by Andrew Toye
It has been the mantra of modern times: an unquestionable article of faith – “The customer is always right”. We are all supposed to be “on the side of the consumer”, against big and powerful vested interests that would rip us off given half a chance.
Given that the Customer is King, I wondered why, in His realm, that there is one huge gaping hole that the free market is failing to fill? By this I mean housing.
Despite all the rhetoric, the consumer of private rented accommodation is being ripped off mercilessly. Rents are going up well above inflation, but the quality of the product that they pay for stays the same (and in some cases deteriorates). Powerful vested interests (landlords) even have the law on their side. You want to double your money? No problem; as long as there are people who are rich enough (and stupid enough) to pay the rents, you can. Some local authorities have a landlords’ licensing scheme, and often serve correction notices on those whose property is sub-standard, but there is no consumer watchdog as in other markets - the customer is always wrong. It all goes back to Magna Carta: wealthy barons protecting their property interests from bad King John. (Democracy came later).
Until very recently, customers of privately rented property could be threatened with eviction if they dared to complain about a sub-standard product, be it dangerous wiring, damp, or rat infestation. In any other market you would be entitled to your money back almost without question. It is good that this form of blackmail has finally been outlawed, but it is still difficult to obtain redress, and landlords have other means of protecting their revenue – the ultimate ability to take back their property at the end of six-month tenure. Squalid conditions persist as if the 20th Century never happened – “beds in sheds” is the latest manifestation of the Victorian slum.
Lack of housing is quoted as the reason for the rip-off, but there are plenty of homes left empty – and for the wealthy, there seems to be no lack of space for building vast underground palaces – and in any case, the normal rules do not apply. A free market (according to Adam Smith) requires there to be freedom of entry and exit, and for supply to match demand. If large numbers of people are excluded from living, say, in London, we do not have a free market. It is perfectly right and legitimate for governments to intervene in such a dysfunctional market.
The case against intervention (in controlling rents) is that landlords could withdraw from the market. However they cannot make their houses disappear. A robust use-it-or-lose-it policy should apply to a residential property left empty for a significant period (say 12 months), or at least there should be an under-occupancy levy against the owners so that this will act as a drain on this so-called “investment” rather than a profit-making opportunity. (Levies on top of Council Tax are already being put in place in coastal towns with large numbers of holiday homes). This should replace the infamous Bedroom Tax that unjustly penalises council tenants who have unused rooms for legitimate reasons (such as storage for mobility equipment or room for visiting relatives, carers or returning students.)
Of course there are bad tenants as well as rogue landlords and they need to be dealt with, but as in any market, we should start with the premise that the customer is always right.