You would be hard put to find a greater political disconnect between much of the residential industry and the general public than over the subject of rent controls.
The issue has been planted on the agenda by Generation Rent, a lobby group pressing for debate over private rents and conditions in the election build-up. A poll commissioned by the group and conducted in January by pollster Survation showed that only 6.8% of people were “somewhat” or “strongly” against controls; the overwhelming majority were in favour.
Yet the Conservatives, Liberal Democrats and UKIP oppose controls outright, while Labour says it will limit future rises in an unspecified way. Only the Greens formally back controls.
In the lettings industry, however, there is widespread concern that Generation Rent – now backed by Shelter, trade unions and consumer groups – may push controls as an element of rental reform if Labour wins the election. Two‑thirds of landlords will sell their investment if rent controls come in, according to research from the Residential Landlords’ Association.
What’s more, much of the industry claims rent controls simply are not required – because market forces regulate rent and determine what is “fair”. Research by LSL Property Services, which includes a string of high-street lettings agency brands such as Reeds Rain and Your Move, says rents are now 16.3% higher than they were five years ago.
In absolute terms, the average residential rent across England and Wales has grown by £107 since January 2010, to reach £763 per month as of January this year. This amounts to an average annual rent rise of 3% over the past five years – or a real-terms rise of 0.6% per annum when adjusted for inflation over that period, says LSL.
If controls do return, it will be for the first time since the Thatcher government’s 1988 Housing Act, which ended the right of local authority housing officers to negotiate lower rents on behalf of private tenants.
Estates Gazette asked some of the country’s leading lettings experts what they thought. A few felt controls could be used to the advantage of the Build to Rent sector but all recognised dangers – some believing the approach could backfire, to the detriment of tenants as well as landlords, agents and institutional investors.
Caps, not controls, give tenants a better deal
“A Labour government will introduce three-year stable tenancies, put a ceiling on rent rises over the course of contracts and ban letting agent fees on tenants.”
Emma Reynolds, Labour housing spokesperson
They destroy investment
“Rent controls never work. They destroy housing investment, leading to fewer homes to rent and poorer-quality accommodation.”
Brandon Lewis, housing minister
Controls deterring PRS investors
“Talk of controls is undoubtedly slowing the evolution of a nascent private rented sector backed by institutional funds. What might work for corporate landlords in the UK, and avoid restricting the market, is a system of open market rents at the point of letting but with a cap on increases during the life of the tenancy.”
Jacqui Daly, Savills director of residential investment research
Private landlords would have no escape route
“I review rents annually against inflation and in some cases haven’t increased rents for two years. I’m not against a kind of cap but landlords will eventually have to pay higher interest rates – and if there are formal controls, what do we do then? The reality is landlords would leave the sector, indirectly creating a shortage of homes to let and, ironically, higher rents as a result.”
Victoria Whitlock, “The Accidental Landlord” columnist in the Evening Standard
Unintended consequences for tenants
“Under a rent control environment in social housing, rents have risen by 22% since 2008; private rents increased by only 7%. Regular increases that don’t always happen with long-term [private] tenancies may now be imposed if built into the tenancy agreement. This could result in tenants paying more rent, not less.”
Kate Faulkner, property market analyst and commentator
Controls may hit the growing online agency sector
“Flexibility is key to our online model and rent controls, including the potential introduction [by several political parties] of minimum three-year tenancies, are inflexible. The controls would restrict both landlord and tenant choice: for landlords, restricting how they can manage an asset; and for tenants, restricting their ability to choose where they want to live and for how long. The lettings sector is likely to experience a decline in investment.”
Robert Ellice, chief executive, easyProperty
Some controls may indirectly help PRS
“The debate isn’t black and white. Regulation of rents could have a very negative impact on investment [but] UK assured shorthold tenancies are typically only six or 12 months, with changes to rent negotiated on renewal. This is short by international standards and can breed uncertainty and animosity. In Germany the majority of PRS agreements are unlimited, giving security of tenure and allowing the tenant to make long-term plans. But landlords have certainty over rent as this is pegged to an index such as RPI, which can be written into the contract. Revisions are possible for improvements but within strict limits, referenced to properties in the vicinity.”
Fionnuala Earley, residential research director at Hamptons International
London and UK plc would be damaged
“There is substantial interest and investment in prime central London from both UK and overseas buyers paying particular attention to the annual yield – they expect capital and income appreciation. Rent controls would damage the current status of prime central London. These investors not only underpin the market in London but also generate a huge income for UK plc.”
Lucy Morton, ex-president of the Association of Residential Letting Agents and director of JLL residential letting arm WA Ellis
