Posts with tag: rent controls

Rent controls will not fix London’s housing crisis

Published On: November 12, 2019 at 9:35 am


Categories: Landlord News

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The proposal for rent controls in London continues to be a controversial one, with mayor Sadiq Khan being urged to focus more on increasing the supply of rented housing across the capital.

The Mayor of London has called on the government to provide him with the power to put a cap on rents so that he can “fundamentally rebalance London’s private rented sector”.

Average monthly rent prices in London have increased by 35% from 2011 to 2018, rising from £1,095 to £1,473, according to the Valuation Office Agency’s analysis.

The latest English Housing Survey has also highlighted that private renters in the city spent 42% of their household income on rent, compared with 30% by those living outside of the capital in England.

However, there is a fear that Khan’s proposal could have a negative long-term impact on the quality of housing.

Paul Sloan, development director for haart, comments: “Rent controls sound great in theory, but unfortunately the reality is that they simply do not work. Around the world, we have countless examples of cities which have introduced rent controls, but that has done nothing to address affordability issues.

“The risk is that landlords are dissuaded from entering or staying in the market, which reduces the supply of available homes and can, in turn, inflate prices – the very thing the controls are brought in to avoid.

“Rent controls discourage landlords from investing in their properties which can mean that the supply of rental housing is of a lower quality than it would otherwise be, and tenants can find that repairs and maintenance are no longer a priority for landlords.

“Not only that, but the research from RLA has shown that rent controls can even serve to accelerate rises. An example from Berlin has shown that rental controls actually made rents rise by about ten% over two years, whereas before the controls were introduced, they rose by about one to two% per year.

“We believe that rental controls are no substitute for a functional market where homes are fairly priced and well-maintained. Rather than plumping for a system which has been proven not to work, we call upon the Mayor and the government to work alongside private landlords to discover measures that will keep them in the market and find ways to entice new people into becoming landlords.

“After all, increasing the supply of good quality homes into the rental market is by far the best method of keeping rental prices at a reasonable level.”

Rent controls will only hurt tenants, says new research from RLA

Published On: October 31, 2019 at 9:33 am


Categories: Tenant News

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Rent controls are only going to make matters worse for tenants and the supply of housing in the UK, according to new research. In some cases, it may even cause rents to increase.

The Mayor of London wants to introduce rent controls across the capital, but an analysis of existing research by the Residential Landlords Association (RLA) reveals the harm they can cause. The research looks into the impact of rent controls around the world, including the following examples:

  • Forms of rent control exist in Los Angeles and San Francisco. A paper for the California Budget and Policy Centre has reported that renters are “substantially more likely to struggle with housing affordability than homeowners.” 

    It goes on to note that: “More than half of renter households paid over 30% of income toward housing in 2017, and more than a quarter were severely cost-burdened, paying more than half of household income toward housing costs.” 

    A further paper for the National Bureau of Economic Research has found that in San Francisco, landlords affected by rent control reduced rental housing supply by 15%.
  • Research for the National Multi Housing Council in the United States warns that rent control and rent stabilisation laws “lead to a reduction in the available supply of rental housing in a community, particularly through the conversion to ownership of controlled buildings.”
  • A document prepared for the European Commission has warned that rent controls “appear to have a significant destabilizing impact on the aggregate housing market, increasing the volatility of house prices when confronted with different shocks.”

    It goes on to note: “The drawbacks of rent controls in terms of unintended consequences for housing market stability and negative effects on labour mobility would advise against their use for redistribution purpose”.
  • In 2015, a rent control mechanism was introduced across Germany. The research cites evidence showing that between 2015 and 2017 rents in central Berlin increased by almost 10%. Before the introduction of the control, they had been rising by just one to 2% each year. 

    Research by the German Institute for Economic Research has concluded: “Contrary to the expectations of the policymakers, the rental brake has, at best, no impact in the short run. At worst, it even accelerates rent increases both in municipalities subject to the rental brake and in neighbouring areas.”
  • In Italy, a paper for the Centre for the Analysis of Public Policies notes that the private supply of rental homes fell dramatically after a law regulating rent levels was introduced in 1978.

    A further paper has found that in Italy between 1998 and 2008, market rents increased by 57% compared to a growth in household income of 31%.
  • In Sweden, a report by the International Monetary Fund this year concluded: “Tackling Sweden’s dysfunctional housing market requires reforms of rent controls, tax policies, and construction regulation.

    In addition to fully liberalizing rents of newly constructed apartments, there is a need to phase out existing controls, such as by applying market rents when there is a change in tenant.”

Criticism of the Mayor’s proposal for rent controls has also come from Kath Scanlon, an assistant professorial research fellow at the London School of Economics. Addressing the Greater London Assembly’s Budget and Performance Committee, she argued: “Landlords would simply decide they were no longer going to rent their properties.”

The Centre for Cities warned earlier this year that: “Rather than helping make London open to everyone, strict rent control would close off London to new residents and divide the city’s renters into winners and losers.”

David Smith, Policy Director for the Residential Landlords Association, said: “This research shows clearly that rent controls are not a panacea for tenants. Far from making renting cheaper, experience around the world shows it can make it more expensive and more difficult for those looking for a home to rent.

“Rather than resorting to simplistic and populist ideas which have shown themselves to fail, the Mayor should instead work with the vast majority of private landlords doing a good job to see what is needed to stimulate the delivery of more homes to rent. Increasing supply is by far the most effective way of keeping rents down.”

Manchester rent controls will choke off housing supply says RLA

Published On: October 7, 2019 at 9:06 am


Categories: Landlord News

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Plans to introduce rent controls in Manchester are currently being discussed. However, the Residential Landlords Association is warning that this will choke off the supply of homes to rent and make it more difficult for tenants to find a place to live.

A new report has been jointly published by The Royal Society for the encouragement of Arts, Manufactures and Commerce and One Manchester. It argues that the Government should grant powers for the Combined Authority to establish rent pressure zones to control high rents.

The RLA has pointed out that all available evidence shows rent controls lead to a reduction in the supply of homes available for rent. This has restricted choice for tenants, led to lower quality housing and, in some places, an increase in homelessness.

In London, where a similar proposal is being made by the Mayor of London, the Centre for Cities has warned that strict rent controls would divide the city’s renters into “winners and losers.”

The association also bring to our attention that there was a recent article on rent controls in San Francisco in ‘The Times’. It warned that they have made the problem of homelessness worse, “because they discourage people from letting out property and thus reduce supply, pushing house prices up further.”

John Stewart, Policy Manager for the Residential Landlords Association, said: “Rent controls are on the face of it an attractive but simplistic and populist approach to the increased cost of housing. In reality, they make the situation for tenants worse.

“All the evidence from around the world where they have been introduced shows that they reduce supply and drive up the cost of housing.

“Having controls on rent is not much help to a person who cannot find somewhere to live because of the cut in the number of properties available.

“Instead, the Mayor of Greater Manchester needs to work with the private rented sector on how to boost the supply of homes for rent to meet ever growing demand.”

Mayor of London Sets out Blueprint for Rental Housing

Published On: January 25, 2019 at 9:04 am


Categories: Lettings News

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The Mayor of London, Sadiq Khan, has set out his blueprint for rental housing in the capital as part of his 2020 re-election bid, including a proposal for rent controls.

Khan is hoping to gain Government support to give the Greater London Authority (GLA) the power to combat increasing rent prices in the capital.

The Mayor wants to create a blueprint for an overhaul of the law for private rental housing, to allow new restrictions on rent prices to be imposed. For this to happen, he would require approval by central Government.

Khan told the Guardian: “London is in the middle of a desperate housing crisis that has been generations in the making. I am doing everything in my power to tackle it – including building record numbers of new social homes – but I have long been frustrated by my lack of powers to help private renters.”

Labour’s London Assembly Housing Spokesperson, Tom Copley AM, has welcomed the Mayor’s rent control plans.

He says: “Londoners have faced continuous and exorbitant rent increases for far too long, paying out an increasing amount of their income without seeing any improvements to conditions or their rights within the private rented sector.

“However, with this announcement, it is clear that City Hall is listening to the vast majority of Londoners, fed up of being ignored by the Government and keen to see rent controls implemented as a matter of urgency.”

Copley also expressed his satisfaction in Khan’s proposal to scrap Section 21 notices.

He adds: “Roughly, a third of Londoners will rent from a private landlord by the end of this decade. So, I hope that the Government will get behind this and other measures that will bring London’s private rented sector into line with European capitals, such as Paris and Berlin.”

Mayor of London Sets out Blueprint for Rental Housing

However, John Stewart, the Policy Manager for the Residential Landlords Association (RLA), is unimpressed by the Mayor’s blueprint for rental housing: “It is curious that the Mayor is considering introducing rent controls at a time when rents in London are falling in real terms, according to official data.

“The Labour Party in Wales has previously rejected rent controls, arguing that they reduce incentives to invest in new property when we need more and lead to a reduction in the quality of housing. The same would be the case in London.”

He explains: “All evidence around the world shows that, where forms of rent control are in place, decoupling prices from the value of properties hurts both tenants and landlords.

“In the end, what is needed is a relentless focus on boosting the supply of housing.”

The latest data from the Office for National Statistics shows that, in the year to December 2018, rent prices in London increased by an average of 0.2%, which was well below the rate of inflation.

Alexandra Morris, the Managing Director of online letting agent MakeUrMove, agrees with Stewart: “The main problem for tenants is a lack of supply in the housing market, meaning it does not meet demand, particularly when it comes to social housing. Rent controls do not deal with this problem; they merely seek to address a symptom of the problem.

“Most good landlords don’t regularly increase rents, because they want to provide a service their tenants can afford. This means most landlords experience a real terms reduction in their rental income year-on-year.”

She continues: “Rent controls would represent another burden for landlords who are already facing interest rate rises, tax relief changes and increasing regulation. This could become a further barrier to landlords covering their costs or making a small profit.

“As smaller landlords often have one eye on getting out of the market, rent controls could prove to be the final straw. This would further reduce capacity in the private rental sector.”

Morris goes on: “In addition, there will also be some landlords who wouldn’t have increased rents, but who now feel they have permission to put rents up in line with the rent control measures.

“All of these factors will lead to more rapidly increasing average rents, because the fundamental issue – that we aren’t building anywhere near enough homes in the UK – has yet to be adequately addressed.”

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Published On: October 5, 2017 at 9:59 am


Categories: Landlord News

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Mortgage interest tax relief changes, coupled with proposed rent controls, could trigger the next property crash, as landlords rush to sell-off their investments, warns a finance expert.

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Gary Heynes, a partner at tax and business advice firm RSM, believes that landlords could rush to put their properties on the market as the full effects of the reduction in mortgage interest tax relief, alongside Labour’s proposed rent controls, hit their profits.

He says that, as the tax relief changes are increasingly phased in, landlords could find themselves paying more in tax than the net rental income they receive.

If they cannot put rents up to cover the shortfall, Heynes claims that there would be a huge influx of properties put onto the market.

The amount of tax relief that landlords can claim on finance costs is already being cut. From 6th April 2017, tax relief is being restricted, with the full reduction due to be in place by 2020/21.

This tax year, 25% of landlords’ finance costs will receive tax relief at the basic rate of 20%. In the next tax year, this will rise to 50% and, by 2020/21, all finance costs will only get tax relief at the basic rate.

Heynes explains that someone with a £600,000 property paying an interest-only mortgage could find that, in the future, what is now a 4% annual return on investment would be replaced with a cost of £1,700 to run the property.

“Margins are getting tighter for landlords,” he says. “Add to this a possible increase in interest rates, and the issue is exacerbated.”

He expects many landlords to simply put rents up for their tenants in order to cover the shortfall.

“However, if a Labour government is elected, rent controls are almost certain to follow, so increasing rents might not be possible,” he explains. “Higher interest rates, coupled with rent controls, would not be a great environment for personal landlords and could instigate the great sell-off, as landlords look to reinvest elsewhere.”

Heynes adds: “This response could cause the next property crash, as the property market becomes over-supplied with assets to sell, pulling house prices down, impacting equity levels and mortgage agreements.”

Do you believe that Heynes’ predictions could become a reality?

Scottish labour hopeful wants stricter rental controls

Published On: September 18, 2017 at 11:50 am


Categories: Property News

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The Scottish Labour candidate, backed by supporters of Jeremy Corbyn, has called for more stringent rental controls to be introduced in Scotland, in order for housing to be made more affordable in the country.

Richard Leonard, who launched his campaign for the Scottish Labour leadership on Saturday, believes that a rental cap would prevent rogue landlords from ripping off their tenants.


Mr Leonard observed that he would like to see: ‘Legislation to enact stringent rent controls and measures to encourage landlords to improve properties.’

Writing for iNews, Mr Leonard said that he wants to create a ‘Mary Barbour Law,’ named after the celebrated activist who led protests against rental rises in Glasgow during WW1.

Under his plans, a national regulator would be introduced in order to assess the fairness of rental hikes from landlords against an index, informed by a range of factors, such as inflation and benefit levels.

Any landlords wishing to introduce above-index rental rises would then have to justify these to the regulator, by demonstrating how the property has been improved.

Scottish labour hopeful wants stricter rental controls

Scottish labour hopeful wants stricter rental controls


In the piece, Mr Leonard said: ‘I want to see legislation to enact stringent rent controls and measures to encourage landlords to improve properties: a ‘Mary Barbour’ law.’

‘There will of course be howls of outrage from the rentier interest. But if we are to be a movement for real change, we must be prepared to face down the complaints of the few in the interests of the many.’

‘We as a party can live up to the example set by ‘Mrs Barbour’s Army’ and show at least the level of determination and ambition of the women of the Glasgow slums a century ago.’[1]