💷 Rent control. Will it actually improve the market?!
Rent control is a subject which is raised frequently by politicians, usually when they have something to gain from courting generation rent, however is it beneficial or could it be catastrophic to the market?
ALRA Propertymark certainly believes it is not the answer to solving ever increasing rents and levelling up the private rented sector. You can read their various pieces on the subject here.
There are a number of ways in which rent controls can be implemented, these are:
- A cap on annual rent increases
- Restrictions on mid-tenancy increases
- A fixed amount a property can be let for
For anyone who has read the rental reform white paper published in June 2022 you will be aware this is already suggesting some form of rent control, however this is a limited control by way of only allowing one increase in a 12-month period. It is likely controls on the amount of rent a landlord can charge will be more detrimental to the market, leading to a further exit from landlords and increasing demand further.
This opinion is echoed by the UK housing minister Eddie Hughes in his reply to a question in May 2022 from MP Rachel Maskell. In his reply, Huges states the government (at the time of writing) does not support the introduction of rent controls. He goes on to reference it discouraging investment in the sector and siting international examples where there has been a negative effect on the supply.
Whilst not explicitly referencing any country, San Francisco originally introduced rent controls in 1979 to specific larges buildings and extended this in 1994 to smaller “multifamily” housing. It was found following the update, available housing decreased which increasing demand and rental prices on the remaining properties.
In our experience, echoed in San Francisco and across the UK housing market following the Coronavirus pandemic, supply and demand will have the biggest impact to increasing prices. Forcing more landlords out of the market can only lead to rents being increased. One solution is to increase the supply. This can take many forms, however we believe research on encouraging landlords to enter the market should have equal emphasis as the research into protection of tenants.
What do you think rent control would do to the market, and do you have any suggestions? We’d love to hear your views!
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