Rent controls? Not on the radar

The UK’s property market can be hard to keep up with. As well as a new minister for housing, communities and local government (step forward Michael Gove), the industry is awaiting the Government’s publication of a Rental Sector White Paper. There is a gentle murmur that rent controls could be on the cards but is it time to panic?

It’s a firm no. The letting industry’s gut reaction is that rent controls are not part of the Government’s immediate plan, especially as the post pandemic recovery is still underway and the leading letting agents’ professional  body – ARLA Propertymark – is not supportive of such an introduction.

History shows us that rent controls have rarely had the desired effect those in charge want, so despite a few rumbles in the press about a possible introduction, landlords should read with passing interest but it’s definitely not time to worry.

A brief history of rent control

The idea that a limit is put on how much rent can be charged – or by how much rents can rise – is not a new one, nor is it a concept consigned to ancient history. Modern-day rent controls were introduced during World War I, when approximately 90% of UK households rented privately. 

As rent caps existed to prevent profiteering during troubled times, it was no surprise that rents were also limited during World War II. Local rent caps, rent tribunals and revised rent Acts prevailed in some form right up until 1989, when the Housing Act 1988 deregulated rents on new private sector lettings and legal limits on rents were lifted.

Will Scotland set the precedent?

Rent control discussions are already happening in Scotland, where a new power sharing agreement between the Scottish National Party and the Scottish Greens has allowed rent caps to make it onto the agenda. The Green Party manifesto outwardly supports rent regulation, favouring ‘a points-based system’ of rent controls, although it remains to be seen if this notion wins cross-party backing. The mood is definitely that controls won’t make the final cut. 

Tenants in Scotland don’t, however, have to wait for a coalition Government to enshrine new ideas to curtail soaring rents. Local Scottish authorities have recently been given the power to introduce ‘Rent Pressure Zones’ – a way of capping rent increases where rents are rising to unaffordable levels. This initiative has staved off widespread rent controls but it remains to be seen whether it’s an effective or sustainable housing model.

Has London already provided the blueprint?

London’s Mayor, Sadiq Khan, has been extremely vocal in his support of rent controls but he actually has zero power to introduce them and there’s actually no need for them.

The capital already has an active way of controlling rents in the shape of the ‘London Living Rent’ – a below-market rent held at one-third of median local household incomes in a localised area. It’s an initiative that doesn’t affect many private landlords, however, as London Living Rent properties are generally only available at dedicated Build to Rent schemes. 

How would other rent caps work?

As nationwide rent caps are theoretical at this stage, how they would be implemented is merely speculation, serving as a discussion topic and nothing more. The Scottish Green Party’s points-based system would work on the basis that housing costs should not equate to more that 25% of a household’s income, while others – including the Labour Party – suggest that rent rises could be limited by linking them to the RPI (Retail Price Index) – which is a measure of inflation. Previous rent caps were linked to the age, condition and location of a property. 

If the mechanics of the lettings sector are something you’d like to know more about – in your position as a tenant or a landlord – get in touch today.