The last year has seen a surge in calls for rent controls across the UK as demand continues to outstrip supply and the cost of living crisis continues.

In Wales, the Welsh Government is exploring what ‘fair rents’ may mean and is planning to publish a green paper on this later in the year. In England a number of the city mayors recently called for a rent freeze and a ban on evictions as a response to the cost of living crisis.

In Scotland, these calls have gone further and rent controls are now a reality north of the border. In September, the Scottish Government froze rents during a tenancy until the end of March in most cases. From April, rent increases are allowed but are capped at no more than 3%. 

The introduction of rent controls in Scotland was also linked to a limited ban on evictions during the same period and a permanent removal of mandatory grounds for possession in Scotland, leading many to suggest this would ultimately lead to a significant reduction in supply as landlords choose to sell once the property became vacant. 

Counter-productive

The impact of rent controls across the UK on supply is ultimately the main reason that most economists view rent controls as a counter-productive policy. Costs are reduced for the tenants who are in residence at the time, but younger tenants ultimately lose out as available lets significantly contract and landlords choose to invest elsewhere.  

Given all of this, the NRLA recently asked Yougov to survey landlords on how they would respond to the introduction of rent controls in their area.

To account for the different types of rent control that have been implemented, the survey asked landlords their opinions on each of the three ‘generations’ of rent control, with the results shown on the graph.

The survey showed the introduction of any form of rent control is likely to cause a significant issue as regards future supply. 

Even in the best case scenario, where only in-tenancy rises are capped (third generation rent controls), almost one in five landlords would definitely sell their properties. This would be the equivalent of losing 782,000 households from the PRS. 

Where rents are controlled during and between tenancies, the figure is even starker. A third of landlords would choose to exit in these scenarios, with a further quarter unsure if they could remain in the sector. 

These figures may be understating the ultimate impact of rent controls though. In Scotland, where third generation rent controls were implemented, survey work by the Scottish Association of Landlords (SAL) found that 61% of landlords intended to sell property following their introduction.

This suggests that once landlords are confronted by the realities of rent caps, the desire to sell will increase dramatically, particularly if costs are rising substantially.

Blog Post from NRLA

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