No to rent controls: Government cites ‘international evidence’ to back stance

Calls for rent controls are never far from the headlines and are front and centre once more following the publication of election manifestos in Wales.

Both The Green Party and Plaid Cymru have featured proposals in their manifestos ahead of next month’s election, with London mayor Sadiq Khan continuing to push for devolved powers allowing him to introduce rent controls in the capital.

Despite these pressures the UK Government has been clear it does not support such proposals and this week went into greater detail as to why, with housing minister Matthew Pennycook agreeing with us that rent controls do not work and reiterating the Government has no plans to introduce them.

What exactly are rent controls?

Rent controls generally fall into one of two camps:

• First generation rent controls: a  form of 'hard' control in which rents are fixed and remain frozen and
• Second generation rent controls: where rent increases are limited to a set percentage or pegged to inflation. 

We, as an organisation, have long opposed rent controls which ultimately fail to address underlying issues of affordability and come with a raft of unintended consequences including:

• A reduction in market supply due to landlords selling properties and exiting the market.
• Reduced incentives for landlords to invest in property upgrades and maintenance. 
• Regulatory failings around capacity to enforce rent controls and a lack of consistency in enforcement. 
• The emergence of labour market rigidities as tenants in properties under rent controls remain in those properties for longer periods. This has a detrimental effect on newer entrants to the market as potential newer entrants - often younger renters - find themselves 'locked out' of rent controlled areas.

International evidence

In response to an oral question by Labour MP Dan Carden, who asked about the evidential basis for the Government’s position, the housing minister cited examples from across Europe and the US where controls have, in reality, made things worse for tenants.

He said: “The Government do not support the introduction of rent controls, which we believe could make life more difficult for renters.

“There is sufficient international evidence from countries such as Sweden and Germany, and from individual cities such as San Francisco, as well as the recent Scottish experience, to attest to the potential detrimental impacts of rent controls on tenants.”

Consultation call

In a response to a supplementary question, asking the Government to take action and consult on rent control proposals he said: “I have looked at a wealth of evidence, particularly international evidence, of what the impact of first and second-generation rent controls are, as well as more subtle forms of rent control, which can have differential impacts on different groups.

“Such controls typically benefit settled and better-off tenants more than those looking for a home or needing to move. While I appreciate that a broad spectrum of regulation falls under the title, there is enough international evidence, in the Government’s view, to attest to the potential detrimental impacts of rent controls, and our position remains that we will not introduce them.”

More information

• To read more about the calls for rent controls in Wales click here.
• To read a transcript of the Government proceedings click here.
• You can read more about renting and rent controls across the globe – and their impacts on p28 of  Property magazine here.