GMLC campaign volunteer Nick Sloan considers whether we need rent controls in privately rented housing in England and Wales.
It is no secret that more people are renting in the UK in recent years. The 2021 census shows that 37.3% of households now rent their accommodation, with 5 million households now living in privately rented accommodation (up by over a million in the last decade).
It is also no secret that private rents have been increasing rapidly over the last few years. The Office of National Statistics found that from September 2021 to September 2022, private rental costs rose by 3.6%. Some estate agents, such as Rightmove and Zoopla, have reported rises of up to 12.3% in the same period. Greater Manchester has been on the sharp end of these rises, with some reports suggesting rents have risen over the last year by over 20%.
It is not uncommon for private tenants to pay half of their after-tax income on rent. Resolution Foundation noted that the rent burden is particularly acute for low-income families, who on average spent more than half of their income on housing costs in 2020-21 – and this is likely to be higher following the last 2 years of rent rises.
It is clear that rising rents are causing serious hardship for private renters. During the cost of living crisis, poorer households are having to turn to food banks, struggling to meet basic needs, and falling into debt on both rent and other bills. So, what steps can be taken to address this hardship?
One possible solution is rent control.
Background on Rent Control
In the 1980s, rent was deregulated, removing the requirement for rent to be ‘fair’ in the private sector. This meant that private landlords were given greater freedom on the amount of rent they could charge. Section 13 of Housing Act 1988 allows for landlords of certain tenancies to serve a one month’s notice in a prescribed form proposing a new rent to take effect. This will take effect without a tenant’s agreement as long as they have been served the notice correctly. The only legal mechanism for tenants to challenge a validly served rent increase is to go to the First-Tier Tribunal before the new rent becomes due, and the Tribunal will decide on what rent a landlord can charge. However, the Tribunal’s remit is only to decide if the rent is a ‘market rent’ the landlord could expect to charge for the property if let again, not whether it is affordable or fair for the tenant. In recent months, the Telegraph found that in more than a quarter of cases, the Tribunal has decided a landlord can raise the rent by even more than they had asked for. In a time of spiralling rents, rent increases of hundreds of pounds a month are getting the green light from the Tribunal, even where the property is in disrepair or historically lower-cost areas.
There have been calls for rent control both from the tenants’ movement and politicians like Sadiq Khan, Mayor of London. Rent control can come in different forms, but it is essentially a way of controlling the rent a landlord can charge and their ability to increase the rent. For example, in New York City, a body determines a maximum base rent and maximum collectible rent for each apartment. In Germany, rents in certain property hotspots cannot exceed the local comparative rent by more than 10%.
The UK government, in October 2022, confirmed that they do not support rent controls. They argued that the use of rent control can reduce investment in new housing stock in the private rented sector, and in the upkeep of existing stock, as well as reducing mobility of tenants in rent-controlled accommodation. Speaking in the House of Commons in September 2022, Andrew Stephenson, then Under-Secretary of State for Housing and Rough Sleeping, commented that historical evidence suggests that rent control would discourage investment in the private rented sector and would lead to declining property standards. A number of landlord bodies, such as the National Residential Landlords Association, have also spoken out against rent control.
The UK government, despite objecting to rent controls, did express commitment to legislate to ensure more predictable rent increases by:
- Only allowing rent increases once per year.
- Increasing minimum notice landlords must give of a rent increase to two months.
- Ending use of rent review clauses in tenancy agreements.
- Preventing the Tribunal from increasing rent beyond that asked by the landlord.
These proposals are helpful, but minimal, and in some places arguably misguided.
It would certainly help tenants to prevent the Tribunal proposing a higher rent than landlords have asked for. It would enable more tenants to approach the Tribunal confidently to enforce their rights, and prevent the Tribunal from participating in setting new, higher market rents – but it doesn’t stop landlords asking for large rent hikes during times when market rents are climbing.
Unilateral rent increases are already restricted to once a year in cases where tenancies are rolling beyond their fixed term, which is the case for many private tenants, and a longer notice period will not prevent rent from going up to unaffordable levels, so both of these changes would be fairly limited in usefulness if passed.
The point about rent review clauses is the most questionable. Rent review clauses are often a good thing for tenants, as they usually cap the amount rent can increase to a certain percentage (for example, using inflation as the measure), whereas tenants without rent review clauses in their agreements can see increases of any amount. As rent review clauses can serve as protection for tenants from rent rises, presenting them as one of the main problems does not help. That being said, it would be useful to prevent automatic rent increases and introduce a cap on the percentage rent can be increased by generally.
Most of all, while no-fault eviction still exists, private tenants are always under threat of eviction if they do not agree to an unfair rent increase.
Rent control in Scotland
In October 2022, the Scottish government introduced a temporary cap on rent increases. This was initially set at 0% for 6 months. In April 2023, it was increased to 3%. This provision was due to expire on 30 September 2023; however, the Scottish Government have recently extended the provisions until 31 March 2024.
The Scottish government noted that the aims of the act included protecting tenants by stabilising their housing costs, seeking to avoid tenants from being evicted by landlords wanting to raise rents, and to reduce the impact of the cost-of-living crisis.
Before deciding whether to extend the provisions until March 2024, the Scottish government engaged in a consultation with relevant ‘stakeholders’. Some of the stakeholders reported the provisions provided reassurance and protection to tenants. Others expressed concern that landlords would be leaving the private renting sector as the provisions meant their business was no longer financially viable. However, the Scottish Government noted “there is no strong empirical evidence at present to substantiate the anecdotal claims from some consultation respondents that landlords are leaving the sector”.
Should England and Wales adopt a similar model?
Based on the consultation conducted by the Scottish government, it appears that rent control has benefitted private renters. There is also no substantial evidence of disinvestment in the sector from landlords. Therefore, some of the UK government’s arguments against rent control appear unfounded.
However, Douglas Fraser, writing for the BBC, expressed concern over the rent control provisions in Scotland, and highlighted that it had been claimed that some landlords are forcing tenants to decide between agreeing to a rent rise now or facing a much larger increase, or eviction, when the law is relaxed.
There needs to be proper research into the effects rent controls have on the quality of properties. If landlords are restricted on the amount of rent they can charge, are they more likely to allow the property to fall into disrepair? The English Housing Survey estimated that in 2021, 23% of privately rented homes in England were in a condition that would fail the Decent Homes Standard.
If rent control were introduced, evidence suggests it would need to be brought in alongside robust enforcement mechanisms for disrepair, better protections for renters around no-fault eviction, and policies that increase the stock of social housing if landlords choose to leave the sector.
What is clear is that something needs to be done to protect private renters from uncontrollable rent rises. Proper research and consultation need to be undertaken on rent control. The UK government should not just dismiss it on the basis of unfounded concerns it will have negative effect on landlords, and should follow in the footsteps of the Welsh government in looking into how to bring ‘fairness’ back into the picture where rents are concerned. While policy-makers delay, low-income tenants face poverty, debt, eviction and insecurity.
___
Image: Platt Lane in Rusholme, Manchester. Alex Pepperhill, Flickr, 2012
