Licensing Jersey Landlords
And how treating land as a commodity helped create “Generation Rent”
If there’s one clear class divide in Jersey it’s between those who own property and those who rent. Landlords have the benefit of not only living in an appreciating asset but owning another one that they are able to rent out to obtain an income off of.
Classical political economists such as David Ricardo, John Stuart Mill, Adam Smith and later Karl Polanyi who helped shape the birth of modern economics understood the risk that landlords could have in seeking “economic rent” from society through monopoly ownership of scarce resources such as land, extracting the wealth and concentrating it into fewer hands.
These economists saw land as distinct from labour and capital, it was not considered a commodity as it has not been produced through labour like a commodity is — in most cases the landlords do not “produce” the property they obtain rent from either. As Mill bluntly put it: “Landlords grow rich in their sleep without working, risking or economising”. They believed if the land was not appropriately controlled through measures such as taxation that it would lead to economic stagnation and rising inequality.
This classical economic understanding changed dramatically with the birth of “free market” and “trickle-down” economics, mainstreamed into policy under Western leaders such as US President Ronald Reagan and UK Prime Minister Margaret Thatcher. As economist Michel Hudson explains: “The main source of gain for borrowers since the 1980s has not derived from earnings but seeing the real estate, stocks or bonds they have bought on credit rise as a result of asset-price inflation — that is, to get rich from the debt-leveraged Bubble Economy.” Today, land is very much treated as a commodity.
The no-strings-attached bailout following the 2008 global financial crisis has meant loans going straight back into the FIRE sector; Finance, Insurance and Real Estate, rather than the “real economy”, leading once again to record stock prices and a booming real estate market, including in Jersey where prices are at record levels. “Generation Rent” has been priced out of a housing market by a crisis and economic system they had no hand in.
At the moment, Jersey’s government has no idea of the wealth distribution in the island, or what value land is compared to the property it sits under and how that difference has changed over the years. It also does not know who or how many landlords there are — exposing the government to the risk of potential tax abuse. And where properties are acquired through companies, as in the case of St John’s Manor, it has no idea of the sale price as they avoid being recorded in our public transaction registry.
Attempts to get some understanding through a land registry as suggested by Scrutiny were rejected by current Chief Minister and landlord, John Le Fondre, on the grounds of it being too costly. Which leads us to the proposed so-called Landlord Registry, to be debated in the Assembly next Tuesday.
Stewart Petrie, a consultant in the Environmental Health Department has previously stated on the need for a registry that: ‘There are plenty of good landlords out there but we deal with complaints and what we see all the time are these very grotty properties’ admitting that the standards being required from the registry are pretty basic and that it’s “not asking much”.
Malcolm Ferey, head of Citizens Advice Jersey, discussing the proposed registry online stated that there were 128 complaints last year in regards to poor properties but said there will be many other individuals who have either self-referred to a government department or have just “put up and shut up knowing there is no legislation to protect them”, adding that:
“These proposals are for minimum standards and some units won’t even reach this low bar. While there is no legislation to proactively deal with these problems they will quietly continue. If we stand up for the most vulnerable in our society, we all rise.”
My Voice Jersey, that protects the rights and services of those suffering serious mental illness, also added that: “Poor housing damages mental health, and poor housing is all too often the only available home to our fellow islanders suffering from serious and enduring mental illness.” Unlike in London and other parts of the UK, there is no tenant’s union in Jersey, with their voice being largely absent from the debate over the suggested licensing scheme.
Landlords, who are well represented through the Jersey Landlord’s Association — with one of its committee members also being a current sitting States member — have been vocally resistant to the registry, describing it as “onerous” and “heavy-handed” with threats of the costs “inevitably” being passed on to tenants which was described as shameful in a JEP editorial last week.
Mostly it is seen as an overly bureaucratic process that punishes the majority of good landlords at the expense of a few bad ones. Former Bailiff, politician and current landlord, Sir Philip Bailhache, even came forward in a JEP letter to suggest an anonymous phoneline instead. Although, when the Environment Department notifies the landlord of the issues with the tenant’s property it’s difficult to see how anonymity will be maintained.
Deputy Kirsten Morel, who sits on the Scrutiny panel and is also himself a landlord, has said the cost of the register will only amount to £4 a week or around 2% of the profits of a simple one-bedroom apartment in town after 20% tax. Housing Minster Sam Mezec further stated on social media that it’s also a tax-deductible expense, so it actually equates to around 77 pence a week.
Advertised rental prices in Jersey have increased by around 18% between 2016 and 2019 with property prices at record levels and in many cases higher than in London. Jersey is clearly an investors market, as capital gains are not taxed and there’s also no inheritance tax meaning wealth can be passed on with no benefit from land value gains going back to the public purse, despite all of us contributing to those gains.
Either we see housing as a human right, as homes to live in, ensuring they’re safe and affordable for all or we treat it as a commodity, an investment for already wealthy individuals to increase and consolidate their wealth, passing it on to future generations tax-free at the expense of wider society. So far it’s been the latter. Next Tuesday is an opportunity for States members to address this imbalance and hopefully the start of moving Jersey to what the classical economists always understood.
