The Institute of Economic Affairs (IEA) has published a document outlining ‘The Flaws in Rent Ceilings’, commenting on Labour proposals for rent caps. The RLA has confronted rent controls/caps before and it is reassuring that the IEA hold a similar position.
The IEA released “The Flaws in Rent Ceilings” on Monday 8th September 2014. The document outlines many of the arguments that the RLA have made regarding the proposals…from why rent controls were first dropped in the 1980s to why rent controls would actually harm tenants rather than helping them.
The IEA document state:
“Since rents can alter between tenancies, tenancy rent controls cannot improve affordability for any group other than in the very short term. It is most likely to simply change the timing of rent costs over a tenancy by raising initial rents. Indeed, the existence of these controls may even increase market rents overall as a result of greater regulatory uncertainty and the business risk of increased security of tenure raising the returns that landlords require.”
A press release for the document emphasises the lack of actual benefit that proposals look to implement. Mark Littlewood, Director General at the IEA says:
“…imposing rent controls on the market will do nothing to improve affordability, and will simply result in a number of perverse incentives that will harm those very individuals which such a policy sets out to protect.”