IRRV Alert - week ending 14th April 2017
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Private rented housing: the rent control debate
House of Commons Library
Private rented housing: the rent control debate
This House of Commons briefing paper provides an overview of the debate around rent control/regulation and includes some information on a small selection of international rent regimes.
Jump to full report >>The UK's second largest tenure
The private rented sector overtook social housing as the UK’s second largest tenure in 2014. The English Housing Survey 2015-16 notes that the sector accounts for 4.5 million (20%) of households. The proportion of households with children living in the sector has increased. In addition, the survey found that “private renters spend a significantly greater proportion of their income on their housing costs than social renters or those buying with a mortgage.”
After 1989, private sector rents in most of the UK were deregulated on new tenancies, this has remained the case but devolution of housing policy is now leading to different approaches in Scotland and Northern Ireland.
Deregulation - Housing Benefit will 'take the strain'
Despite claims that Housing Benefit would “take the strain” of increased rent levels following deregulation, in 2010 the Coalition Government identified a need to address “ballooning” expenditure on Housing Benefit. In 2013 the Department for Work and Pensions estimated that £2.9 billion (33%) of private sector Housing Benefit expenditure in 2010/11 could be attributed to real terms rent growth over the previous ten years. There has also been an increased focus on the affordability of private rented housing, particularly in high housing demand areas such as London and the south east.
Calls for predictable rent increases
While the Government has sought to reduce Housing Benefit expenditure by introducing a number of restrictions on eligibility, some commentators have called for a degree of rent regulation to control rent increases during the term of a tenancy. The Coalition Government published a model tenancy agreement which landlords can use to offer longer tenancies with more predictable rent increases. Shelter is arguing for a “stable rental contract” to offer tenants predictable rent increases. A distinction can be drawn between rent controls, which impose nominal rent caps, and systems that permit rents to adjust to near-market levels but which allow for a degree of regulation.
Not surprisingly, there is substantial opposition amongst landlords, both individuals and institutional investors and their representative bodies, to interventions which would restrict rents both at the start of, and during the term of a tenancy. It is argued that market intervention would result in landlords withdrawing investment, both in terms of new supply and upkeep of the existing stock.
International comparisons
Comparisons are frequently drawn with different rent regulation regimes operated elsewhere in Europe. When seeking to learn lessons from alternative regimes it is important to bear in mind that the private rented sector in the UK is not directly comparable to that in, for example, France, Germany and Switzerland, where a much greater proportion of the population sees private renting as the ‘normal’ choice of tenure.
PDF, 1.02 MB)