Rachel Reeves' Rent Control Plans Stir Alarm in Lettings Market

Shadow Work and Pensions Secretary Rachel Reeves may consider introducing rent controls in England including a full freeze on rents. Letting agents have condemned such proposals as “alarming” for the rental market. Ms Reeves’ plan would be part of the government’s attempts to ease the economic pressure on renters.

The rent controls proposed in recent weeks have shocked property investors, viewing the freeze on rents as radical and unreasonable. But behind the headline lies a political imperative that cannot be ignored. With the economy tough and family budgets under pressure, government has acknowledged the financial hardship faced by renters. A rent freeze looks set to be one of the short-term policies deployed to offer immediate respite.

But there’s little chance of that happening. Agents warn that imposition of rent controls would represent a seismic shift in the lettings market and, without sufficient incentives for landlords, could end up reducing the already strained supply of properties available to rent for future tenants. And according to the National Residential Landlords Association, there is ‘no evidence’ that capping rent levels results in more affordable housing for tenants.

Existing rules are intended to shield tenants from unfair treatment but they may have a chilling effect on investment in rental property. Smaller landlords are already feeling the pinch. Coinciding with the upcoming introduction of the Renters’ Rights Act on 1 May, these proposed changes have been seized on by landlords who argue they will make property investment even less viable.

Government plans for controls on rents have been described as “mind-boggling”, but agents have said such measures could help landlords adjust to future legislation.

Practical Takeaways for Buyers:

1. For buyers and sellers, renters can be a useful barometer; We would advise them to keep an eye on the latest news regarding restrictions in their region of the country; in England particularly, as the measures put in place to try and stem the spread of the virus will inevitably affect the affordability and availability of rental properties.
2. Landlords and property investors should be aware of the potential overall risk to returns on their investment as rental growth may be limited.
3. If you are looking to get onto the rental property market, seek advice on how future legislation could affect your bottom line.
4. Agents should continue to keep their clients advised regarding all developments in the rapidly changing legislative area.

The Final Takeaway:

Affordability solutions, including rent freezes, risk pushing the market toward a severe shortage that can end up harming affordability in the long run. The gnarly housing affordability problems we’re facing can’t be fixed with a quick government Band-Aid.