The 'new' idea of rent controls
The Labour proposals are that in essence rent increases will be restricted. The funny thing is that being a politician and a meeley mouthed politician they don't want to call it rent control (or should I say price control). It's dressed up as some kind of half way house where landlords would be prevented from 'excessive' rises during a 3 year period. This is controlling prices in any way that I understand it.
The reality is that rent controls were tried before in the last century and almost the killed the private rental sector (these proposals will have exactly the same impact.)
Real rents have been falling
The whole debate on rent control has a slight unreal element about it. Real rents particularly outside London have been falling in real terms for at least a decade. Have a look at this recent post post outlining the rental increase mirage. The only places that rents have probably being increasing in real terms are in the posh parts of central London...the stomping ground of the likes of Milliband and Balls highlighting the 'Westminster bubble' that they clearly exist in.
So why control rents?
The latest proposal from the two Eds are nothing to do with making the private rental sector better. It's all about grabbing the tenant vote particularly in the 'overheating' London property market. The FT agrees and are none too impressed with Labours proposals for the private rental secotor.
The reality is that their proposals for rent control will:
- cause a flight of capital from the private landlords from the rental sector as some choice to sell up fearing more onerous controls
- kill the build to rent initiative (who will want to fund or build new property facing this uncertain regulation)
- prematurely increase rents for tenants - have a look at this piece in City Am
- generate a massive and inaffective bureaucracy that tries to implement, oversee and administer this system of price control
- give less choice to private tenants and ultimately force up the real level of rents which have been falling
Landlord insurance - get expert advice - professional rates
There is little doubt that rents in parts of London may be "too high", but that's not the case here in the West Midlands where I have only managed to increase the rent on one of my properties in the last 2 years and the rest are level or decreasing!
ReplyDeleteIf (and lets hope is is IF) Labor form the next government and bring in rent controls, how would they assess a fair rent? If they use the current VOA figures that are used for DSS rent assessment then very few landlords with mortgages could afford to stay in the rental market even at current interest rates. As mortgage rates are likely to rise before the next election this would be a double wammy, forcing landlords to charge less just as our costs increase.
Personally I don't see point 1 as a problem think it would be better if the people that live in a house would be able to own it themselves.
ReplyDeleteHow will it force up rents (and how is this a problem from the author's point of view)?
@ Sanna, I presume it will force up rents as if landlords know that in the future the increases will be capped, they'll do their best to get them in before any regulation comes into force.
ReplyDeleteAnd a utopia where everyone owns their own house is very unlikely to ever materialise. And why should it? We are not a communist country (at least last time I checked) so there will always be those that have more than others.