More property experts have urged Andy Burnham to reconsider potential rent controls in England in his bid to address the cost of living.

The new Prime Minister announced he hadn't ruled out the move earlier this week. However, wages are rising faster than rents this year and most tenants have no difficulty paying their rent, according to Lauder Teacher Associates, while housebuilding continues to plummet towards all-time lows and rent controls in Scotland and Ireland have been abject failures.

The firm points to MHCLG data that shows two thirds of private renters find paying rent very or fairly easy, while just 7% find it very difficult, along with ONS figures showing wages rising faster than rents; in the three months to May, total pay was up 4.4% over the quarter, compared with ONS private rent inflation of 3.3% across the UK.

The one part of the market that was still delivering at scale – build-to-rent - has contracted sharply due to uncertainty around rent controls, says founding partner Andrew Teacher. “If government needs private capital to deliver its policy of building 1.5 million homes, then that capital needs to make a profit.

“A rent freeze would further whack business plans and kill remaining viability, hitting institutional capital such as Burnham’s own Greater Manchester Pension Fund and other local government pension funds,” says Teacher (pictured left).

Reduced

Rent controls simply don’t work, asserts property lawyer David Smith. “In general, studies show that it leads to reduced housing supply, increased rents outside the boundaries of what is controlled, and a general reduction in standards.”

The latest proposal comes from the Institute for Public Policy Research (IPPR) which suggests that annual rent increases could be limited by a ‘double lock’ linked to whichever is lower: inflation or wage growth. It proposes exemptions for new build property to encourage continued investment and bringing back mortgage interest tax deductability for landlords who have mortgages.

However, this is based on a series of flawed premises, says Smith at Bishop & Sewell (pictured right). While the IPPR suggests that rents have risen steeply due to wars and the decisions of the UK government, most studies show that rents have been relatively flat. Rents are also subject to other factors around available supply and demand which are fairly localised.

National

“In practice a rent control mechanism like this based on a national standard will simply ensure that rents generally always rise by this figure in every area. In some areas that will mean a greater rise than now, not less. It will also mean that landlords who might keep rents down in tenancy, as many do, will not do so as any failure to increase a rent will lead to that property forever dropping behind the rest of the market with no ability to catch up.”

Additional incentives and corruption are increased as people attempt to jump the queue, adds Smith. “It is hard to avoid the view that rent control is, to some degree, punishing landlords for an ongoing failure to build enough housing and a failure to find ways to keep wage growth in line with inflation. These are not the fault of landlords and it is open to argument whether they should have to pay for this.”

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