This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Category: government and politics
Labour has announced that if they win the General Election, they plan to stop bidding wars for rental properties, saying that all tenants suffer, with landlords being the only winner.
Bidding wars are where tenants compete to offer the highest rent for a property, in order to secure the tenancy.
In an interview with BBC Newsbeat, shadow housing minister Matthew Pennycook has spoken out against bidding wars, which he says are unfair and damaging to tenants.
Bidding wars have already been banned in New Zealand, and in several Australian states, and Labour are keen to follow their example.
Pennycook explained that he believed bidding wars only benefit the landlord:
And so for all those tenants who miss out on a property as a result of bidding wars, they're in a bad position.
But even those who secure a property by that means, they're often pushed to the financial limits of what they can afford.
He said that his party wants to amend the Renters Reform Bill, which is currently going through Parliament, to include a ban on bidding wars.
Landlords say the problem is deeper than ‘banning’
However, some landlords and industry groups have argued that bidding wars are a result of supply and demand issues, and that banning it would not solve the underlying problems of the rental market.
Chief Executive of National Residential Landlords Association, Ben Beadle, has weighed in on the bidding war debate.
Beadle says that these situations arise because of shortages of rental properties, and Whitehall should look into what facilitates these situations instead.
You can't go around banning everything,
What I would say is we need to look at what's forcing people to make these decisions.
The BBC 5 Live breakfast show debated the subject of bidding was, with a landlord from Nottingham, Mick Roberts, putting his point of view.
Mr Roberts said landlords are facing rising costs – such as the selective licensing scheme in Nottingham that costs him £900 - and increasing regulation, which are putting some “on the edge”. He pointed out that, given these circumstances, if there is the opportunity to generate more rent, landlords are likely to take it.
Roberts’ reflected back to a time in the industry before mortgage interest tax relief was removed, pre-2015, saying that at that time he “used to fight for tenants”, where now tenants can’t leave.
This argument would seem to have merit, given the fundamental law of supply and demand is that, where supply exceeds demand, prices will fall.
So, if there were more choice of properties for tenants, they would not be forced to compete against one another for a property and rents would come down, as landlords would start to compete for the custom of tenants.
