolished.
Your ‘private rented property licensing scheme’ is illiberal, misguided and only serves to demonstrate to the community the hubris and economic ignorance that blights the minds of its elected government officials.
Raising the cost of renting for landlords will inevitably lead to higher rent rates and even less available rental property in the borough. You are not only forcing tenants to choose quality over quantity, but also forcing them (and landlords) to act according to your own subjective standards of acceptable living conditions.
By forcing landlords, they who provide people who can’t afford to buy houses with homes to live in, to buy your rental licenses you harm the very group of people you are so convinced you can help by using government force.
You may point out that your public consultation shows that tenants and residents strongly support your scheme, but the fact that these people overwhelmingly support a scheme that promises to improve their living conditions at no direct or immediate cost to them is neither surprising in the least nor justification for its enactment.
Londoners are already struggling to cope with a housing shortage crisis, which not coincidentally was caused by State monopoly control over developable land, and so the social harm wrought by your scheme will only be magnified.
Having the best of intentions does not guarantee that your actions won’t have the worst of consequences. Your mistake is in believing that force can solve social problems. It cannot. Coercion almost always leads to the opposite of its intended goal.
All is not lost, however, You can prevent the harm caused by the unintended consequences of your ill-thought out scheme by immediately scrapping it and refunding all landlords who have paid for licenses. After that the greatest good the council can do for society is to stop forcefully interfering in the private economic exchanges of individuals.
I do not demand blind faith in the system of spontaneous order we call free market capitalism, just that you learn to understand how it necessarily benefits everyone who freely participants in it; and thus how hampering it can only leave people worse off.
Do what’s best for everyone and do what’s right: end the scheme.
I have owned a rental property for about 10 years, and in that time the (national) regulations on landlords have become significantly more prescriptive, bureaucratic and costly. The result – fewer rental properties, higher rents for tenants, and less flexibility for everyone.
I see, so you’ve got first hand experience of all this. Must be a pain in the backside and the pocket. It’s a disturbing trend all right. I suppose we can only hope that it peaks sooner rather than later…
The new regulations were all made by the last Labour government, but the present government hasn’t done anything to reverse the changes.
Right. It seems to me that there’s a widely held belief that the conservatives have ‘undone’ much of what Labour did, but it’s really not the case. As I showed in a previous post, the creation of new regulation has only continued to increase at the same pace over the last five years. Only a tiny fraction is ever repealed. Also, despite most people believing that this has been an era of ‘austerity’ the coalition has created as much debt in five years as the previous Labour government did in 12 years! People think Labour and Conservative are chalk and cheese, but the only difference between the two is superficial: it’s what they say on the podiums on front of the TV cameras and press.