Labour hopefuls warned over dangers of rent control

The National Landlords Association has issued a briefing note which it says is a warning to Labour’s leadership and deputy leadership hopefuls not to introduce rent controls or similar policies.

The NLA says such measures - although common in many countries, cannot be easily replicated in the UK’s private rented sector, according to findings from a new interim report by the London School of Economics and Political Science.

The interim report, commissioned by the NLA, looks at evidence from the UK as well as from other countries where stronger regulatory policies are already in place, including Germany, Ireland, San Francisco, New York and the Netherlands. 

The report suggests that:

In Ireland – which apparently provided the model for the Labour Party’s proposals – controls introduced in the last few years have had very limited effect. The country is experiencing a housing crisis, with rapidly rising rents and a near-standstill in new housing production.

In Germany – often cited as the best example of a country with a stable PRS – the system of indefinite security and in-tenancy rent stabilisation has in the past been cushioned by low house prices and demand. Moreover, initial rents can be well above current market levels in high-demand areas.

In San Francisco and New York – the main beneficiaries are older middle class households and the young hardly get a look in.

The NLA says the report should be required reading for Labour politicians who - it claims - “seem to be ignoring both academic evidence and the overwhelming rejection of similar policies by the electorate last month.”

The association goes on to say: “Private rented sectors in many countries, regulated or not, are facing major problems in high demand areas. Market fundamentals cannot just be regulated away”.

Kath Scanlon of the LSE says her team of researchers “found clear evidence that inflexible controls reduce supply, but the strongest message was that what may work in one country cannot simply be transferred to a different market and institutional environment”.

During the election there were also calls to abolish business tax relief for buy-to-let, alongside the introduction of rent controls. However, the LSE report found that where rent controls are already in place the negative impacts are usually offset by a more favourable tax treatment of landlords – an area which the UK falls behind in comparison with other countries.

LSE’s final report, due to be published later this year, will examine London specifically, to see how renters in the capital would be affected by such proposals.