Wednesday 4 February 2015

Rent controls, do we need them to stop rents from spiralling out of control?

Not a day goes by that we don't hear about the London property market, and namely that rents are astronomically high. Higher than other parts of the country of course. But so are earnings; and food; and transport; and everything for that matter. We are frequently hearing from tenant action groups calling for lowered rents and a fairer deal for tenants. But what about landlords? Nobody is campaigning for lower mortgages and better laws to stop tenants from withholding rents and so forth...

The latest comes in the leadup to the elections with Labour touting Rent Controls as the latest gimmick to sway voters. Or renters should I say. I can't imagine that many landlords would embrace the idea of the government telling them how much rent they can earn from their investment. That's like the government interfering with the stock market, limiting the rise and fall of share prices.

One argues that renters are being squeezed out due to rents being unaffordable, and research suggests* that 77% of private tenants are in favour of rent controls. This would offer them a fairer deal. In the short term. If rent controls are introduced it would no doubt restrict the number of BTL investors, thus reducing the number of homes to rent. Less choice. Which is bad for consumers, in this case the would-be tenants. And consumers/tenants love choice. I can tell you a thing about that, it takes quite a few viewings before a tenant makes a decision on where to live! 20 viewings is not uncommon.

But as the Telegraph would suggest there is no problem to fix. There is no evidence that would-be homeowners are being pushed out of the market. With various help-to-buy schemes helping to fund deposits and so forth there is plenty of assistance. Would rent controls aid this further? Arguable.

With the elections upon us in the not all too distant future we are finding ourselves under attack by promises of fairer deals, lower taxes, more job opportunities, better education and so forth. But if we read past the headlines and the bold statements, does it hold water?

* Source: The Telegraph Online

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