A housing commission has called on the government to legally rule out rent controls and amend the Renters’ Rights Act, warning that policy uncertainty is undermining investment in the PRS.

The Prosper UK Housing Commission’s report - chaired by former housing minister and Downing Street chief of staff Gavin Barwell - argues that increasing the supply of rental homes is the only sustainable way to bring rents down.

It recommends a statutory exclusion preventing rent controls, backed by a ten-year agreement between ministers and the sector on rent indexation, to give investors greater certainty over future returns.

The commission also wants the Renters’ Rights Act amended to extend the interval between rent reviews from one year to two. It says rent increases challenged unsuccessfully at tribunal should be backdated to when they would otherwise have taken effect, removing the present incentive to appeal merely to defer payment.

Defined

It argues that the tribunal’s jurisdiction should be defined more precisely to ensure it determines open-market rents rather than becoming, in substance, a rent-setting body.

The report cites Scotland’s experience of emergency rent restrictions as evidence that controls can undermine investment and push up rents when properties are re-let. It says about £700 million of build-to-rent investment was paused or withdrawn following Scotland’s rent restrictions, with a further £2.5 billion of development pipeline considered at risk.

The commission argues that because the restrictions applied within tenancies but not between them, landlords were able to increase rents when properties became vacant. Advertised rents across Scotland rose by around 12% in the year to the fourth quarter of 2022, including 14% in Glasgow and 15% in Edinburgh.

Although Scotland has since introduced a permanent rent-control framework with exemptions for build-to-rent and mid-market rental homes, the commission argues that exemptions can be withdrawn and therefore don’t provide sufficient long-term certainty for investors.

Improve

It also calls for changes to improve the viability of these developments, including reinstating Multiple Dwellings Relief from stamp duty, reducing the additional homes surcharge to 3% for such schemes, standardising Section 106 agreements and allowing one property licence per building rather than per individual home.

It says BTR could provide a scalable source of additional rental housing and recommends setting up a public BTR programme in which local authorities and other public landowners develop land in partnership with BTR developers for social rent, funded through an expanded recyclable fund administered by Homes England, with completed and occupied homes sold to institutional investors to return capital to the fund.

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