Rent controls would critically damage any prospects of growth in the private rented sector in Wales according to the country’s leading voice for landlords.
Following Labour leader, Ed Miliband’s calls for the re-introduction of rent controls in England, the Residential Landlords Association is writing to all parties in the Assembly to seek assurances that they will not introduce such a policy in Wales.
The RLA argues that introducing rent controls would leave many tenants in Wales worse off given that rents across Wales are increasing by much less than inflation as measured by both CPI and RPI.
According to data from the Office for National Statistics, rents in the private sector in Wales increased by just 0.6% over the past year and 3% in the five years between March 2009 and 2014.
All the evidence from the UK and overseas demonstrates that rent controls deters investment in the private rented sector and so reduces supply. This includes evidence from the Organisation for Economic Co-Operation and Development (OECD) which shows that rent controls lead to greatly reduced quality and quantity of new homes.
Douglas Haig, Director for Wales for the Residential Landlords Association commented:
“Whilst it is good to see a debate being held on the role that the private rented sector has to play in meeting the country’s housing needs, it is vital that it is based on fact and not populism.
“All the evidence clearly shows that rent controls critically undermine investment in new homes to rent and are not needed given that official statistics show that rents are increasing by less than inflation.
“I am therefore writing to all parties in the Welsh Assembly to seek reassurances that they do not intend to adopt a similar path for Wales which would be against the interests of tenants.”
The RLA represents almost 20,000 private sector residential landlords in England and Wales.
The latest rent data for the private rented sector, produced by the Office for National Statistics can be accessed at http://www.ons.gov.uk/ons/rel/hpi/index-of-private-housing-rental-prices/january-to-march-2014-results/index.html . A summary of the figures can be found in the table below:
Research published in 2011 by the Organisation for Economic Co-Operation and Development (OECD) has shown that rent controls lead to greatly reduced quality and quantity of new homes. It concludes: “an illustrative correlation shows that across countries, stricter rent control tends to be associated with lower quantity and quality of rental housing, as measured by the share of tenants who lack space and who have a leaking roof.” (See page 18 at http://www.oecd.org/eco/growth/46901936.pdf .)
A further paper prepared for the OECD in 1987 noted that the “flight of investment” from the private rented sector as a result of rent controls in the UK led to the proportion of privately owned rental properties falling from 53% in 1950 to 8% in 1986.
The cross party House of Commons Communities and Local Government Select Committee in its report into the PRS in July 2013 observed that rent controls: “would serve only to reduce investment in the sector at a time when it is most needed.”
In New York, a city often cited as an example for rent controls, the evidence clearly points to them having a serious impact on the supply of housing. In April 1997, Mark Green, then the Democrat Public Advocate for New York City wrote to the State’s Governor and Senator to explain that, “the number of rent-controlled apartments fell 18.2% between 1991 and 1993 and the new data we have analysed shows an even greater decline — 30% — from 1993 to 1996. Indeed, the total number of rent-controlled apartments has fallen by 75% from its peak of 285,000 in 1981.”