Should The UK Introduce Rent Controls?

When you ask people about their main household expenditure, almost everyone except for the mortgage-free will mention housing.  Whether you rent or have a mortgage, the cost of putting a roof over your head in the UK has shot up over the last decade.  But one seemingly radical idea keeps raising its head: rent controls.  Even in the world’s capital of free market capitalism, New York, rent controls are in place to keep homes affordable – so shouldn’t the UK be adopting them, too?

Average monthly rent on one bed flats in London have shot into the four figures.  This has forced many families to live in Victorian-era conditions of an entire family in a room.  While the government is trying to make buying easier through Help to Buy schemes, the high prices of property mean that many are still unable to get on the housing ladder.

The numbers renting has shot up in the last few years to nine million as house prices surged and those with spare cash invested in property rather than savings accounts.  The population is booming while too few homes are being built, forcing up demand and leading ever more people to live in overcrowded conditions.  The whole country has been affected, but London and parts of the South East have felt the hit particularly hard.  Many areas that only a decade ago would have been considered dangerous now have prices so high that a full time minimum wage job wouldn’t even cover the rent on a basic one bed apartment.

DSD Minister Kicks Off £18m Social Housing Scheme in Newcastle by DUP Photos, on Flickr.  This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Rent Controls

One solution that is increasingly getting an airing in newspaper opinion columns is rent controls.  These would place a maximum rent on each type of apartment in an area, meaning that it would be illegal for landlords to charge more than this maximum.  The limit would be determined based on average wages in the area, for instance at a third of average take home pay for a two bed house or flat.

This solution isn’t popular with everyone though.  And it’s not just private landlords that are opposed to the idea.  We had rent controls before and the result wasn’t always as anticipated.  Back in the 1960s landlords started selling their properties as they weren’t making enough, and no one was buying new property to rent to tenants.  Those who couldn’t afford to buy and weren’t eligible for council housing had trouble finding places to live, or were forced to use alternative services to pay.  Some argue this led to a decline in the building of new homes.

But it doesn’t necessarily have to be like that again.  And even with landlords buying up properties there’s hardly been a building boom supplying their demand.  Profits made by landlords can be gigantic, with rent paying off their investment in as little as ten years.  Even with rent controls in place it’s likely that real estate investors can make decent returns.

In other countries large companies own and maintain apartment building and build new ones despite the rent they charge being controlled – this could be encouraged here.  Indeed there are signs that this form of renting is starting to emerge, with the Athletes Village at the Olympics being turned into this form of project.  The government is getting behind these ‘build-to-rent’ projects offering £1 billion to fund these.  But unless rent controls are introduced this will have little impact on rents we’re having to pay to put a roof over our head.

With house prices expected to soar by 42% and rents by 46% by 2020 if nothing is done, more and more people are thinking that a combination of rent controls and government backing for new built-to-rent schemes is the only way to maintain living standards.