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What is happening with UK ‘rent control’?

Housing rarely made the news during the recent General Election other than the unrealistic promises from all the parties to build more homes, reform planning and help first-time buyers. All very sensible but not particularly new policies. However, the one issue that really lit the touch paper was rent controls.

For landlords this goes to the heart of their investments. While capital appreciation will pay for their retirement, rent is needed to pay the mortgage, fund maintenance and repairs and, if there’s any left over, provide an income. Restricting landlords’ ability to set rents makes many nervous that their costs could outrun their rental income and create losses, leaving them with few choices – either swallow the monthly deficit and hope things improve, remortgage, or sell the property.


What does Labour have to say?

The Labour leadership recently rejected rent controls in England but there are plenty of big beasts within the party, including London mayor Sadiq Khan and Lisa Nandy, who think they are the only way to make renting affordable, although Keir Starmer persuaded Khan to tone down his rhetoric on this – for the time being.

Labour also commissioned a report that championed rent controls and then, when it became clear it wouldn’t go down well politically, distanced itself from the findings. The report recommended several measures to help tenants facing high rents and low availability within the PRS which, it said, would help tenants gain ‘stability’. These include a ‘double lock’ cap on rent rises for those renewing their tenancies which would restrict rises to either consumer price index inflation or local wage growth, whichever is lower. The report also recommended that rent rises be limited to once a year and that tenants should be given four months’ notice of any rises.

Its commentary also recognised that rent controls are gaining traction in a way they have never done before – they already exist in Scotland via the SNP’s ‘rent arbitration scheme’, a modified version of which is due to operate until March next year, and after which a beefed-up system of ‘rent pressure zones’ will be established. And in Wales the Government is evaluating a now closed public consultation on rent controls, which Plaid Cymru says are needed. A decision on the matter is expected imminently.


How could ‘rent control’ transpire?

One aspect of this topic that must be considered before clambering onto any soap boxes is that rent controls come in many flavours.
The strongest is a ‘rent freeze’ during which landlords cannot advertise a property to rent for more than it was previously marketed. The other and often most popular is a ‘rent cap’ which, as the Labour report highlighted, restricts rises to annual inflation or local average rents for comparable properties.

But are rent controls, which for many free marketeers represent a dangerous official intervention in markets, ever going to work?


Are rent controls going to work?

Property giant CBRE – which has an axe to grind as many of its clients are large institutional landlords – thinks not, saying only a few weeks ago in a report that “we know from the past that while the introduction of rent controls might tackle the symptom of rising rents, it doesn’t tackle the disease itself.

“In fact, the introduction of rent controls can make things worse, by further reducing the supply of rental homes”.

This point was recently highlighted by Foxtons, which polled a thousand landlords and found that, while most were relaxed about the prospect of a Labour government – mostly likely because it couldn’t be worse for them than the previous 14 years of Tory policy making – 63% said they were concerned that Labour would U-turn on its promises not to bring in rent controls within England. Incidentally, the damage that the Tories did to the private rented sector also came out in the poll – just 9% agreed strongly that the ‘party supports the sector’.

Rent controls remain popular among tenant rights campaigners, many of whom use inflammatory language about rent rises – to give you a flavour the London Renters Union recently said “estate agents and landlords are out of control”, when justifying its call for rent rise restrictions within the capital.

Although I can understand the arguments on both side of the fence, the real problem here is implementation.


How will rent controls be implemented?

Rent controls are very difficult to legislate on and even more difficult to regulate on the ground, as Scotland has found out. Its original rent pressure zones, introduced in 2017/18 to great fanfare, have never been operated in any meaningful way.

This is largely because, as the Scottish Government’s own guidance made clear at the time, councils had not only to prove that rents within a pressure zone were racing away, but also evidence that the high rents were causing tenants hardship.

Both these requirements needed substantial data collecting activity locally and also boots on the ground to see how tenants were coping with the rises, both of which are expensive activities for cash-strapped councils. And even the most watered-down rent controls, such as limiting annual rises to official inflation figures, require a level of snooping that many people and politicians are not comfortable with.

For example, the Property Portal – suggested within the now ditched Renters (Reform) Act – did not include rent information but did include EPC and other safety compliance information. My guess is that while it’s one thing to ask landlords to prove their property is safe and ‘decent’ but another to force them to disclose their personal financials to open public scrutiny.


Taking all this into consideration, it’s obvious to me that while many landlords may be nervous about Labour’s more ‘market intervention’ instincts, the likelihood of rent controls being introduced is very low and even if they were, the challenges of implementation would bog them down for years. What we need is more rental homes being built, not rent controls.

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