Comment: Why Miliband’s rent cap will make your rent increase

By Phil Scullion

Ed Miliband wants your rent to be lower, so much so in fact that he’s prepared to do the one thing which will guarantee it increases.

The Labour leader made all the right headlines yesterday by calling for a cap on rents, to kick off his party’s local and European election campaign.

Rental prices are, as Ed Miliband correctly points out, scandalously high.

In most places it costs more to rent than it does to buy and the problem is particularly acute in London, where those on national average incomes find themselves priced out to the very end of the Tube line.

It makes absolutely no sense that renting is more expensive per month than buying, especially when you are expecting those same people to consider saving up for a mortgage deposit.

As you can probably tell, Ed Miliband should have a convert here. I am all for a policy which will reduce rents.

Unfortunately though, the Labour leader’s populist position is forged in the flames of economic ineptitude.

There is a simple flaw in Miliband’s proposal. Any market relies upon supply and if you cut that supply, then prices will go up as demand rises.

Perception is everything and if the would-be prime minister sends out the message that rent may be capped then that will put off prospective landlords, which reduces the supply of homes available to rent.

In July 2013, the Communities and Local Government Select Committee, a cross party group, said that rent controls would serve “only to reduce investment in the sector at a time when it is most needed”.

This addresses the key point, the problem with the private rental sector is a lack of supply. High rents are just a symptom.

The government should be encouraging housebuilding, specifically build-to-rent. If it does this, then it can ride a natural dip in rental prices as the market becomes more saturated, rather than attempting to engineer a solution through rent caps.

Miliband’s rather vague promise to establish an “appropriate benchmark level for average market rents”, is more short term electoral boost than long term cure to the UK's housing problems.

Besides, no politician can realistically expect to force landlords to cut rents on agreements that are already in place.

The only thing Miliband will be able to tinker with is how much rents increase, but the latest figures from the Office for National Statistics show that rents have gone up by less than inflation in the last year, rising by just one per cent in England.

Presumably then, rents would be as high under Miliband as they are today. But with the added bonus that landlords are discouraged from entering the buy-to-let market and thus there’s more competition for each property.

And the more desperate people become for rental property, the more likely they are to be pushed into the arms of rogue landlords and letting agents who exploit them.

Once again then, Miliband has chosen to make a grandiose statement on an issue, without any thoughtful policy-making backdrop.

When he pledged an energy price freeze he generated good headlines and most likely won himself a few votes, but effectively added a few pounds onto your bill.

As the energy secretary Ed Davey put it at the time, it was “highly irresponsible and fails to deliver what consumers want”.

“We think it’s a con, because the energy companies will all shove up their prices before and certainly shove them up afterwards, so the consumer won’t get any benefit,” he added.

Lo and behold, the energy companies followed suit after Miliband’s intervention and delivered more bumper price rises.

There’s no reason to assume this couldn’t happen again, with landlords ramping up prices in anticipation of Miliband’s rent cap.

Just as with energy prices, it is commendable that the Labour leader is aware of the problems which face those struggling to keep up with their monthly rent.

However, like most political conundrums, this one will take a little more than a cheap gimmick and a throwaway headline.

Phil Scullion has written for a number of property sites including, and You can find him on Twitter at @PhilScullion.

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