Starmer had the chance to put ‘same old Labour’ behind him – and he blew it
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On Wednesday, the findings of a report on the private rental sector commissioned by Labour were leaked to the public. The key recommendation: the implementation of rent controls across England and Wales.
Similar to the “triple lock” on the state pension – which goes up by inflation, average wage growth or 2.5pc, whichever is highest – a “double lock” would see rent rises pegged to inflation or local pay growth, whichever is lower.
Rent controls aren’t official Labour Party policy. The trouble, however, is that this report was commissioned by Lisa Nandy when she was shadow housing secretary. Having asked for ideas to address the UK’s stark housing crisis, the party needs to respond to the findings.
Keir Starmer is desperate to show that Labour has moved on from the ideological days of Jeremy Corbyn.
The opposition leader takes every chance he gets to highlight that the more moderate-seeming wing of the party is now in charge. This week he delivered a speech that was seen by many as an attempt to imitate Tony Blair, the rhetoric of the Corbyn era swapped for a promise of shorter NHS waiting lists and 6,500 new teachers if his party wins the next election.
Moderating his party, however, isn’t always an easy task. As Labour’s power grows, so do the demands from the left of the party. Starmer and his ministers will struggle to dismiss radical ideas out of hand. If he were to find himself in Number 10, Starmer would need to at least pay lip service to the ideas of his backbenchers to keep his party governable and onside.
But the policy of rent controls is one of those rare exceptions where no lip service needs to be paid. It’s a policy idea so terrible, so destructive, that no consideration is needed.
In the words of Left-wing American economist Paul Krugman, “analysis of rent control is among the best-understood issues in all of economics, and – among economists, anyway – one of the least controversial.”
Capping rents or rises is near-universally accepted as terrible public policy: where rent controls have been tried, they have failed. There is no sugar-coating (and no point wasting time trying to do so) what Swedish economist Assar Lindbeck once explained as “the most efficient technique presently known to destroy a city – except for bombing”.
What an opportunity, then, for Labour to boost its pragmatic credentials. Categorically shooting down the findings of a report it commissioned would have been a bold indication that the Labour Party is now engaged in critical thinking of its own, that a Starmer government wouldn’t be led by bureaucracy and commissions, but rather by decades of evidence around what works, especially in the crucial area of housing policy.
Unfortunately, the party’s response was no bang, just whimper. “While we do believe action needs to be taken to protect renters and rebalance power,” a Labour spokesman said of the report, “rent controls are not Labour Party policy as we remain mindful of the risk they could pose to the availability of rental properties and the harmful impacts any reduction in supply would have on renters.”
It’s by no means an endorsement of rent controls, but it is a remarkably soft reply to such an awful idea. The statement reads like the party knows the right answer to the question but is too nervous to say so.
If this is the kind of delicate response the party is dishing out to the easiest of questions – “are rent controls a good idea” – then how will its leaders respond to the far more difficult questions that will come up in the next parliament? What stance will they take on “borrowing to invest”, on how to most quickly tackle the NHS waiting list, or where, exactly, Labour’s promised new homes will actually be built?
Back in the present, Labour seems to have inadvertently injected the idea of rent controls into the housing debate. Writing in the Guardian, the report’s author Stephen Cowan doubled down on the findings, insisting that his idea was “not a cap on rents, but a cap on rent increases” – a rejection of hard rent controls and nothing like radical policy.
Worldwide examples suggest otherwise. Caps on rent and rent increases both distort the market – a lesson learned at considerable cost in Argentina, where an attempt to implement the latter in 2020 led to an estimated 45pc of landlords pulling their properties from the rental market and selling them off instead.
In every country that tries them, rent controls play out with similar results every time: fewer properties, declining quality, and countless unseen victims of the policy, who find themselves unable to move for work due to a rapid decline in rental supply.
But the UK doesn’t even need to look abroad for rent control horror stories. While calls for rent controls in England and Wales picked up pace, the country that flirted with rent caps – Scotland – declared a “housing emergency” this week.
Despite bringing in a temporary 3pc cap on rental increases in 2022, private rents surged by almost 12pc. Not surprising, given the inevitable outcomes of rent controls every time they are tried, but devastating nonetheless. Greater competition for housing, overlapping with cuts to housing budgets in Scotland, has put the most vulnerable renters in an even more precarious position.
Labour’s recent rhetoric on housing – including Starmer declaring himself a proud Yimby (“Yes in My Back Yard”) – is one of its best offerings to date. Were the party to deliver on building the hundreds of thousands of new homes the UK desperately needs, it would almost certainly deliver that economic boost that politicians have been searching for.
The big question for Labour remains the details of its policy: not simply where the new homes will be built, but how the party will liberalise to make mass-building possible. Its failure to strongly reject rent controls now adds a new question: will it be able to face down the calls from its backbenches for more red tape and regulations?
This week was the ideal moment to make some of these positions clear: to rule out once and for all the party’s socialist inclinations in areas like housing and to prepare (and excite) the country for a house building boom.
Instead, Starmer blew it. When critics stand up and criticise the “same old Labour”, he will have to acknowledge his own role in crafting that narrative.
