Landlords need to accept responsibility not only for the housing crisis – but for our misery

The funny thing is, I never set out to write a book called Against Landlords. My intention was not to write an anti-landlord screed, and for most of its existence the book had a different working title: A Crisis By Design. It was intended to be a much broader analysis of the multi-factorial causes of our current housing woes, looking at various policies including government policy, homelessness and the role of speculation and mortgage credit.

But I approached the research with an open mind and I gradually reached the irresistible conclusion that it is landlordism, rather than any sort of supply shortage or ‘financialisation’ caused by international finance capital, that is at the heart of the extreme housing difficulties facing Britain today.

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The argument runs that house prices are ultimately determined by rental yields, whether those yields are actual or notional. Everyone who buys a home is in direct competition with other buyers, including landlords. That means that the financial value of any house is ultimately determined by the price that a landlord would be willing to pay: and that, in turn, depends on its potential to generate rent.

We live in a context in which rents are totally deregulated. Landlords can (and do) ask whatever price that the tenant is able to pay. Early economists of the left and the right (Adam Smith and Karl Marx) both argued that unregulated rents tend to reach monopoly prices, because landlords can’t out-compete each other by producing identical commodities and under-cutting each other. Rents do not find their limits through competition, but by coming up against the hard limits of tenants’ means.

This means that we live in an environment of ever-rising rents – which, in turn, means ever-rising house prices. The great problem of housing affordability, in other words, is ultimately rooted in landlordism.

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This is easy to see once we think about it. What has changed over the course of the housing crisis? It is not supply: the pace of a supply restriction sufficient to explain our current crisis would need to be very drastic indeed, but in fact the number of homes-per-capita has been modestly growing over the last 20 years. What has changed is the nature of landlordism. It is a boom industry: two million new landlords have been created since the end of the Thatcher administration.

And nor does the mass sell-off of council housing really provide a complete answer. It is an important factor, of course, but we still have roughly double the EU average of socially rented homes. The crisis here is particularly severe, despite our housing data being comparable to many other countries. Where Britain does exceed its peers, though, is in the total lack of restraints on private rents.

Landlords need to accept responsibility for the very direct role they play in driving the housing crisis. With the rent increases we see each year, they are driving up housing costs across the board. They are ensuring that the nation’s children are growing up in ever-worsening poverty, while everyone’s housing conditions reach intolerable levels. As a class they bear the most responsibility for the housing crisis in economic terms, and they ought to be held accountable for so directly participating in our misery.

It may be difficult, however, to launch a frontal assault on the private rented sector. In Britain, landlordism is distributed among 2.5 million fairly ordinary people. This is far more people than the coal industry ever represented at its peak. Their interests are also aligned with nearly 15 million owner-occupiers, whose prosperity relies on house prices and (by extension) on a strong rental market. This dependency on property is a dangerously important part of the national economy: more than half of the UK’s net worth (double the proportion of Germany’s) is made up of housing wealth.

Our deep embedding of rentierism within our society means that tenants’ interests are directly opposed not just to landlords’ interests, but also to homeowners’ and to the national economy more broadly. We have put ourselves in a situation where we are forced to pursue two contradictory economic and social aims at the same time. The government cannot fail the nation’s homeowners, given that it has deliberately fostered a culture of dependency on passive income to replace pensions, wages and social services. At the same time, the state absolutely must fail them if it intends to do anything meaningful about the crisis of housing affordability.

In this sense, the sad fact is that ‘generation rent’ is dependent on its own exploitation. It is the renters who fund the housing crisis. A 2016 Resolution Foundation report found that the typical millennial will pay £53,000 in rent before their 30th birthday, and their figures are now certain to be out of date. We have put ourselves in a situation in which land value is so fundamental to the economy that, each time these millennial tenants pay half of their income on rent, it is essentially a self-serving act: they are playing their part in ensuring that the national economy does not collapse.

To decommodify the private rented sector would go a long way towards solving the housing crisis, but it is a highly dangerous operation. The rot has set in very deep. Landlords are in such a strategically important position that – if we do take any steps against them – they are likely to bring us all down with them.

Against Landlords: How to Solve the Housing Crisis by Nick Bano is out on 26 March (Verso, £13.59).

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