Councils and governments in the UK should reject the first generation of hard rent controls in favour of its more moderate iterations, academics have warned.

The UK Collaborative Centre for Housing Evidence acknowledges that rent control is attractive because it is relatively fast-acting compared with policies such as building new affordable homes.

It’s also a high-profile policy that acts directly on the issue and doesn’t involve a greater commitment of public resources.

Its new report on rent controls reveals how a combination of rent stabilisation along with stronger tenancy conditions can make a modest positive contribution.

But the authors say: “We concur with the overwhelming majority of studies that conclude that first-generation rent regulations should be avoided.”

Freezes, caps and resets

They explain how first-generation rent control refers to nominal ‘rent freezes’, while the second generation allows rental adjustments to reflect changing market conditions, cost inflation, or the costs of refurbishment, and are also known as rent regulation.

Some approaches do no more than cap ‘excess’ rent increases to smooth rent inflation and prevent landlords from capitalising in the short term on sharp shifts in demand or supply, and are also known as rent stabilization.

Third generation rent control, or so-called tenancy rent control, is when rents are simply ‘reset’ at market levels between tenancies.

Political

The report says that changes towards (de)regulation have always been political and that this political battle is fought at different levels – either through political parties or vested interest groups – and through very different means, such as election campaigns or in the media.

It concludes that the question of how to ensure access to a decent, secure and affordable home regardless of tenure should be part of a national conversation that permits rather than represses political contestation and struggle.

It adds: “Strong rent control measures may be advocated within the political process, but policymakers should assess their wider costs and undertake due diligence about implementation before heading down that track.”

Read more about rent controls.

3 COMMENTS

  1. Clearly no one has learnt anything since the 1970’s… The current system (AST, Section 21 etc) came about because radical reform was needed in the PRS because no one was prepared to be a landlord, simple as that. Rent controls effectively brought the entire market to a halt.
    A new approach was needed and after a lot of thought and input from all concerned the current system was developed and put into law.

    ALL so-called controls do not take into account the simple reward/risk ratio.

    If it costs £100,000 to buy a small BTL then in order to make a modest return of 5% before deductions then the rent has to be £5,000 / year.
    So if a property costs £200,000 then the rent must be £10,000

    With current inflation exceeding 5% then the rents / returns simply have to increase just to stand still.
    As mortgage rates begin to return to “Normal” then clearly if we reach a point where building society savings accounts reach 5% then there will be no incentive to entire the PRS at all unless rents are allowed to increase accordingly to maintain the 5% margin.

    The biggest issue that all of those determined to interfere in the market place do not understand is that NO ONE can force me or anyone else to invest in the PRS. I can put my money wherever I like and of course will seek out sectors that give me the highest return with the lowest risk.

    So those advocating interfering in the market need to be fully aware that in the end it will (Just like the 1970’s) be the tenants that suffer when the market collapses. I will not suffer because I will simply have moved my money to another sector and therefore will continue to enjoy returns on my investments.

  2. Rents are high because demand exceeds supply. The answer is not rent caps but increasing supply. Whether that is done by building more homes or encouraging more investors does not matter, but it is the only way to keep rents from spiralling out of the reach of tenants.

  3. Building more property will NEVER be the answer.

    There is simply NO way that sufficient properties will ever be available.

    Only by CONTROLLING demand will there be a chance for properties built to catch up with demand.

    That means closing the UK borders.

    No more dinghy people.
    No Ukrainians.
    Europe has safe countries for Ukrainian refugees

    The UK has already suffered from 6 million EU nationals deciding to reside in the UK.

    There are reckoned to be about 6 million EU Nationals now able to live in the UK.
    Plus about 2 million illegal immigrants.

    Not that it will ever happen but if a that lot were deported the housing crisis in high demand areas would disappear.

    You would need 10 million properties being built in the next 5 years to cover for all the properties that EU nationals and illegal immigrants are currently occupying.

    It is simply impossible for sufficient properties tp meet demand.

    Controlling demand is the only way to give a chance for sufficient properties to be built.

    There appears to be NO political will to control demand.
    Deporting illegals would make many more properties available.

    Consequently there will always be a housing crisis.

    Good news for LL and homeowners.

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