Labour’s plans for rent controls will make it more difficult for young people to find decent homes to rent, taking the country back to the dark days of the seventies’ and eighties’.
Rent controls resulted in the size of the private rented sector shrinking from 55% of households in 1939 to just 9% in the late 1980s. Data from the English Housing Survey shows that since rent controls were lifted in 1988, the private rented sector has more than doubled in size to 19% of all housing stock.
The Residential Landlords Association (RLA) is reminding Labour that their last Government warned of the dangers of rent controls.
In a consultation on investment in private rented housing published in February 2010, the Treasury argued that when rent controls were previously in place they “reduced investment in the sector, contributing to…lower maintenance standards in the stock that remained.”
The conclusions of this document echo the concerns of Labour’s Communities Minister in Wales, Lesley Griffiths AM who in February this year (2015) told the Welsh Assembly that rent controls, “reduce the incentive for landlords to invest and can then lead to a reduction in quality housing.”
The respected Organisation for Economic Co-Operation and Development (OECD) also warned earlier this year that “excessive rent regulations result in under-developed rental markets” which, “hinders labour mobility and reallocation, reducing in turn matching between workers and jobs. The consequence is lower productivity and higher unemployment.”
Commenting on the proposals, Alan Ward, chairman of the Residential Landlords Association said:
“Labour’s plans would take use back to the dark days of the seventies and the eighties which caused a shortage of decent homes to rent.
“Whilst they talk the talk on boosting supply, they continue to want to clobber landlords to secure cheap political points rather than pursuing serious economics.
“It speaks volumes that no Labour spokesperson has so far denied that their rent control plans would choke off investment in much needed new homes to rent.”
- The most recent English Housing Survey can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/406740/English_Housing_Survey_Headline_Report_2013-14.pdf . On pages 11 and 12 it notes that, the size of the private rented sector as a proportion of all households increased from 9.1% in 1988 when rent controls were abolished to 19% in 2013-14.
- In February 2010, the then Labour Government published a consultation on Investment in Private Rented Housing available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/81460/consult_investment_ukprivaterentedsector.pdf . This outlined the dangers that rent controls pose. Page 11 said: “A key factor behind the decline in the PRS was the introduction of rent controls during the First World War, and these became more extensive over time. Artificially low rents reduced investment in the sector, contributing to…lower maintenance standards in the stock that remained.”
Page 11 also reads:
“The post 1918 period was characterised by a long-run decline in the private rented sector (PRS), although even as late as 1939 over half of households in the UK were housed in the sector, but by 1991 this figure stood at less than 9 per cent.”
- On the 10th February 2015, Lesley Griffiths AM (Labour), the Welsh Minister for Communities and Tackling Poverty made a statement to the Welsh Assembly introducing the Renting Homes (Wales) Bill. The transcript is at http://www.assembly.wales/en/bus-home/pages/rop.aspx?meetingid=3107&language=en&assembly=4&c=Record%20of%20Proceedings#199863 . As part of this, Plaid Cymru’s Housing Spokesperson, Jocelyn Davies asked Ms Griffiths:
“Minister, I wonder if you’ll tell us if you’ve considered rent control methods in the lead up to this Bill and, if so, why it doesn’t appear to be included.”
The Minister replied:
“Okay. I thank Jocelyn Davies for her questions. In relation to rent controls, I do recognise that rent control can look attractive initially, but I think previous experience shows that rent controls reduce the incentive for landlords to invest and can then lead to a reduction in quality housing. Those properties that are still subject to rent control under the Rent Act 1977 are often of the poorest quality, so I think such a proposal would require very careful consideration. Again, I think that could give possible unintended consequences to the supply of private rented properties.”
- The OECD’s annual Going for Growth, document published earlier this year can be found at http://www.keepeek.com/Digital-Asset-Management/oecd/economics/economic-policy-reforms-2015_growth-2015-en#page49 . Page 48 reads:
“Excessive rent regulations result in under-developed rental markets (e.g Sweden). This hinders labour mobility and reallocation, reducing in turn matching between workers and jobs. The consequence is lower productivity and higher unemployment.”