According to the Office for National Statistics, private rental prices jumped 2% in the twelve months from January 2021 to January 2022 – the largest annual increase since 2017.
The energy crisis, inflation and interest rates are all impacting the affordability of private rented stock in the UK, and plenty of tenants are concerned that they may get priced out of their own homes.
There is growing support for reintroducing Rent Controls in England and Wales, with supporters and detractors in equal measure.
Labour MP John McDonnell has already called for rent controls, citing housing affordability issues as the “largest single expense” facing modern tenants in England.
Meanwhile, the National Residential Landlords Association has moved quickly to propose a white paper against the government’s call for more rent controls, stating that 37 percent of landlords “would cut the number of properties they rent out” if rent controls were introduced.
But in which direction will calls for rent controls go?
What are rent controls?
Rent control policies regulate rental prices of properties, placing a price cap on rents to make private renting more affordable—from localised rent freezes to a ‘reset button’ for new tenancies nationwide.
Rent controls are currently prohibited in England. The Thatcher government repealed them in 1988, at the same time as it launched ‘right to buy’ legislation to encourage private ownership of property.
They were initially introduced as a temporary measure in WWI to prevent landlords from profiteering while demand for housing outweighed supply. Various forms of rent controls persisted throughout the early 20th century which saw the PRS dwindle to just 10% of housing stock in 1991, down from 90% in 1915.
But Thatcher’s 1988 Housing Act deregulated rents on new private sector lettings, which allowed the PRS to begin growing again.
Proceed with caution
Rising affordability issues are the spark that has reignited the call for rent controls in England. A chronic lack of supply, high inflation, and the ongoing energy crisis are all contributing to an unstable PRS in England—with 67% of tenants saying they would welcome rent controls in a recent YouGov survey.
However, rent controls aren’t straightforward to implement. Landlords would face their own affordability issues if the maximum allowed rent makes their BTL business unprofitable. Especially at a time when BTL mortgages are becoming more expensive; the risk with rent controls is that local PRS markets will shrink should landlords divest themselves from the sector.
There is also an argument that rent controls would incentivise landlords to charge the maximum legal rent, no matter the size, quality, or location of the accommodation—thereby distorting the local free market and removing more affordable options for tenants on lower incomes.
Scotland and Wales leading the debate
In Scotland, legislation is already in place that lets the government designate “rent pressure zones”—areas in which temporary rent controls can be put in place for any new tenants arriving in the area—should rent prices be rising too much.
And in Wales, a white paper to introduce rent caps was recently proposed as part of last year’s Labour/Plaid Co-Operation Deal, but it was rejected after most Labour members abstained.
Carolyn Thomas, Labour’s North Wales MS, said: “We need a national scheme. Controls must be linked to the property, not the tenant.”
Meanwhile, Wales-based Conservative MP Janet Finch Saunders has said that rent controls will only empower landlords to raise prices to the maximum allowed amount, saying, “[Rent controls] have actually been detrimental to the housing market.”
These movements are ones to watch as legislative changes in Scotland and Wales often have a knock-on effect to new changes in England.
Could rent controls be introduced in England?
Potentially, yes. Bristol and London have already made moves to introduce independent rent controls for residents in the local area, with a “Renting Summit” having already been run in Bristol at the start of March.
Marvin Rees, Mayor of Bristol, said: “Piloting rent control in Bristol will allow us to take a step towards tackling our local renting crisis.”
Meanwhile, Sadiq Khan, Mayor of London, has made repeated claims that affordability in London is “exploitative” and damaging the “physical and mental health of tenants”. Khan has called for a two-year rent freeze in London, which would save tenants an average of £3,000.
He said, “Private renters make up nearly a third of everyone living in the capital and they are set to be hit by a devastating combination of price and bill rises. Too often the needs of private renters are ignored by both landlords and the government.
“A rent freeze will give people a chance to get back on their feet after the pandemic.”
Rent controls remain a hotly debated subject in the PRS. Nevertheless, financial strain on tenants may force the government’s hand in an attempt to shield tenants from the rising cost of living across the country. Scotland and Wales have already initiated their own versions of rent controls, and the most successful ideas could yet be presented in support for implementing controls in England too.
Most tenants are understandably happy with the idea of introducing rent controls. However, they do have their drawbacks for tenants and landlords alike—including higher prices, properties being withdrawn from the PRS market, further compounding the stock shortage and ultimately reducing choice for renters.