Labour Rent Controls would force Landlords out of the PRS

A survey by the Residential Landlords Association (RLA) has revealed that three out of five landlords would leave, or consider leaving, the private rented market if rent controls were introduced by a Labour Government after 7th May. The latest figures actually show that most landlords are planning on freezing their rents in 2015.

Alan Ward, Chairman of the RLA, warns that rent controls will leave tenants worse off. He said “These results blow a hole through the myth that rent controls would be good for tenants. At a time when tenants need more choice over where they live, state-controlled rents would choke off supply, increase rents and reduce quality. It would be history repeating itself.”

Further, Alan Ward points to official figures showing that in the social rented sector, rent controls have seen rents massively outstrip inflation. The most recent English Housing Survey shows that between 2008/9 and 2012/13 social sectors increased rents by over 25%. By comparison, rents in the private sector increased over the same period by just 6.5%. Inflation as measured by both the CPI and RPI over this period was around 16%.

Mr Ward continued “The reality is that rent controls would leave many tenants paying more than they do at the moment. Rather than coming up with ideologically driven ideas, proponents of rent controls need to address the root issues, namely the need to boost the supply of homes to rent.”

Labour’s policy is all the more extraordinary given that during the last Labour Government they published a consultation on Investment in Private Rented Housing. It said “A key factor behind the decline in the PRS was the introduction of rent controls during the First World War, and these became more extensive over time. Artificially low rents reduced investment in the sector, contributing to … lower maintenance standards in the stock that remained.

Further, 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. Page 18 reads “An illustrative correlation shows that across countries, stricter rent controls tend 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” .

The CLG Select Committee in it’s report into the PRS in July 2013 observed on page 44 that rent controls “would serve only to reduce investment in the sector at a time when it is most needed.

The evidence suggests that Labour’s policy, whilst aiming to help tenants in the PRS, would actually have the opposite effect.

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