Is rental regulation inevitable?

Is rent regulation inevitable?  It seems so with the Labour Party opportunistic appeal to the 4.8 million households that now rent privately.  It appears that landlords and the private rental sector has become a victim of it's own success.  Back in the the early 1980s with less than 10% of the population renting privately it had become a political irrelevance and surely it was just a matter of time before it disappeared under the unstoppable juggernaut which was private home ownership ownership.

The saviour of the private rental sector

It was the actions of Margaget Thatcher and some of her advisors that rightly saw that a vibrant private rental sector was not only ideologically important but a practical necessity for an increasingly mobile and youthful workforce to be able to live where the jobs were and without the shackles of home ownership.  In essence housing policy was borne out of economic necessities.

The rebirth of the private rental sector

The rebirth of the private rental sector has continued a pace over the last 30 years and now is rapidly approaching 20% of the total housing stock.  This means lots of votes for politicians and in particular the Labour party who naturally see renters are part of their voting constitution.  The latest proposals for the private rental sector from Labour are essentially a 'throw back' to the waves of regulation introduced by successive Labour governments during the whole of the last century.  The result then - a contracting private rental market, less choice, less investment and a flight of capital away from landlords renting their residential property to them selling property into owner occupation when they could.

What has changed since 1988?

Since the arrival of the Assured Shorthold Tenancy with the original Housing Act in 1988 we have seen a slow evolution of the private rental sector away from just providing short term accommodation for young professional before they buy their own property to an increasing permanent rental class particularly in London and the bigger towns & cities ....the so called 'generation rent'.  Originally it was envisaged that assured tenancies with their greater security of tenure would become the default tenancy for many landlords.  However, their inflexibility and the granting of a considerable amount of security of tenure meant that it failed to appeal to both tenants and landlords.

Need for change for 'generation rent'

The private rental sector does need to change to respond to the needs of todays 'generation rent'.  The option for longer term tenancies are probably not only a good idea but essential to cater for demands from the new army of renters.

Labours proposals for rent regulation

Labours proposals however wrongly assume that rents are escalating at an unprecedented rate.  They may be in certain upmarket parts of London where Labour Party apparatchiks reside.  In the rest of the UK real rents have been falling.

Controlling rents in any meaningful way is likely to create a massive wasteful bureaucracy.  This all to regulate something that for the odd anomaly regulates itself through competition.  What are we really gaining?

Is rent regulation inevitable?

If the current government can lead the evolution in the private rental sector by incentivising landlords to offer the choice that today's generation rent demand then there is every reason to believe that heavy handed regulation is avoidable.  In fact by leveraging the interest in investing in residential property as an investment politicians could kick start the sector into several more decades of growth and stimulate the all important need for more new properties to rent.

The question for all of us including our politicians is do we want to go backwards to the dark days of rent control and a shrinking private rental sector or do we have the courage to go forward and adapt and evolve it to cater for a changing world.

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