Labour’s proposals to introduce rent controls risk shrinking the availability of properties for tenants, according apropos by D.J. Alexander. Apropos believes that the introduction of rent controls would discourage future investment in the private rented sector (PRS), while encouraging existing landlords to exit the market.
With the shortfall of available housing set to increase due to a predicted rise in UK population of over 300,000 per annum, there would inevitably be many people unable to find somewhere to live if the PRS shrinks.
David Alexander, managing director of apropos, commented: “Labour have correctly identified the need for greater social housing to counter the rising waiting lists for homes in the UK. However, they seem to believe that an improved social housing policy must be predicated on attacking the PRS when the truth is that both are required to meet the rising demands of renters in the UK.”
“Rent controls are a crude means to limit rent rises since they limit increases for existing tenants, but often result in new tenants paying higher rents as landlords and investors seek to recover their missing revenue in another part of the housing chain. Stanford University research found that rent controls in San Francisco resulted in lower rental costs over a 16-year period of $2.9bn, but that new renters paid an extra $2.9bn over the same period due to housing shortages caused by the policy. The result was that younger renters were actually paying for the cheaper rents of older tenants with no net gain overall.”
David continued: “The problem with rent controls is that it is a harsh measure of limiting charging that does not consider the fluctuating market. Demand rises and falls, as some cities become more expensive while others appear more attractive, so the idea of fixing rent rises and is linked to a centralised policy, which actually results in a less fair market.”
“Of more value for England would be - for any new Government - to look at the way the PRS operates in Scotland, where there are already open-ended tenancies, the abolition of no-fault evictions, and greater monitoring of the relationship between landlords and tenants. Indeed, there is already discussion of replicating the Scottish system in England, with the Prime Minister already committed to ending section 21 no-fault evictions.”
David concluded: “I think that the Labour party needs to end its confrontational approach to the PRS and work with the sector to ensure that we have a steady flow of homes, both in the private sector and in social housing to meet demand from the UK’s growing population. Any sudden changes to the way in which the sector is regulated or controlled would cause major disruption with individuals suffering seriously reduced availability of rental homes in the future. The majority of good landlords and forward-thinking agents understand that greater security of tenure, the ending of no-fault evictions, and transparency and fairness in all relations with tenants is the future. The truth is that the PRS has stepped in and resolved a property shortage over the last two decades caused by successive governments lack of investment in social housing. Policies which aim to punish the PRS could result in large numbers exiting the market and if that happens, then Labour will have to build a lot more than one million homes in ten years.”