WHAT CAN I DO NEXT?
There is no major city in Western Europe or the USA where it can be demonstrated rent controls have been a consistent factor in making housing more affordable. Yet there is continued interest in applying rent controls in the Private Rented Sector (PRS).
Research from the RLA highlights the inescapable truth that rent controls simply do not work. A lack of new social housing and flat real wage growth are factors common across cities in Europe and the USA. The presence of rent controls – where they exist – have done nothing to address affordability.
The RLA call on the Government to rule out the introduction of rent controls to ensure that -
- there is a healthy supply of homes to rent
- there is greater choice of properties for tenants
- landlords are more likely to improve their properties
Impact of rent control
More and more households are looking to the private rented sector for a home, including increasing numbers of families – and they are staying for longer. Therefore now, more than ever housing policy needs to be focused on encouraging the supply of private homes to rent. A shortage of homes to let has driven up rents irrespective of whether rent controls are in operation or not. Research indicates:
- Rent controls covering part of a city's private rented housing stock push up rents in adjacent neighbourhoods
- Although tenants may pay less for their rent-controlled home, their landlord also provides less support and investment
- Landlords affected by rent control often leave the sector, either selling their property or converting it so it falls outside the remit of the controls - hitting supply and further exacerbating housing shortages
- Rent controls do not necessarily equal affordability.
- People tend to remain in rent-controlled accommodation, even if their circumstances improve or it no longer meets their needs. As a result, labour becomes less flexible, affecting the wider economy.
Research Provided by RLA PEARL. See more
Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.Gunnar Myrdal (winner, Nobel Prize for Economic Science)
GLOBAL EXPERIENCES OF RENT CONTROL
In Berlin rent controls failed to stop rent levels accelerating. Between 2015 and 2017, rents in central Berlin shot up by almost 10%. Before the introduction of the rent brake they had been rising by just 1-2% each year. At the same time rent controls have spread across Germany, and now cover over over 300 cities and municipalities. Rent controls have spread and are becoming tougher despite their ineffectiveness.
Rent controls have throttled back the supply of housing, drving up prices. The effects of rent controls in Stockholm and other cities ripple out across the economy. Rents elsewhere are pushed higher. In the regions, economic development suffers as labour heads towards the big cities in pursuit of a rent controlled lifestyle. Rent controls have led to decade long queues for housing and have created, not resolved, a housing crisis.
Attempts to introduce rent controls have become mired in legal challenges and administrative tangles. Disputes between landlords and regulators on technicalities such as definitions of bedrooms and balconies undermine the system. Rules on exemptions and allowances all add to the complexity. In attempting to please everyone, the rent control system in this city pleases no-one.
Paris is one of the most recent rent control systems, New York City one of the oldest. Around 45% of all occupied and vacant rental units are either ‘rent stabilised’ or ‘rent controlled’. Analysis shows non-controlled rents are up to 25% higher as a result. The ‘average’ rent control tenant chooses to remain in residence 18 years longer than an identical tenant in identical,non-rent controlled property. Rent controls work for those lucky enough to be covered but not for others nor for the flexible economy.