Are rent controls likely in England?

Rent controls are spreading across the UK, creeping into Scotland and now possibly Wales, but the Labour Party says it is committed to not introducing them into England.  Housing minister Matthew Pennycook recently told MPs that England does not need rent controls, which were recently introduced in Scotland and set to be tried in Wales.  This came in response to a question from shadow secretary of state for housing Kemi Badenoch to Pennycook about whether Labour had plans to introduce them.

Does Matthew Pennycook (Housing Minister) support rent controls?

Pennycook said: "The Government does not support introducing rent control. We have clarified that we intend to use the Renters' Rights Bill to provide tenants with greater protections against unreasonable within-tenancy rent increases."   Rent controls have been disastrous in Scotland, producing a flight of landlords, dwindling rental stock, and some of the UK's highest rental inflation.

Now, Wales is considering a similar initiative and has launched a Green Paper entitled 'A Call for Evidence on Securing a Path towards Adequate Housing Including Fair Rents and Affordability.

With Wales set to introduce rent controls - what is the likely outcome?

Property industry leaders have called for the property industry to fight back. They want the sector to 'act together.'   They also recently noted that agents in Wales believe controlling rents will reduce supply. The report states that urgent attention should instead be given to dealing with inadequate supply and barriers to increased adequate housing.  Several charities, too, have been campaigning for them in England. Private renting is too expensive for many households, but since 1989, when fair rent tenancies were phased out, national governments of all parties have pledged themselves to 'free market rents. Other European countries impose rent controls, their rent levels are lower, and their homes are more commonly appropriate for rent.

What are the arguments against rent controls?

The controversy surrounding the introduction of rent control in London has provoked much unfriendly argument against:

Supply Shortages: Rent controls decrease the rental housing supply. With rent ceilings placed on what landlords may collect, they respond to cap rents by leaving properties out of the rental market or changing uses to increase housing shortages. Historical evidence also shows that rent regulation frequently results in waiting lists and reduced availability of rental units.

Rent Controls create market distortions because they cause inefficiencies in the housing market. When rents are too low, tenants sublet at higher prices, creating a black market of rental agreements. This defeats the seeming welfare that rent caps are supposed to grant to the tenant.

Quality of Housing

Quality of Housing: Controlled rents lower landlords' incentives to maintain or improve quality properties, thus reducing the quality of housing. If the landlord cannot recoup costs through higher rents, they might neglect necessary repairs and upgrades and show an understanding only at the tenant's expense.

Economic Implications: Rent controls have higher-order economic implications, for example, on employment recruitment by firms in companies that experience difficulties in identifying willing residents to reside in regions with expensive costs of living. Rent controls might create an artificial dichotomy between the richer tenants who can afford costly places and the poorer ones who are forced into cheaper places.

Why is Labour not supporting rent controls in England?

Trade unions and residents' organisations are supporting measures to cap rents over the prolonged housing crisis in a new high of rent control debate. A letter from several union leaders appealed to the government to set up rent caps and invest in public housing to relieve families torn apart by exorbitant rents. However, the Labour Party rejected the suggestions for the caps, citing that it wouldn't solve those deeper issues within the housing market.

Critics affirm that although short-term relief is offered to a certain number of tenants, the policy may eventually result in adverse effects. They argue that rent control reduces investment in rental properties and poor-quality houses4. The existing debate indicates increased concern about housing affordability and accessibility in England, and it has shown that finding practical solutions to the crisis will be difficult.