10:49 AM, 16th August 2024, About 3 months ago 14
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Rent controls do far more damage than benefit tenants, according to a comprehensive global review.
A new briefing paper from the Institute of Economic Affairs (IEA) has poured cold water on calls for rent controls in Britain, finding overwhelming evidence of negative consequences.
The paper by Dr Konstantin Kholodilin, analysed 196 studies spanning six decades and almost 100 countries.
While rent controls may initially lower rents for existing tenants, the review found they typically lead to higher rents in uncontrolled sectors, and reduced housing supply and quality.
Tenants can also face difficulties finding homes, while landlords may be discouraged from building new properties.
Dr Kholodilin said: “Rent control effectively reduces rents in the controlled sector but does it a high price.
“Tenants occupying the rent-controlled dwellings benefit the most, at least in the short run, while newcomers lose from rent control.
“In the long run, rent control can undermine the rental sector forcing landlords to convert their dwellings and tenants to become homeowners.”
The findings come as politicians, including London Mayor Sadiq Khan and the Green Party, push for rent controls in response to the housing crisis.
Scotland recently ended a rent increase cap, but tenants can still challenge some increases.
Dr Kholodilin warns that rent controls can create ‘excess demand’ for housing, leading to discrimination against marginalised groups and increased black market activity.
The policy can also result in people staying in homes longer than needed, causing a ‘misallocation’ of properties.
The IEA’s editorial director, Dr Kristian Niemietz, said: “Economists are a notoriously divided profession: ask three economists, and you get four opinions. But there are exceptions to this, and the study of rent controls is one of them.
“This is an area where the empirical evidence really overwhelmingly points in the same direction.
“The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce mobility among private tenants, and lead to a misallocation of the existing rental housing stock, is as close to a consensus as economic research can realistically get.”
However, Generation Rent has hit back at the report, claiming that the IEA’s findings are out of touch with the realities faced by renters.
Its chief executive, Ben Twomey, said: “The IEA’s own research is that rent controls do protect renters from unaffordable rent rises where we live – across England this would mean 12 million renters better protected from poverty and homelessness.
“Listed among the IEA’s apparent downsides of rent control is ‘forcing…tenants to become homeowners’… Yes, please!
“That’s what so many of us would want and are unable to do because of soaring rents.”
Mr Twomey also dismisses concerns about declining housing quality under rent controls, pointing to a ‘million’ of private rented homes that already fail to meet basic standards.
He said: “More than one in 10 private renters are living with potentially life-threatening hazards – all in the absence of rent controls.
“The idea that desperately needed rent control protections for renters would be outweighed by the so-called harms above is completely out of touch with the pressures facing tenants right now.”
He adds: “Rent controls will not solve everything, and more affordable homes need to be built where people want to live, but renters on low and middle incomes need breathing space now.
“A fair and common-sense approach to stop rents rising faster than our wages or inflation is not going to drive landlords into poverty and homelessness, but it would protect so many renters from that fate.”
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Chris @ Possession Friend
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Sign Up21:10 PM, 16th August 2024, About 3 months ago
Reply to the comment left by Caley McKernan at 16/08/2024 - 12:49
Yes rents are higher in London, but so to are property prices and running costs, Much Higher.
In fact, area by area, London has amongst the lowest rental yields ( profit ) in the country.
Beaver
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Sign Up15:08 PM, 17th August 2024, About 3 months ago
Reply to the comment left by Chris @ Possession Friend at 16/08/2024 - 21:10
The other problem with rent controls and the prospect of them is that typically small landlords used to be open-minded about holding the rents down slightly to encourage long-term tenancies and decrease the risk of void periods. Void periods are a problem if it's not your main business; if you're a large portfolio landlord you can just take them in your stride.
So as soon as somebody waves the big rent-control-stick the only sensible thing that you can do for a new rental is put the rent up as high as you can now just in case you can't do it later. So if SNP says we're going to hit you with the rent control stick in Edinburgh, or Sadik Khan waves it at you in London, then no sensible letting agency is going to do anything other than advise you to maximise your rent now just in case you can't do it later.
Chris @ Possession Friend
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Sign Up12:31 PM, 18th August 2024, About 3 months ago
Reply to the comment left by Beaver at 17/08/2024 - 15:08
I've just offered to pay a token gratuity amount towards my tenant who's spent an amount of her money on transforming the garden at my rental property.
She told me most sternly, after thanking me for my thought, that on no account would she accept anything, as she's grateful that I haven't increased her rent.
Goes back to what I was saying about Tenants biggest enemy are the so-called campaign groups that claim to act - speak on their behalf.
The only type of tenant that these groups and the renters Coalition support and are of any use to, are the recidivist bad Tenants who make up a small proportion of tenants overall, but are the same " Usual suspects "
Rookie Landlord
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Sign Up17:57 PM, 29th August 2024, About 3 months ago
I want to take an opposing view. I think that rent controls could be workable. Here's how I'd introduce them. First of all any rent cap would be optional. Next tax breaks would be given to landlords that
a) Meet the required property standard
b) Rent out the property at a pre-determined price.
c) Agree to set values for in-tenancy and between tenancy rent rises
I believe that this would eliminate those landlords that over-stretch themselves and would leave landlords that offer good value for money properties, and those that offer superior quality accomodation.