Rent Controls – A throwback to the end of the first world war!

Earlier this week, Jeremy Corbyn used his leader’s speech at this week’s Labour conference in Brighton, to commit the party to introduce rent controls when it next forms a government.

“Rent controls exist in many cities across the world and I want our cities to have those powers too and tenants to have those protections” he told delegates.

Residential Landlords’ Association policy director David Smith said “Rents are high due to the continued failures by successive governments of all stripes to build enough new homes in the right places. Instead of attacking landlords who are helping to provide homes, it would be better to treat them as part of the solution and to supplement their efforts with a sustained and well thought out building programme overseen by government”

Surprisingly, even Shelter has warned that this could indirectly “end up harming” the very tenants which Corbyn and his colleagues seek to protect. 

Shelter chief executive officer, Polly Neale, says: “Shelter supports controls that lengthen tenancies and protect families from unfair rent rises, but not old fashioned rent-setting which we think could end up harming the very people on low incomes they’re meant to help, if and when landlords sell their properties.”

The National Landlords’ Association has branded it “economically illiterate” and says government intervention through rent controls would be counter-productive to encouraging supply at a time when it is so badly needed.

“Rent control, or the artificial suppression of rents, may also serve as a barrier to further investment in the stock of private rented properties if the rent generated is too low to allow the landlord to operate a proper maintenance regime without making a financial loss” it adds.

Regardless of your personal political views, this was simply an exercise in making populist statements to win votes at a time when the property market has been under significant scrutiny.

What do rent controls look like in other countries?

In Germany landlords in large cities, including Hamburg and Berlin, have since 2015 been subject to a “rent brake” banning them from raising rents to more than 10 per cent above a local average. Dublin introduced an annual limit of a 4 per cent increase on rents in October last year.

History of rent controls

Rent controls have been used before in the UK, with most privately rented homes subject to some form of rent cap until the late 1980s. A “fair rents” regime saw local officials set the maximum amount that could be charged based on the age and location of a property, the quality of any furniture and the assumption that there was no shortage of other, similar homes for rent in the area.

The 1980 and 1988 Housing Acts, introduced under then prime minister Margaret Thatcher changed all that. Rent controls were abolished and tenancies were deregulated — which continued throughout the 1990s — in a move supposed to increase investment in the private rental sector.

Rent control and security of tenure were first introduced on 23 December 1915 with the Increase of Rent and Mortgage Interest (War Restrictions) Act 1915 and were intended to be temporary measures (due to expire six months after the end of the First World War) to deal with excessive increases in rents caused by the wartime housing shortage due to the cessation of building.

There was a gradual process of decontrol between 1923 and 1933, but just when it must have seemed that the end of control was in sight, the threat of war revived fears of the excessive rent increases that led to the initial introduction of control in 1915, the Rent and Mortgage Interest Restrictions Act 1939 was introduced.

From 1957 onwards, there was then a slow process of decontrol until the 1980 and 1988 Housing Acts were introduced paving the way for the market we have today.

Martin & Co Basingstoke Comment

It seems that the political wind, regardless of party, is set to drive some level of control over the property market, and in particular the rental market. Although in principle, there should be a level of control over how much rent can be increased, relative to the market conditions, and therefore protection for tenants, this should be considered very carefully.

One of the main reasons that house prices and rental prices have continued to rise, is simply because the of the dire lack to available property in the market as noted by David Smith above. The housing market needs rental properties and it needs private landlords. Despite some political comment, rent rises are not the result of greedy landlords, but the result of simple supply and demand.

What is needed is a sustainable building strategy from successive governments, regardless of colour, to address the current lack of social, affordable, first time buyer and buy-to-let properties.