Fighting the Bidding Wars
For most people, reports of tenant bidding wars for rental properties are proof of a broken housing system. For landlords, they're proof of that system working exactly as intended.
Demand for London properties in August this year was up almost 80% on the average for 2017-19. Credit: Getty Images
Recent stories from the frontline of the rental market track an apparently novel trend. As articles in the Times and Financial Times show, prospective tenants are being forced to enter bidding wars to find a place to rent.
These practices—recently outlawed in New Zealand—appear rife in the post-lockdown housing market. Renters are forced to adopt strategies to make themselves more attractive to potential landlords, such as offering to sign longer contracts, flaunting professional jobs and stable relationships, or simply making heartfelt pleas to a landlord to accept their tenancy.
For prospective tenants, it’s a tough market, as the supply of rental properties is squeezed by high demand. The immediate cause of this squeeze lies in the post-lockdown conditions and the return to ‘normality’.
While the pandemic saw rent fall as office workers fled cities and a glut of rental properties entered the market, the post-lockdown ‘bounce back’ has thrown this trend into reverse. Research by the Financial Times shows that demand for London properties in August this year was up almost 80% on the average for 2017-19. Outside of the capital the picture is even more stark with rents up by 6%—the strongest growth since the financial crash.
The issue of soaring demand is compounded by an apparent contraction in the supply of homes to let. The Times reports that private landlords have either converted their stock to the short-term lettings market, to take advantage of the ‘staycation boom’, or sold them, taking advantage of ballooning house prices. The bidding wars appear at first sight to be the result of a mismatch between supply and demand.
Predictions of the ‘death’ of the city or of a permanent lowering of rents brought on by the pandemic were misplaced. Far from the pandemic leading to any kind of meaningful break in how cities operate, and how people find places to live, we have returned to ‘normal’—and bidding wars, which existed at least ten years ago, are indeed normal.
A Broken System?
The reports of bidding wars have the capacity to shock us, as they seem so obviously unfair. But should they? Perhaps rather than bidding wars being the product of a ‘broken’ housing system, we should see them as proof that the system—where the balance of power is tipped firmly in favour of landlords—is working exactly as intended.
In Britain, housing is set up in the interests of landlords, developers, mortgage providers and homeowners. It operates as a giant profit-generating machine, a place for individuals and institutions to invest and generate a return on their investment through rents and rising land values. So advanced is this system, that we might, as Joe Bilsborough has suggested, consider Britain as a ‘housing market with an economy attached’.
This system’s origins lie in the historic transformations wrought by Thatcher’s government—the privatisation of council stock, the loosening of mortgage controls, and the introduction of the Assured Shorthold Tenancy, which governs the private rented sector. These reforms transformed housing as simply places for people to live into the beating heart of Britain’s new asset economy.
The housing crisis is endemic for those who seek housing as a place to live rather than a place to invest. The bidding war forced on those in the former category by those in the latter should not shock us—it is the inevitable result of too much power concentrated in the hands of too few people.
Their Solution, and Ours
Faced with the crisis, some propose an easy remedy. For free marketeers, neoclassical economists, hyper-online ‘YIMBYS’, and anyone with a passing connection to the housing industry, the answer is simple: rebalance the disequilibrium of supply and demand—or, as Ed Glaeser argued once in a New York Times op-ed, ‘unleash the cranes’.
Indeed, the housing industry is already gearing up to promote another round of real-estate speculation as a purported solution to the current crisis: witness the phenomena of microflats, build-to-rent, and co-living, or The Economist’s recent paean to the move by big investors into the housing market. Consider too the change in permitted development rights that came into force in August this year, which allows developers to easily convert vacant shop units into low-quality, low-cost housing.
With this all in mind, let’s look again at the round of stories in the press concerning the tenant bidding wars. All the cases considered appear to be of young, professional tenants at the higher end of the rental market. These individuals are outliers in terms of the wider picture of tenants in this country. As research for the think tank Autonomy earlier this year showed, the majority of renters are working-class, with the most prominent professions in the care and service sector. Seen in this light, the purpose of these stories appears twofold—to shore up the framing of supply and demand vis-à-vis the housing system, and to build consensus around the need to ‘unleash the cranes’ in response.
No doubt the bidding wars are happening, but it is incumbent upon us to situate them in their proper place: not as something unprecedented, but as just one symptom among many of a housing system scarred by rent racketeering, poor conditions, the unending churn of evictions, and the scandal of temporary accommodation. It’s a system that is no doubt broken for the millions who rely upon it to find a place to live, but to landlords, speculators, and developers is working just fine.
Recognising the systemic roots of these symptoms, our solutions must tack away from the siren-song of those who cry ‘build more housing’. What we need is not ‘more housing’ in the abstract, but council housing in the concrete. Rent controls will be vital to ensure stability for tenants in the private rented sector. Ultimately the crisis can only be solved by the decommodification of housing—and with that the scourge of rent bidding wars, as well as many of the other pathologies of Britain’s housing system, will fade away.