Labour’s rent controls under attack

Labour’s rent controls under attack

Labour’s plans for private rented sector rent controls have been widely condemned by housing and landlord groups.

Landlord Today reported yesterday how a Labour government would introduce legislation to cap rents so they cannot rise by more than the rate of inflation (CPI) during secure three-year tenancies.

The British Property Federation (BPF) warned that rent controls could deter investment in housing. It said that an overly-prescriptive approach to rent increases could deter much-needed investment in the housing sector.

The organisation also highlighted how the policy could lead to uneven rent rises for tenants who live in a property for several years, when the rent returns to market after three years.

Melanie Leech, chief executive of the British Property Federation, said: "Ultimately what will help tenants best is more investment in housing. Pension funds and other institutions have billions to invest in this market – developing places that would provide a new generation of high-quality homes that offer greater choice to renters, including the option to sign longer tenancies.

"This additional investment will be vital to tackle the housing crisis, and we would urge the next government to do all it can to encourage it, rather than chase it away with an overly-proscriptive approach to rent setting.

"In places like London, tenants will find this policy on rents may make their budgeting harder, rather than easier. Their rent will tick along at CPI for a couple of years and then they will face a potential sharp rise in year three when the rent returns to market."

Meanwhile the Residential Landlords Association (RLA) reminded 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 who in February this year told the Welsh Assembly that rent controls, “reduce the incentive for landlords to invest and can then lead to a reduction in quality housing.”

RLA chairman Alan Ward 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.”