POLITICS


have security but the landlord can put the rent up, then he can price you out of the accommodation. Similarly, if your rent is controlled but the landlord can give you notice to leave, provided he has a more profitable use for the accommodation his economically rational strategy will be to clear out his tenants. In the 1970s and 80s the tenure sector


that was growing was owner-occupation. If an elderly sitting tenant died then the landlord would sell to an owner-occupier. They would not contemplate letting to another tenant, because to do so would mean a controlled rent and another lifetime of not being able to recover possession (in broad terms anyway). This became translated into a rather


cynical game at the auction houses where a property for sale with very elderly single sitting tenant was worth considerably more than a similar property but with a middle- aged couple in occupation. It was known as the “expectation value”. During the 70s and 80s the private rented sector continued to decline until it reached its nadir of 9 per cent of the total housing stock, down from 90 per cent at the turn of the 20th century. So rent control was bad for new


investment in the private rented sector, it made landlords reluctant to invest in their properties and it distorted the labour market because someone with a controlled rent and a tenancy for life was very unlikely to give these things up and move on. Who was rent control good for? Affluent middle aged people who are settled in a locality do well out of rent control, in their case it’s a subsidy which passes directly from the pocket of the landlord to the pocket of the tenant. Rent control is also good for a Government that wants to cap its Housing Benefit bill. So what is a private investor to do? Well,


a Labour government committed to re-introducing rent control is still a way off


THOSE IN FAVOUR


In The Guardian Blog in November 2011, Councillor James Murray, executive member for housing at the London borough of Islington wrote: “There seems to be an


accepted myth that rent regulation just isn’t right for England, that it is impossible to have a sizeable and successful private rental sector if you have limits on rent rises and longer term contracts for tenants. The myth cautions us


that the decline in private rent over most of the 20th Century coincided with a period of particularly rigid rent regulation. This decline was only arrested in the 1980s and 1990s thanks to free market rents with little stability for tenants, it is said; these conditions are required to support the sector’s current growth. But the myth is


problematic. It fails to analyse closely the wax and wane of the private rented sector in the context of the fortunes of social rented and owner occupation. On the basis of England’s particular history of rent regulation, it effectively rules out the possibility of future interventions altogether.


Like all long-held


myths, it must be challenged. In fact, challenges to the accepted orthodoxy can be found without needing to scratch very deep. Research commissioned by the last government but published after the 2010 election suggests we should not be so ready to dismiss opportunities to change the way the sector works. The study shows that the accepted view, that rent regulation reduces the size of the sector and discourages investment is not borne out by international comparison. Countries such as Germany balance a large and decent private sector with limits on rent increases and long term stability for tenants. The discussion will


require us to be clear what we mean by rent regulation. Historically, the form of regulation that England experienced seems to have made our country wary of looking at other forms of rent regulation which are commonplace overseas.” Since then, the


discussion rumbled on. In March 2012, Jeremy Corbyn, Labour MP for


but if they want to de-risk here are some strategies:


• • •


•


Invest in properties that are easy to sell and have potential for future capital growth – you can sell if you need to


Let to tenants who might buy the property from you – you might have a ready exit


Buy properties at higher rental values – these are the least likely to be capped


Consider fully furnished lettings – properties which are suitable for short term letting only might escape rent control.


Islington North, asked Housing Minister Grant Shapps, “Almost a third of my constituents are private tenants who pay very high rents in fl ats and houses that are expensive to heat and often badly maintained.


Does he not think that it is time that we had much tougher regulation of the private rented sector, including rent regulation, because rents are astonishingly high for people who are unable to save or to move on from the it?” The Minister said, “If


we introduce rent control we know exactly what will happen. Rent controls were introduced after the war and the private rented sector shrunk from 50% of the market to just 8%. When rent controls were removed, it doubled to 16%. Rent controls would restrict the market and make it more expensive for exactly the constituents whom the Honourable Gentleman is trying to protect.”


Finally, the best advice is to make sure


you keep abreast of the news in this area; many in the private rented sector would really prefer not to see a return to rent control, so we all need to watch and listen to what the think tanks are suggesting and what is said – or inferred – in political manifestos.


Join the debate: email your views to the editor: Sheila@propertydrum.com


Do you have any views to share? www.propertydrum.com/articles/rentcontrol0612


PROPERTYdrum JUNE 2012 57


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