Rent controls – a series of rules that seek to restrict the amount of rent landlords can charge tenants – have generated plenty of headlines lately, with relentless debates heating up between agents and politicians.
With a radical rental overhaul underway in Scotland and London Mayor Sadiq Khan proposing bigger fines for landlords and more compensation for tenants, the sector is speculating whether rent controls will build momentum across the UK. Below, we set out the current state of play with this most polarising of policies to determine whether they will eventually become a reality.
The evolution of rent controls
Rent controls are not a new phenomenon introduced in the UK during World War One under the Increase of Rent and Mortgage Interest (War Restrictions) Act 1915. During this period, the controls were designed to prevent profiteering during the war, when some 90% of households were privately rented.
Though initially intended as a temporary measure, rent controls extended beyond the Great War until The Rent and Mortgage Interest Restrictions Act 1939 was created for the same reason.
Following this, the Rent Act 1965 introduced a flurry of laws that introduced rent tribunals and various measures like local rent caps, regulated tenancies and ‘fair rents’.
The House of Commons Library notes that: “Rent control has been widely identified as a factor in this decline; it is argued that there is a direct correlation between reduced rental returns and reduced investment in the sector.”
However, it also states that the popularity of alternative investments and the growth of the mortgage sector caused private rent to take second place to the increasing owner-occupied sector.
But then-Prime Minister Margaret Thatcher attempted to liberalise the private rented sector via the Housing Act 1980, which introduced assured shorthold tenancies (ASTs) and the ‘right to buy’ policy.
This inevitably changed the landscape of the housing sector in England and Wales, which later combined with the Housing Act 1988 – shifting the power dynamic between landlords and tenants.
Calls for rent controls throughout the UK
In the present day, though, the UK’s four nations each have their own rules on rent control, with the policies coming in different forms. Regulations might include:
- Preventing landlords from increasing rent during a tenancy.
- Capping annual rental increases so that they do not increase beyond a given figure.
- Creating a ‘rent ceiling’ which specifies the maximum amount certain properties can be let for.
Now, the measures are in heavy focus once again, with major politicians in favour of rent controls.
This has been underpinned by what some agents describe as ‘anti-BTL’ measures, such as the phasing out of tax incentives, introducing a stamp duty surcharge, and more.
In Scotland, the government’s ‘A New Deal for Tenants‘ plan seeks to introduce rent controls, including amending the possessions procedure, elevating property and energy efficiency standards, and implementing a national system of rent controls.
Meanwhile, proposals have been put in motion by the Welsh nationalist party Plaid Cymru to get the Welsh Government to implement rent controls across the country.
Khan has pledged to introduce a new qualification and training for borough council housing enforcement officers to clamp down on landlords and agents in London, the city synonymous with high rents.
He claimed that 18% of privately rented homes in the capital fail the government’s Decent Homes standard and says private renters in London are disproportionately likely to be defined as ‘vulnerable’.
Others are arguing for more robust controls on rent increases, too. The IPPR think tank recommends limiting rent increases to once per year and capping them in line with CPI.
However, agents’ body Propertymark, while it backs some of the proposals, stressed that others will place additional burdens and costs on landlords and will be ‘detrimental’ to the sector.
Still, the vast majority are giving the green light for moving to a more highly-regulated rental market, with the forthcoming Renters’ Reform Bill likely to contain even more extensive measures.
What could this mean for agents?
With rent controls more likely to be imposed at a future date, it stands to reason that agents should consider the implications this could have on landlords’ income. Our most recent Rental Index revealed that in February 2022, the average rent in the UK, excluding London, stood at £902pcm. This rises to £1,069 including the capital – up 8.6% on the same period last year, and 0.5% from January’s figures.
But, naturally, a restriction on rent would lead to significant knock-on effects for agents. Critics argue rent controls would discourage landlords from investing in the sector when it’s needed more than most, leading to further strain on the current supply and demand issues.
Stringent rules would undoubtedly remove, or significantly lessen, any incentive for existing or new landlords. It would also be another hit to those who have faced increasing regulation, stamp duty hikes and tax changes.