The recent rise in private sector rent levels and the focus on reducing Housing Benefit expenditure has led several commentators to call for the reintroduction of some form of private sector rent control.

 

This note provides historical background to the introduction and impact of rent control, its continued use until January 1989 and its use in other European countries. The Increase of Rent and Mortgage Interest (War Restrictions) Act 1915 introduced rent control whereby rents were restricted to their August 1914 level. The Act was designed to prevent landlords from profiteering during the war years when demand for housing exceeded supply.

 

Though originally intended as a temporary measure rent control continued to be applied to some rental agreements until January 1989. The private rented sector which had made up nine-tenths of the housing stock in 1915 declined to one-tenth by 1991. Rent control has been widely identified as a factor in this decline because of its effect of reducing possible rent returns: thus reducing investment. Several other causes of this decline have been identified including, the increasing availability of alternative forms of investment other than rental property; and factors making it easier for people to own their own property such as rising real-terms incomes, Right to Buy and the increased availability of mortgages. Efforts were made to stimulate the private rented sector by restricting rent control through the 1967 Rent Act, which allowed previously controlled rents to be based instead on gross property values; the 1965 Rent Act, which introduced regulated tenancies; and later the 1988 Housing Act, which deregulated rents on new lettings after 15 January 1989. These acts were intended to encourage investment in the private rented sector by increasing potential rental income. At 2000/01 regulated tenancies made up 6 per cent of the private rented sector in England.

 

Published - http://www.parliament.uk/briefing-papers

 

Author: Wendy Wilson,  Topic: Housing, Private rented housing

 

There is no doubt landlords fuel competition for housing stock and in turn this can increase prices but the fundamental issue is people need somewhere to live, there is an undersupply of general and social housing  and a significant proportion of the work force prefer the mobility renting provides.

 

Should the government decide to empower [or extend the powers] of the Rent Service to regulate rent then they will see a decline in investment in the Private Rented Sector. Investors may take a more supportive stance should the government introduce a more favourable/flexible tax system that rewards [re] investment - Should the adopted strategy be erosion of yields then they will potentially  undermine confidence in the banking and house building sectors.

 

Confidence in providing housing to the Housing Benefit Sector has already been undermined with the sleight of hand introduction  of price fixing [capping] rents payable  

CONCLUSION - The benefits sector is already regulated by the Local Housing Allowance, but if one were to introduce generic rent caps then investors could not achieve sufficient yield to justify such investment [& risk]. In addition rent cover would probably underperform the rental income multiples currently required by mortgage providers so investors could not expand their portfolios and this would see a reduction in demand. Should Buy to Let mortgages be provided as life Mortgages, with Pension Tax Relief  and/or Roll over Tax Relief on capital gains, then rent fixing may work if something is provided in return to warrant the risk.

 

It does pose the question "why has a briefing papers been published on the parliament website?"