Rent Controls Pledge From Minister
A short, terse statement from the government has cleared up policy on rent controls for landlords in England. The statement was from housing under-secretary Eddie Hughes in response to a written question from Labour MP Rachael Maskell, who asked if his department had considered allowing councils to impose rent controls.
“The government does not support the introduction of rent controls to set the level of rent at the outset of a tenancy. Rents are negotiated and agreed between landlord and tenant,” said Hughes.
“Evidence suggests that these would discourage investment in the sector, leading to declining property standards, which would not help landlords or tenants. Recent international examples suggest that rent controls can have an inadvertent negative impact on housing supply and may encourage more illegal subletting.”
The statement follows a week of politicians grappling over rent controls. London Mayor Sadiq Khan led the chorus by demanding rent control across London. He had close support from Bristol City Council, which is bidding to become the first English council with the power to set rents. Khan accepts he has no power to set rent control but pledged to lobby the government in favour of rent control.
What Is Rent Control?
Rent control is when a council or other authority limits the amount a private landlord can demand from a tenant. The aim is to keep rents affordable for poorer tenants. England and Wales do not have any rent controls.
Does Rent Control Work?
Economic theory suggests rent control does not work. The policy objective is to force rents down, but, the argument goes, this leads to landlords selling or switching homes to holiday lets. This departure from buy-to-let reduces the number of properties available to rent.
Britain has no recent history of rent control, but San Francisco and Germany are two places with such a past. A study in San Francisco concluded tenants in rent-controlled homes saved £2.2 billion on their housing costs between 1994 and 2010.
However, this saving was cancelled out by new renters who paid an extra £2.2 billion in rent over the same period because prices increased as the number of homes to rent became scarcer. Rent controls increase house prices and gentrified suburbs as landlords demolished and rebuilt apartment blocks.
New builds were exempt from rent controls.
The conclusion favoured abolishing rent control and providing more affordable rents with official subsidies or tax credits. More than 300 cities and towns in Germany have had rent control since 2015. However, research in Berlin, where 1.6 million of the city’s 1.9 million homes are private rentals, argues rent control only works in places where rents rise the fastest. London Assembly research in 2015 reported rent controls like a three-year freeze on rent rises would do little to ease affordability.
Capping rents at two-thirds of market value and other radical measures would drive landlords from the market. The researchers decided tenants gained nothing from rent controls and the most likely result in a sharp reduction in private rented homes.
Rent controls – the future
The current disputes over the rights and wrongs of rent control are driven by politics rather than evidence-based policy.
London and Bristol are the two most vocal supporters of rent controls, both cities with Labour mayors.
Rent control was a flagship policy of Jeremy Corbyn’s defeated effort to win the 2019 General Election. The ‘no rent controls’ statement from Eddie Hughes has closed the current debate – but that only lasts until the end of the current session of Parliament in 2024. Labour could revive the policy as a manifesto pledge for the next election.
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The landlord and tenant should mutually agree on the initial rent. During the first six months of a tenancy, tenants can refer the rent to the First-tier Tribunal (Property Chamber - Residential Property) for review if they consider the rent above the market rent. This is, however, very rarely done.