Speaking at the Labour Party conference last week, opposition leader Jeremy Corbyn announced his plan to explore the implementation of rent controls on private landlords. Many experts in the real estate industry have been quick to criticise the idea, although some media observers received it more favourably.
Starting case studies
If the plans follow existing models, they would likely involve putting a maximum limit on how much landlords can charge tenants. Corbyn said he would in particular examine similar policies already in place in Ontario, New York and Berlin, where property owners are banned from raising rents by more than 10% of the local average.
As part of a broader plan to take on a “dysfunctional and lopsided” market, Corbyn also spoke of greater government intervention on regeneration programmes. Specifically, he called for developers to guarantee previous tenants a place to live once a scheme is completed.
Despite the announcement containing little detail, industry bodies quickly released statements criticising the move. The Association of Residential Letting Agents (ARLA) warned, “Whenever and wherever rent controls are introduced, the quantity of available housing reduces significantly, and the conditions in privately rented properties deteriorate dramatically." The sentiment was also echoed by homelessness charity Shelter.
Residential Landlords Association (RLA) Policy Director David Smith, meanwhile, claimed the move was attacking landlords for the failure of successive governments to meet accommodation needs. He highlighted the benefits of current private-sector activity, noting that it is “...a key part of providing more housing and has invested in providing homes for the population.”
Finding a balance
Nonetheless, other commentators such as the Guardian have pointed out that rental rates have been rising rapidly in recent years. As a result, some landlords have been taking advantage of tenants – many of whom rely on benefits to cover their costs.
Such responses have led to various conclusions about how rent controls may work in practice, from giving tenants greater confidence in the long-term costs of their tenancy to giving local authorities the power to intervene – a move that would lead to a large regional re-balancing.
Whatever the outcome, landlords will need to monitor the situation to keep their capital streams stable. For more information on how Dukes can help you maintain a robust cash flow, contact us today.