Rent controls do ‘more harm than good’ – IEA

I’ve put it to the IEA that the ‘ I Economic A ‘ impact of housing is immense and affects over 5 million Tenants and over 2 million Landlords.
I think if Landlords were to write to / comment – engage with the IEA, it might bring the topic of Housing more to their attention and the IEA would be a useful ally to have on the Housing crisis.

I was going to comment on the article ( but only paid subscribers to the IEA can post comments ) - that those that advocate rent controls, do so for their own short-term political gain, not in the economic interests of Tenants, who as the survey shows, suffer to their financial detriment in the longer term.

I use the ‘Baking’ analogy, if Govt impose a maximum price on bread, such that it becomes unprofitable , then bakers will stop producing – supplying and concentrate on other products.
That is what’s happening with Housing.

Increasingly landlords are looking to either diversify into Commercial or Holiday lets, or else investing in other financial sectors.
When an average yield for Landlords is in mid single digits, and comparable or greater return can be found elsewhere, rental properties will decrease, exacerbating the already dire shortage ( which is a surprise to some Tenant pundits that shortage increases price ( rents )

GR has just shown themselves well and truly up as complete numpties.

GR claims that the IEA’s findings are "out of touch with the realities faced by renters"

IEA's findings come from years of empirical evidence using data of real life situations across many areas over many years taken in differing times of economic circumstances.

Are they that stupid to not understand that the REALITY is that ANY political decision has a consequence and that moreover in this case the consequence will result in more harm to the people they are apparently trying to help?

Does he really think every renter can afford to buy? He presumes every tenants wants to buy the place they currently reside too and that the LL wants to sell?

Idiot.

Reply to the comment left by Reluctant Landlord at 16/08/2024 - 11:34
I think your referring back to the well known ( but not by GR ) principle of Newton's Third law.
That every action - force, has an equal and opposite reaction.

"A fair and common-sense approach to stop rents rising faster than our wages or inflation..."

With Unions pulling Labour's strings, this will ENSURE wages and inflation increases will follow......

15% salary increase anyone? Chooo Chooo.....

Reply to the comment left by Reluctant Landlord at 16/08/2024 - 11:34
They are turkeys voting for Christmas!

Reply to the comment left by Stella at 16/08/2024 - 11:48
This study has been publicised in the Telegraph:

https://www.telegraph.co.uk/money/property/buy-to-let/rent-controls-damage-housing-market-drive-up-rents/

Although this is actually a well-known phenomenon internationally the Scottish National Party recently did this in Scotland and proved that this is what happens; the consequences of their actions were visited on renters in Scotland. In fairness to our regions, Mark Drakeford (labour) did not do this in Wales and appears to have understood that rent controls would make the housing problem worse.

It's really important that politicians learn the lessons of history. John Prescott said 20 years ago much of what Angela Rayner is saying now:

https://www.theguardian.com/society/2004/nov/24/housingdemand.politics

What then happened to John Prescott is that the water companies told him that there wasn't enough water in the area:

https://www.dailymail.co.uk/news/article-389196/Prescotts-department-failed-consider-water-crisis.html

So when politicians come out and say we're giving you targets and you've got to make 50% of them affordable you've also got to ask the question how do you make this sustainable? And what do 'rent controls' do to affordability and sustainability?

So what are the landlords and IEA answers to rents of over a £1000+ pounds for a room with en suite bathroom.As, the going rate in London. How do you stop that without some kind of rent control. Landlords one room will more than cover the mortgage for the whole house. These are the new so called property developers.
My mortgage for a 2 bedroom is £482.00 with a garden??? In London. Rent can have the biggest profit margins .i know some cases landlords are just about covering their mortgages . But, when you have a house converted into a HMO. Then, 1 bedroom self contained , or seperate bedrooms can charge more than the room , the 2 bedroom more than the 1.

Reply to the comment left by Caley McKernan at 16/08/2024 - 12:49
The Private Rented Sector (PRS) is exactly that. It is private. The benefit of the PRS is that it provides choice and competition. People arguing for rent controls may think that they are doing the right thing, but in reality all that they do is to drive competition out of the market and drive rents up.

What labour should be doing is looking at things like the Rent a Room Scheme (which is a good project) and increasing the amount of tax exempt income that people may earn by renting rooms in their own homes. They also need to look at the restrictions on renting rooms to family members from more than one group that effectively mean you have to license the house as a HMO if you do it. They also need to look at stamp duty which is a disincentive to people who are considering downsizing but are faced with a punitive tax bill for doing it. These are things that encourage choice.

Reply to the comment left by Caley McKernan at 16/08/2024 - 12:49
The price reflects a there not being enough supply or too much demand.

So you could make the area less desirable (which would help no-one) or increase supply, which in itself would be expensive.

If I can't afford a picasso, I buy a local artists art.
If I can't afford the rent, I move to a place I can afford the rent. It's not hard.

In terms of the margin on a HMO, these can be very time consuming, when you take out the costs of upgrading a HMO and the salary you would have been paid to manage it, the return doesn't look so good. Which is why I don't bother with them.

Reply to the comment left by TheBiggerPicture at 16/08/2024 - 13:23
There are other things they can look at. Coincidentally the telegraph has just published something on downsizing:

https://www.telegraph.co.uk/money/property/buying-selling/overcome-downsizers-block-move-perfect-house-property/#:~:text=The%20solution%3A&text=%E2%80%9CFocus%20on%20all%20the%20benefits,afraid%20to%20ask%20for%20help.

This says that downsizing can make sense even allowing for the stamp duty. In fact, this isn't true. When you become elderly you need to factor in access to healthcare and also access to transport links for a time when you find that you are no longer able to drive. Even if you can no longer drive you still need car parking for carers, family or both to continue visiting you.

I recently advised some elderly friends on this who were considering it. What I pointed out to them was that if they factored in the cost of the stamp duty along with what they needed to have to enable their children and grandchildren to continue visiting them in the area that they still wished to live whilst still having access to amenities then the cost of moving was far more expensive than just putting in downstairs bathing facilities.

If you are in one of the most expensive areas which of course is where the highest rents are and also the greatest demand for rental accommodation, then the cost of the downsizing to somewhere where you still have access to everything that you need INCLUDING GOOD HEALTHCARE AND TRANSPORT is prohibitive.

So the labour party could look at stamp duty which is a tax not only on working that makes it harder for people to justify moving for work (the cost is something that you have to meet out of net-earnings), but also a tax on moving in retirement.