What actually is the point of the Private Rental Sector (PRS)?

The Housing Act of 1988 deregulated new lettings to encourage the PRS to return, 44 years later the potential for 1910 rent strikes of pre The Rent Control Act of 1914 look like they may return.

Sitting in the library, grinding my way through various papers and journals on Rent Control (RC), I started to read a report from the much admired Joseph Rowntree Foundation (JRF) published in 1992 with various academic, housing pressure groups, practitioners and financiers together with advisors to politicians from different parties all contributing to the discussion. So far so good, but…..

The book in question amongst my usual chaos

Two issues of cognitive bias became increasingly apparent, both of which we all suffer from as emotional beings, so I’m not specifically criticising the authors of the report, but taking the more cautious route of an anthropologists like, the sadly departed David Graeber and also the political economist Thomas Piketty. Graeber in his book (and the secret is in the title) Debt; The First 5000 years and Piketty to a lesser extent focussed on the past 200 years in his highly acclaimed and fascinating book Capital of the 21st Century.

Recency bias is a cognitive bias that favors recent events over historic ones

The first bias was the effect of just looking to the lived and experienced recent past (recency bias) and making a judgment that a correlation of rent controls of the recent past have meant that the PRS has reduced due to not enough yield being available from old RC properties, that is a fair judgment, but does that mean that to get more rented properties available for the small sector (at the time of the report) of transient renters, namely young people on their way to purchase and temporary work force ( in fact a red herring) moving around the country, you just simply reverse the model?

So with that logic, if rent control causes PRS shortages then abandon rent control and supplement the PRS and a ‘fair’ rental market will return with the benefit of landlords now also getting a ‘fair return’.

What could possibly go wrong’?

The issue with this decision is that now in 2022 we are seeing the true consequences of this reversal, rather than market rates settling to a ‘fair rent’ level they are driving people into cohabitation and single room conversions with shared bathrooms as incomes have stagnated (not so much trickle down, but rather, trickle up), but rents increase as scarcity within the ‘free market’ predicts.

Whereas if they had taken the time and effort to look back to pre 1914 Rent Act they would’ve seen the issues of free market rents gradually consuming and therefore monopolising a sector that even Winston Churchill in 1909 fumed and rallied against to the greed and slothfulness of the rentier class.

Churchill in his mid thirties around 1909

Money for Nothing

3 examples of products that arose out of a deregulated lending sector that was allowed to self regulate, with the post 1979 political ideological support of a ‘free market neoliberal doctrine’ allowing a light touch regulation regime within the sector.

Spoiler alert, it didn’t turn out well

Three examples that I personally and many millions of citizens had to navigate (1988-2009), through mazes of poor legislation, based on neoliberal ideologies of individualism and therefore individual responsibility.

“Which is a handy smokescreen for those businesses who want to shift risk from one party (the lender) to another (the borrower) whilst isolating the borrower as an independent individual versus the banking system”.

“There is only one winner in this loaded game”.

I’m glad to say this eventually unravelled, but with huge losses to the borrowers and to the once trusted reputations of various banks and building societies, here are just three of many heavily marketed products from the 1988-2008 that were sold to the unsuspecting public. The Mutual Building Society mortgage model of pre Big Bang (1988) no longer existed and the public had yet to catch up with this fact, so the driven lenders (who needed to show ever increasing profits for their shareholders) had to find other and additional ways of extracting money from future borrowers, knowing that only a few people actually understood the true value of the products namely, the inventors

In the following three pages are just 3 of the most prominent and now all banned examples of these products