Spain’s experience of trying to tackle its housing crisis has highlighted the potential impact of tighter regulation on the UK’s private rental market.

Repeated attempts by Spain’s minority government to tighten rental rules have created uncertainty for landlords and investors, with a credit ratings agency warning that the measures could discourage rental investment and ultimately push more households towards buying.

The Spanish government has proposed measures including rent controls, stronger protection against evictions, restrictions on corporate purchases of residential property and longer tenancy arrangements. However, Prime Minister Pedro Sánchez was forced to call a snap general election after the housing proposals failed to secure parliamentary backing.

The latest measures were approved again earlier this week and follow widescale protests, including a campaign to highlight the eviction of an 87-year-old woman from the home she had rented for decades after an investment firm bought her block and raised the rent.

Uncertainty

Morningstar DBRS warns that uncertainty could cause some investors to scale back their plans, sell properties or withdraw them from the rental market. Institutional investors could also become more cautious, while Spain’s still-limited build-to-rent sector could be particularly vulnerable.

It warns that any further reduction in rental supply could push rents higher and make housing harder to access, particularly as people increasingly opt to buy rather than rent.

Industry watchers also believe it could serve as an early warning for this country; after our next general election in 2029, a minority Labour Government could be in charge and under pressure to take similar action about the high cost of renting property in England.

Resist

While the UK government continues to resist rent controls, pressure groups and charities continue pushing the agenda. The Joseph Rowntree Foundation has called for rent controls to be introduced in England from 2027/28 alongside the restoration of Local Housing Allowance to the 30th percentile of local rents. Its modelling suggests that linking LHA to local rents would cost £1.7bn in 2027/28, rising to £2.7bn by 2030/31 without rent controls.

Introducing inflation-linked rent controls, however, would reduce the projected 2030/31 cost of restoring the LHA link to £1.6bn – a £1.1bn, or 40%, saving.

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