Annual rent-increase cap is focus of Labour campaign launch

A future Labour government would cap rent increases in the private sector and scrap letting fees to estate agents to give a "fairer deal" to tenants.

Ed Miliband pledged to end "excessive" rent rises when he launched his party's campaign for local council and European elections.

An "upper limit" on rises will be put in place based on average market rates.

The Labour leader also called for longer, securer tenancies and rental charges of up to £500 to be axed.

But the Conservatives said evidence from other countries suggested rent controls lead to "poorer quality accommodation, fewer homes being rented and ultimately higher rents".

Speaking in Redbridge in London, Mr Miliband said a "cost-of-living crisis" affecting millions of families would be at the centre of Labour's four-week campaign before the polls on 22 May.

Unveiling the party's new slogan, "Hardworking Britain better off", he set out a 10-point "cost-of-living contract" with voters, including the new policy on rent rises and previously announced pledges like the energy bill cap.

'Generation rent'

"People are working harder, for longer, for less, with a few at the top getting the big rewards, insecurity at work for the many. And the promise of Britain, that the next generation should do better than the last, being broken," he said. This was the "defining issue of our age", he added.

A generation has been unable to get on the housing ladder due to spiralling prices and yet the needs of long-term tenants have too often been neglected, he argued.

"Generation rent is a generation that has been left ignored for too long - not under a Labour government," he said.

"Nine million people are living in rented homes today - over a million families. They need a fairer deal."

Too many tenants, Mr Miliband argued, were vulnerable to being asked to leave their properties at short notice under current rules - sometimes because a landlord wanted to put the rent up.

Citing figures suggesting rents have risen by 13% on average since 2010, equivalent to £1,020 a year, Mr Miliband said tenants need greater protection and predictability regarding their monthly outgoings.

Under Labour's plans, landlords and tenants in England would agree initial rents based on "market value" and, thereafter, a review could only be conducted once a year.

While landlords would still be able to increase what they were charging following changes in market conditions, there would be an "upper ceiling" to prevent rent hikes out of step with the overall market.

The threshold would be based on an industry benchmark of average rent rises.

Labour said the Royal Institution of Chartered Surveyors (Rics) was "already examining" what an appropriate benchmark to use would be.

Rics denied that it was seeking to impose any specific benchmark on private-sector rent rises, and head of policy Jeremy Blackburn said: "We do not recommend that a government introduce a ceiling on rent increases."

However, the institution has recently consulted on a draft code of conduct for the private rental sector which aims to promote longer-term tenancies by suggesting landlords arrange with tenants that rent will increase at a rate linked to a measure of their choosing - such as inflation, earnings or average market rents.

Tenancy agreements

Estate agents would also no longer be able to charge a letting fee for renting out properties in addition to requiring a deposit and the first month's rent upfront.

Although fees vary widely at the moment, Labour said tenants were having to pay an average of £355 each time they moved into a new property.

Rules on tenancy agreements would also be changed to give more certainty to tenants wanting to remain in their properties for an extended period.

As now, a tenant would be able to terminate a tenancy after the first six months, with one month's notice.

But a landlord could only do so with two months' notice and if certain conditions were met, such as the tenant failing to meet their rental payments, engaging in anti-social behaviour or breaching their contract in other ways.

After the six-month probationary period, contracts would automatically run for a further 29 months.

During this period, landlords could only ask tenants to leave for a breach of contract, or if they wanted to sell the property or needed it for their own use, not as a way of raising the rent.

Students and business people on flexible contracts would still be able to request shorter tenancies while existing contracts for buy-to-let properties agreed before the changes took place would be honoured.

Under current rules, tenants already have the right to challenge "excessive" charges and to be protected from "unfair eviction and unfair rent".

Conservative Party chairman Grant Shapps said the Labour plan was a "short-term gimmick" and accused the opposition of "political tampering".

"The only way to raise people's living standards is to grow the economy, cut people's taxes and create more jobs. We have a long-term economic plan to do that, Ed Miliband doesn't."

Speaking on BBC One's Question Time, Liberal Democrat party president Tim Farron said Labour in power had built fewer council houses than the Conservatives under Margaret Thatcher, adding: "That takes some doing."

He said of Mr Miliband's cap proposal: "In theory it seems like a great idea. In practice it will crush supply and put people out of homes they would have been in otherwise."

Housing charity Shelter welcomed any move towards more "modern, stable rental contracts" but the Institute of Economic Affairs said rent controls would distort the market and create "perverse incentives" for landlords in areas where market rents rise quickly.

On Europe, Mr Miliband claimed that Labour's priority will be to change the way the European Union works rather than seeking to leave.

Labour has promised an in-out referendum on the UK's membership of the EU if further powers are transferred from London to Brussels, but admits this is "unlikely" during the next Parliament.