Could Venezuela-style housing reforms work for Britain’s Generation Rent?

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Basing rents on market value means that housing is often unaffordable. Natesh Ramasamy under a Creative Commons Licence

Earlier this month, British minister for housing Grant Shapps called proposals to ban letting agents’ fees and cap increases in rent ‘Venezuela-style rent controls’.

Like Britain, Venezuela has a housing crisis. In 2011, 3.7 million people were registered as homeless or vulnerably housed. The 2012 presidential elections saw housing become a key issue, and incumbent President Hugo Chávez promised to tackle the problem.

Following the elections, the Chávez government launched the Great Venezuela Housing Mission (GMVV). The aim of the multi-billion dollar project is to build 3 million homes by 2019. The majority of new housing built through the GMVV is bought by people in need using state-subsidised loans. Existing bad housing is being addressed through a renovation scheme called Barrio Nuevo – Barrio Tricolor.

However, there are still many people living in private rented housing. In 2011 a new leasing law came to parliament from a 400,000 signature petition collected by tenant activists. The law aimed to improve conditions for 750,000 renters through expanded rent-controls and to allow tenants who had been living in the same home for 20 years the right to buy from their private landlord. If such a law were passed in Britain, only about 4.5 per cent of tenants would qualify because private renting is less secure.

The current set of rent controls in Venezuela were established in 2012 as part of price control measures to tackle inflation. Rents are now set by the Ministry of Housing based on construction costs, rather than property prices, and can be challenged through an inspection. Typically rents are set at between 3-5 per cent of the total value of the property, with landlords owning multiple properties being able to charge less rent.

The National Superintendency of Leased Housing, ‘Sunavi’, carries out inspections to determine the value of properties. Volunteer lay inspectors drawn from tenants’ and other civil society groups accompany the official inspectors. The final value and rent of the property is set out in a document signed by the inspector, the landlord, and the tenant.

There is debate in Venezuela as to what the effects of rent-control have been. On one side, the Chamber of Metropolitan Real Estate claims the supply of rental housing has declined by 72 per cent in two years. On the other, the Federation of Small and Medium Industries claim that the reduction in rent means people are able to spend more, boosting the economy. The government insists that all price-control policies are calculated to avoid affecting supply. In November 2013, rent controls were established for commercial properties as well, setting an upper limit of 250 bolivars (US$40) per square metre per month.

So, how does this compare to the policies being discussed in Britain? Labour’s proposals are that rents would be set based on market value at the start of a tenancy and that an upper limit would be placed on rises over the course of the tenancy. The problem with basing rents on market value is that it does not ensure that housing is affordable. If Venezuela’s policy of basing rents on construction costs rather than market value was adopted in Britain, then perhaps the number of homeless would not be rising year on year. 

Stop the foreclosures: Main Street takes on Wall Street

Foreclosure sign

Taber Andrew Bain under a Creative Commons Licence

The City of Richmond in California is buying up property to prevent its residents being evicted by their banks. Mayor Gayle McLaughlin talks to Samir Jeraj about the programme which has got Wall Street up in arms.

What prompted you to take action on foreclosures in Richmond? Why is it important to you?

Richmond is a majority minority city and our working class neighbourhoods were targeted by Wall Street for predatory loans. This means we’ve been really hard hit by the housing crisis and by foreclosures. It’s taking a toll on the entire city. In addition to the families losing their housing, home values have plummeted, neighbourhoods are dealing with blighted vacant properties and property tax revenue is down, affecting city services.

We heard about this programme, which could be enacted locally, that will help prevent foreclosures and restore community wealth. We are acquiring troubled loans, reducing the mortgage principal, and getting the homeowners into affordable, sustainable mortgages.

How will it help the people of Richmond?

The programme hasn’t been implemented yet. When it is, we believe we will be able to save thousands of struggling homeowners hundreds of dollars on their monthly mortgage payments.  Fewer foreclosures will occur. We will prevent further destabilization of neighbourhoods.

How is the City working with community groups on this programme?

Very closely. The community organization Alliance of Californians for Community Empowerment (ACCE) is a membership-based community group in Richmond’s lower-income communities of colour.  These are the neighbourhoods hardest hit by the housing crisis. ACCE has been organizing and engaging community residents in general and ‘underwater’ homeowners specifically, to push for this programme and help develop it. They have pulled together a coalition of Richmond organizations that are supporting this effort. I work closely with all these groups and am committed to them being at the table and involved every step of the way.

Do you think this type of programme will become common in US cities?

There is tremendous frustration across the country that so little has been done for ‘Main Street’ – so little has been done to help struggling families save their homes. For over five years we have been hoping that the federal government would offer widespread relief, but they haven’t. Once we show that there is finally a local way to write down troubled mortgages at scale and help thousands keep their homes, many cities will want to follow suit.

How will it affect the City’s finances?

We do not expect it to affect the City’s finances. One of the great things about this programme is that it doesn’t cost the City anything. We have a private partner that provides the funding to acquire the loans and the funding to operate the programme.

The New York Times reported that you are facing opposition from the real estate and banking lobbies. How have you managed to deal with this level of well-funded and well-organized corporate opposition?

The key has been that there is tremendous public support. The community overwhelmingly supports this effort and they’ve been organizing to demonstrate this support. There were over 200 supporters at a City Council meeting in September, when the opposition was trying to kill the programme. And those of us in elected office who are pushing this are not afraid of Wall Street and don’t feel beholden to Wall Street. We are listening to the people who elected us.  

In addition to people power, we are working with lawyers, and local and national policy experts.  There are many people across the country who are motivated to help us, because they know this could set an important precedent.

Gayle McLaughlin has been Mayor of Richmond since 2007, and is a member of the Green Party of the United States. For more information on the Richmond Cares programme please go to the Save Richmond Homes website.

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