What a wheeze it must have seemed for John McDonnell to come up with the idea of a right to buy for private tenants. How could Conservatives object to private tenants being allowed to pick up their homes at a discount when they so enthusiastically supported Margaret Thatcher’s right to buy for council tenants? Surely it is the same thing, only with wealthy buy-to-let investors being deprived of the value of their properties rather than local authorities.
But it isn’t the same thing at all. On the contrary, McDonnell’s policy stretches to the very limit Labour’s slogan of acting ‘for the many, not the few’. For one thing, while the right to buy forces local authorities to sell their assets at a discount, they are simultaneously in receipt of large sums of central government money. If you look at the public sector as one entity, Thatcher’s policy has been granting handouts to one group of people — relatively well-off council tenants — funded through general taxation. You can call it an electoral bribe, an attempt to create Tory voters from a class of people who had previously voted Labour — and there is some truth in that — but Thatcher cannot be accused of appropriating the assets of anyone other than the state.
McDonnell’s policy, on the other hand, proposes to transfer wealth from one group of individuals — landlords — to another group: tenants. It is easy to see why that should appeal to young voters frozen out of the housing market. At first sight, his initiative might come across as a ‘Robin Hood’ policy that redistributes wealth from the rich to the poor. But is the shadow chancellor sure that is what he would achieve?
While many people might have an image in their heads of poor tenants being exploited by fat-cat landlords, the reality in many cases is a lot less clear-cut. Private tenants are a very different demographic group to social tenants. According to the Office for National Statistics (ONS) the median weekly income of a private tenant is £517, compared with £343 for a social housing tenant. Among private tenants, 25.4 per cent earn more than £40,000 a year and 15.2 per cent earn more than £50,000 a year. The corresponding figures for social housing tenants are 6.1 per cent and 2.5 per cent.
And landlords? Last year, the Ministry of Housing, Communities and Local Government conducted a survey into private landlords which revealed that they are, in general, far removed from the wealthy capitalists they are often made out to be. Most — 94 per cent — are individuals rather than institutions or companies. One in three is retired and 59 per cent are over the age of 55. Just under half — 45 per cent — own only one rental property. In 44 per cent of cases they bought it to bolster their pension.
The median gross rental income for landlords is £15,000. Take off letting fees, maintenance and service charges and that will be closer to £10,000. But here is the statistic that really catches the eye: income from property represents a median of 42 per cent of a landlord’s total income. Put those figures together and we have a picture of an archetypal landlord: someone who is retired or close to retirement, who has been pushed into renting property as a result of meagre returns on other investments, most notably cash, and who relies on their property for nearly half their annual income of around £35,000 a year.
That hardly makes them rich. Indeed, there will be a great many tenants who are better off than their landlords. Not all tenants, after all, are frustrated would-be homeowners. Many of them could afford to buy a home but are not sufficiently settled in their job or location to make it a wise investment. Many rent for a short period between buying and selling a home. Some will own properties elsewhere. But then along comes John McDonnell offering them the right to pick up the property they are renting – and at a discount. Meanwhile, their struggling landlord is deprived of an asset on which they are forced to take a loss. Is that fair?
McDonnell, as it happens, appears to have a second home — a bungalow in the Norfolk Broads in addition to his home in west London. It doesn’t seem, however, that he would fall victim to his own right-to-buy policy because he doesn’t let it out. Many other owners of investment properties may well come to the same conclusion: why let out a property and risk losing it at a discount if the tenant exercises their right to buy? McDonnell’s law might persuade some buy-to-let investors to sell but others would simply hold on to their properties, waiting for better times — and, in the meantime, leaving them empty. There are good arguments for measures which improve life for tenants, such as allowing them to take out longer tenancies, with perhaps three years becoming the norm. But all Labour would achieve through its right to buy for privately rented properties is to reduce the size of the rental market, making it even more difficult for people to find a home.