What Germany can teach us about renting

Many readers will be aware that being a private sector tenant is quite normal in Germany, without the stigma it carries here. Some may also have heard of recent measures in Berlin to cap private sector rents. In due course we should see their long term impact, but looking at policy over the last 50 years should tell us something about why private renting works well now.

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“Wutbürger” – The German for NIMBY

Originally posted in the Sydenham Town Forum, 30 June, 2013

Last week’s uncharacteristic radio silence was thanks to cycling round Normandy. With my rusting French revived, I came across an interesting article in Le Monde on the way back, dealing with a report into the sorts of people who in 2010 gave German this new ‘word of the year’, and is now in official dictionaries. I know virtually no German, so I’ll have to go via the French to give the literal meaning in English as “angry citizens”, but on reading the article, it becomes clear the cultural meaning is NIMBY. For these 

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are not the young of the various Occupy movements and protesters in Turkey, Egypt or Brazil, but “they are for the main part people without children, working part time, with good school backgrounds, teachers and above all, those approaching retirement and the retired … More than a half say they are non religious, and a large majority say they don’t think Germany is a real democracy”

So – what to they do? Well, stop the redevelopment of the area round a station in Stuttgart, limit night flights in Frankfurt, and a new runway at Munich, stop proposed long term storage for nuclear waste by chaining themselves to railway lines, stop the electrification of the Munich-Zurich train line, get in the way of the high tension cables needed to bring electricity from wind farms in the north to the south, even get in the way of creating a national park in the north of the Black Forest.

Seems to me, these are just Germany’s Baby Boomer “usual suspects”, with too much time on their hands, and used to being able to get their own way, and for whom a real democracy is a system which delivers whatever they want.

We need more evidence on tenure and occupancy

It is sometimes argued that policy changes which affect landlords can have no effect on the balance of supply and demand for tenants because the properties which may move between being rented and owner occupation will still exist, and will be occupied all the same.  See for example these recent tweets Continue reading We need more evidence on tenure and occupancy

Flooding, engineering, planning and politics

Reposted from my local Forum, 16 Jan, 2014, with a more helpful title, and some editing.  It rambles a bit, but putting here now because it touches on various questions which arose yesterday (July 25, 2018) when I attended a consultation event on ‘De-risking’ growth in the Cambridge Milton Keynes Oxford arc. 

I’m thinking about it now as much as raising the general problem of why landowners and other interested parties fail to co-operate.

The trigger here is this BBC interview with a member of the Chartered Institution of Water and Environmental Management (CIWEM) as reported here:

Back-to-nature flood schemes need ‘government leadership’

Continue reading Flooding, engineering, planning and politics

South Anywhere County Development Corporation / Equity for land rights funding

Rather than purchase land for some monetary amount, compulsorily or otherwise, and load local authorities / development corporations with debt, a South Anywhere County Development Corporation (SACDC) would issue equity to landowners whose land was affected by the JSP, in exchange for rights SACDC acquired over the land.  Continue reading South Anywhere County Development Corporation / Equity for land rights funding

How to fix the rental market for real

we need an understanding that better ways are needed for setting rents on longer term tenancies, that these will need the buy in of landlords and their agents, and that they will involve an accurate reflection of local market rents.  The history of their development in Germany suggests they were pioneered at a municipal level before being required nationwide by central government, but still operated locally.  Even if the data used in the most sophisticated German municipalities is not immediately available for any UK local government, a lot of data will be available across different parts of government, and a better system than currently available for setting rents on longer term tenancies could be developed. It needs one local government to pioneer such an approach, and a department of central government to sponsor it.

Continue reading How to fix the rental market for real

Self-build, Community Land Trusts and the Housing Crisis

What follows isn’t meant as opinion, but an attempt to research the extent to which self-build and Community Land Trusts have a role in helping solve the housing crisis. Writing it, I find I want to research more, and ask questions of various contacts who know more about aspects of the subject than me.  So, I am publishing it here, and seeking their comments before any attempt to develop an argument. 

Continue reading Self-build, Community Land Trusts and the Housing Crisis

A solution to the asset rich, cash poor problem

This is something I wrote last year, but didn’t publish. I just saw a tweet to which it seems relevant, so with some minor changes I’m publishing it here now. On rereading, I feel it deserves a more thorough rewrite, but I think the central idea, a revenue neutral, non market distorting change to the operation of the Land Registry to allow more efficient property taxation is a good one.  Happy to discuss further. Continue reading A solution to the asset rich, cash poor problem

The Long Short for Generation Rent

How are Generation Renters supposed to get on with their lives when housing is so unaffordable that they have no realistic hope of buying their own property – and quite possibly would be ill advised to do so anyway?

It’s an agonising personal question for millions of young people, but I’m not aware of any policy responses to it – handwringing doesn’t count.  I did hear something constructive last night when I went to the inaugural lecture of the LSE’s new Professor of Economic Geography, Christian Hilber

who explained very clearly how to make housing more affordable – build more – but that is a different question, which is going to take a long time in any case, since the politics aren’t going to be easy.

Most of those young people, to whose plight the political classes pay lip service, but give no answers, probably still hope vaguely for some political answer, although many will have given up hope.  Here I want to suggest a social response, although it emerges from thinking about the economics of the problem, and from the social response there could be political consequences.

Why ‘The Long Short’?

Although I have followed the writings of Christian Hilber and others in the LSE SERC department, I hadn’t realised that he had been working in Fannie Mae at the same time as the unlikely collection of odd balls described by Michael Lewis in The Big Short were looking at the same numbers, and coming to the same conclusion, that the status quo was unsustainable.  As Prof. Hilber explained, he isn’t that sort of market animal, and now, in the UK, it is even harder to imagine an arbitrageur finding a way to put on the big short.  However, our young people, wanting to own somewhere but realising they cannot, already, in effect, have a short position,  but one which will only pay off in the long run.  In the meantime, it needs to be financed, and that can be painful.

Financing the Long Short

The easy part of this is saying what’s involved – the hard part is accepting it.  In essence, the financing is just keep on paying the rent, but there’s a bit more to it than that.  As a renter, you will want a relationship with your landlord which is as healthy and professional as possible, so that they, as a matter of business, prefer to have you as a tenant than go to the trouble of finding a new tenant.  Agents’ fees for new lets, paid by landlords or tenants, are a bad sign, suggesting that agents are making money out of undue tenant churn.  

If rents for similar properties as yours come down, you’d want to have an agreement with your landlord that your rent should come down in line, without you having to move to such a similar but lower rent property.  In areas like London, it’s sometimes hard to believe that rents can come down, but supply and demand really does operate in the rental market.  Here’s one recent story from the BBC

Rents fall for first time in six years

Conversely, your landlord will want the agreement to allow your rent to rise in line with rents on similar properties if they go up.  That is only fair – and the alternative, which is what we have now, is a system of short term lets where landlords can increase the rent as much as they can anyway.

In either case, it will be helpful if authoritative numbers are being published for what rents on similar properties are doing.  This raises a policy question – can local authorities provide such a service?  It would need financing, but it has been done in Germany for years, and where stable renting is entirely normal, and being in ‘Generation Rent’ is not an issue.

Financing any position in housing involves paying for the maintenance of the property.  Someone has to do it, and most of the costs will be borne by the renter, so the renter will want to find a landlord whose property managers can deliver good long term value for money.  Easier said than done, but as a rule of thumb, large landlords, especially if they have a reputation to maintain, will be better, although small landlords may also be able to subcontract these responsibilities to a proven property maintenance company.  Having a landlord take responsibility for the maintenance is also likely to be better than doing it yourself.  Some people will have the skills to maintain properties more economically than professionals, but in blocks of flats, this will often be out of the owner’s hands.  There should be a way to find out how well landlords do maintenance.  Either I do not know of it, or else there is an opportunity for someone to provide such a service – call it Which Landlord?

Living the Long Short

This is where the sociology comes in.  In the UK, property ownership carries an extraordinary social weight.  ‘Buying your first property’ feels like an essential marker of having become a full member of society, and renters are often seen as not having put roots down where they live, so not quite accepted into community decision making, even if they felt inclined to participate anyway.  To suggest to anyone that they should accept the idea of renting while they get on with their lives will, to most people, be offensive.  To that significant but well connected group within Generation Rent with access to the Bank of Mum and Dad, or just well enough paid jobs that they can see their way to getting a deposit, it may also seem unnecessary.  Psychologically it will be easier to conform to their elders’ social norms, and proudly – nervously? – step on to the housing ladder.  Once in position, with the danger of negative equity if housing does become more affordable, they will become some of the strongest defenders of the status quo.  It will not be easy for their peers – school friends and work colleagues – to follow their alternative life choice with pride, living the long short.

However, the economics of housing mean there are millions who face this choice, between complacency, embarrassment or a sense of victimhood, and getting on with their lives undamaged.  And those who can could transform our politics.  In many ways, they would be like an earlier generation of a reformist Left:

  • driven by economic interests to achieve a fairer society, but
  • dealing with professionally with others, e.g. landlords,
  • using municipal power to publish information about rents to help markets work more effectively, and
  • pushing for good quality independent information about landlords

They would also campaign for an adequate supply of new housing, in well planned developments, but with no ideological demands for it to be owner occupied, social or private rented sector.  Even so, those who have bought into the norms of the previous generation will attack them as dangerous subversives.

So, for the time being, no political party shows much interest in doing anything for this Generation Rent, even though social attitudes should encourage them to do so – this taken from Professor Hilber’s lecture.

ChangingAttitudes