Recent rent control legislation in Scotland has brought strong condemnation from some and admiration from others. Despite clear opposition from Labour leader Sir Keir Starmer, London Mayor Sadiq Khan continues to argue for the path laid out by the Scottish Government in September of last year, claiming that in Scotland “The sky has not fallen in. There are still people renting out their properties. What we are seeing is people’s rents not going up during their tenancy.” In a similar vein to Mayor Khan, the Leeds Green Party also wants an immediate freeze to alleviate fast-rising rents.
Proposals like these are attempting to deal with real, serious issues present in the chronically under-supplied and under-developed British housing market. Rent controls, however, which can range from a freeze on rent prices to a cap on yearly increases, consistently seem like the worst solution. In the short-run, affordability and security for tenants is attainable; however, the following response by landlords and housing associations, which is typically to convert previously rented housing into properties exempt from rent control, seriously constricts the supply of rental housing in the market. Low supply is further exacerbated by an over-consumption of rent-controlled housing, as tenants are extremely unlikely to move; couple this with the fact that these kinds of policies usually exempt new development from rent control (so as not to discourage new homes being built) and any new, non-controlled properties left to move into will have huge surges in demand and equally surging rents.
A 2019 study of rent control in San Francisco by Diamond et al. found that subsequent property conversions led to a decrease of rent-controlled housing supply by 15%, as well as an 8% drop in all rental properties. Data from ImmoScout24 (a German online real-estate platform) of the housing market after Berlin’s 2015 rent control legislation shows that while rents in rent-controlled homes fell by 5%, the total supply of rental apartments in Berlin fell by 41.5%; demand soared by 172% and the waiting time to find a long-term home grew massively.
In Scotland, exempting new properties from rent control didn’t quell investors’ economic anxiety. A recent report by the Scottish Property Foundation (SPF) suggests that £700 million worth of investment in Build-to-Rent schemes was pulled or paused following the freeze; the stated reason was that investors had serious distrust in the economic stability of the residential investment market, chalked up to the seemingly arbitrary nature of the freeze combined with the Scottish Government’s lack of communication with developers. David Bookbinder, director at the Glasgow and West of Scotland Forum of Housing Associations (GWSF) expressed concern that with rising maintenance costs but frozen rent revenues, housing associations “simply won’t have the cash” to install new renewable heating systems, which should present a serious dilemma for Green Party rent control advocates.
I reached out to Ed Carlisle, Green Party councillor for Hunslet and Riverside Ward, for his opinion on rent control, and what he thought about the possible consequences. He suggests
“…an immediate freeze, followed by discussions to agree and implement a fair way of managing rent increases going forward.”
He also notes,
“…it’s a complex field, and landlords […] are facing rising costs too. But the bottom line is that the landlord sector is broadly making very solid profits from their industry, whilst people across society are facing punishingly fast-rising rents.”
When asked about the possible consequences of rent control – restricted supply and growing rents – Carlisle stated,
“There would […] be a challenging transition period, as the sector responded to changes and adapted. But the reality is: rental controls have been demonstrated to work, historically, and across the world to this day. Post WW2, rent controls in the UK successfully suppressed rental spikes at a time (not unlike now) where there was a real shortage of properties.”
Councillor Carlisle is of course correct that serious policy is necessary to tackle rising rents. However, ignoring the mounting, modern, and contextually-relevant evidence from the UK, the USA and Germany that rental controls shrink the housing supply and inadvertently raises rents, instead focusing on data from post-WWII Britain, doesn’t do justice to the economic paradigm shift we, as a country, have had since then; namely, rather than believing “private landlordism has failed” as the Labour Party did in 1956, we now (generally) understand that the Private Rented Sector (PRS) should be utilised where and when it works to raise the supply of homes, lower rents, and ease burdens on the government budget.
The decade-long post WWII rent control policy which Councillor Carlisle mentioned saw the PRS shrink to its smallest ever size; however, since its repeal in 1988 by Thatcher’s government there has been enormous growth in the sector. From 1991 to 2001, there was a 29% increase in the size of the PRS; According to a report by Core Cities UK (a self-financed collaborative advocacy group), from 2001 to 2011 the PRS in Leeds grew by 127%, greater than the GB average of 106%. The number of homes that this growth provided for millions of Britons around the UK should not be understated.
I strongly agree and believe in many of Councillor Carlisle’s – and his party’s – policies: I agree that rents are growing too quickly; I agree that more homes need to be available; and I agree that retrofitting new, sustainable, and energy efficient systems in homes is critical to tackling fuel poverty and carbon emissions. It is for these exact reasons, however, that I completely oppose rent control.