In the run-up to the General Election politicians in Westminster have decided to step into an area that evokes different emotions in many of us – property. Those of you who rented property in the 1970s and 1980s may remember the difficulties of tenancy agreements that permitted the tenant the right to stay in the property for life. In particular cases, tenancies could be transferred to their children, rents could not be increased and it was difficult to remove tenants if at all. One of the political parties has suggested rent controls as a viable option. As there are 4.4 million people renting 3.4 million properties in England alone, you could argue that this was a bit of a cynical play for those “generation rent” votes.
Under the current legislation, tenants are already able to challenge rent increases that are unreasonable. They also have the benefit of giving a months’ notice to the landlord when the tenancy is a rolling agreement, i.e. a periodic tenancy. But do rents need capping? Well, in SE22 there are 7,352 people renting 3,218 rental properties. As we mentioned in a previous article in December, inflation since 2008 has been 19% while rents in London have only risen by 15.1% over the same period. Consequently, if rents tracked inflation, tenants would be paying more today than they would without rent controls. In fact, in other parts of the UK rents are lower than they were in 2008.
A possible result of rent controls would see more properties for sale due to reduced confidence in the housing market, which in turn, would reduce property prices along with the amount of available rental stock. Finally, a lack of interest from potential investors (due to the poor yields) would end up generating a shortage of affordable housing to rent.
The Office of National Statistic figures show a substantial increase in renting within the Borough of Southwark Council over the last ten years, (12.49% vs 22.2% of property 2001 to 2011), and an increase in home ownership (31,700 households owning their own property in 2001 vs 35,300 households in 2011). The introduction of such a policy has the potential to harm both Landlords and people who own their homes. It could be a real hot potato.
I believe that the changes to tenant law made in the Housing Act 1988 resulted in benefits to both landlords and tenants.. Yes, the total rent paid by SE22 tenants is an awful lot of money, £62,055,912 but rents are free to move up as well as down, why fix what isn’t broke?