Rent controls would not work in UK, research suggests

Rent controls and similar policies which are thought to work well in other countries cannot be easily replicated in the UK’s private rented sector, according to findings from a new interim report.

The interim report by the London School of Economics and Political Science (LSE) and commissioned by the National Landlords Association (NLA) looks at evidence from the UK as well as from other countries where stronger regulatory policies are already in place, including Germany, Ireland, San Francisco, New York and the Netherlands.

It suggests that in Ireland, which apparently provided the model for the Labour Party’s proposals in the run up to last month’s UK general election, controls introduced in the last few years have had very limited effect. The country is experiencing a housing crisis, with rapidly rising rents and a near standstill in new housing production.

In Germany, often cited as the best example of a country with a stable private rental sector, the system of indefinite security and in-tenancy rent stabilisation has in the past been cushioned by low house prices and demand. Moreover, initial rents can be well above current market levels in high-demand areas.

It also says that in San Francisco and New York the main beneficiaries are older middle class households and the young hardly get a look in.

‘The report is required reading for those such as the Labour leadership and London Mayor hopefuls, who seem to be ignoring both academic evidence and the overwhelming rejection of similar policies by the electorate last month,’ said Carolyn Uphill, chairman of the NLA.

‘Private rented sectors in many countries, regulated or not, are facing major problems in high demand areas. Market fundamentals cannot just be regulated away,’ she added

Kath Scanlon of LSE London said the research found clear evidence that inflexible controls reduce supply. ‘But the strongest message was that what may work in one country cannot simply be transferred to a different market and institutional environment,’ she added.

During the election there were also calls to abolish business tax relief for buy to let, alongside the introduction of rent controls. However, the LSE report found that where rent controls are already in place the negative impacts are usually offset by a more favourable tax treatment of landlords, an area which the UK falls behind in comparison with other countries.

‘The taxation of buy to let is a touchy subject for some, even though landlords in the UK receive no special treatment compared to other businesses. This report reinforces why successive governments have chosen to treat landlords as businesses. Doing so encourages best practice and, above all, helps to ease the housing crisis,’ Uphill concluded.

The full details of the report are due to be published later this year and will include more detail on London.

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Source: Property News Spain