Rents Hit Record Highs - it's time for controls

It’s time for an informed debate on rent controls. The laissez-faire, competitive market approach in the privately rented sector has demonstrably failed - as average private rents in Britain have climbed to record highs, renters are suffering and excessively high rents create a drain on the economy.

Property website Rightmove has said that in May this year, the typical advertised rent outside London reached a record ￡1,316 a calendar month. In London it was ￡2,652 a month – almost three times the ￡894 asked for in north-east England.

Rightmove said the average advertised rent outside London in May was an inflation-busting 7% higher than a year earlier.

This leads those in the property industry with a vested interest to argue for an increase in supply. But it’s economically illiterate to believe that simply adding more privately rented housing will bring rents down.

We need to look seriously at rent controls.

Rent control policies vary widely across European countries, with differing approaches and outcomes. While some countries have implemented strict rent controls, others have opted for more market-based approaches or a combination of both.

The UK: A Market-Led Approach

The UK has historically adopted a market-led approach to rent control. There are no nationwide rent controls in place, and landlords have significant freedom to set rental prices. This approach has led to concerns about rising rents, affordability, and tenant insecurity.

Germany: Rent Control with Nuances

Germany has a complex rent control system. In many areas, rent increases are capped to a certain percentage above the local average rent. This is aimed at protecting tenants from excessive rent hikes. However, there are exemptions, such as for newly constructed properties or properties undergoing significant renovations.

France: A Recent Shift towards Rent Control

France has traditionally had a more liberal rental market. However, recent years have seen the introduction of rent controls in certain areas with high housing demand, such as Paris. These controls limit rent increases to a specific percentage and aim to protect tenants from excessive costs.

The Netherlands: A Mixed System

The Netherlands has a combination of rent controls and market-based rents. Older properties often fall under rent control regulations, while newer properties are subject to market rates. This system aims to balance the needs of both landlords and tenants.

Sweden: A Focus on Tenant Protection

Sweden has strong tenant protection laws, including long notice periods and restrictions on evictions. While there are no strict rent controls, these measures contribute to a more stable rental market and protect tenants from arbitrary rent increases.

Key Differences and Considerations

• Scope of Controls: The extent of rent controls varies significantly. Some countries apply controls to all rental properties, while others limit them to specific areas or property types.
• Control Mechanisms: Rent control methods differ, including rent caps, indexation to inflation, and restrictions on rent increases between tenancies.
• Impact on Housing Supply: There is a debate to be had about the impact of rent controls on housing supply. Some argue that strict controls can discourage investment in new rental properties, while others contend that they can prevent excessive rent increases and protect tenants.
• Tenant Protection: Beyond rent controls, tenant protection laws, such as security of tenure and eviction procedures, play a crucial role in the overall rental market.

So what rent controls would work in Britain? Are there different housing markets across the country? If so, should rent controls be devolved in Scotland, Wales and Northern Ireland, and to Mayors in England? There are many questions.

Whatever route is taken, urgent action is needed to rebalance a ruinously unbalanced market.