Ray Boulger: Rent controls would cause a drop in supply

Michael Lloyd

July 24, 2019

Although Sadiq Khan’s proposed rent controls would give tenants a benefit in the short-term, it would ultimately cause a drop in supply, Ray Boulger, senior mortgage technical manager at John Charcol has argued.

Last week the Mayor of London called for the government to give him new powers to control rents in London.

Boulger (pictured) said: “If landlords fear rent controls may prevent rental income from reflecting the value of the capital asset this is just another factor which will reduce the number of rental properties they choose to buy, and increase the number disposed of.

“History tells us that any short-term benefit to tenants from rent control will end in tears, as the supply of property available to rent will reduce, reducing choice for tenants and putting more pressure on local authorities to find accommodation for homeless people.

“If Khan had achieved his new build targets there would be a little less pressure on rents, but some politicians never learn that instead of controlling prices a better solution is to increase supply, to bring supply and demand more closely into line.”

He praised the current Conservative government for introducing several improvement to tenancy contracts, such as banning letting agent fees to tenants and the introduction of a Rogue Landlord Database, and other changes in the pipeline, such as banning no fault evictions.

Boulger added: “The impact of recent tax changes, particularly restricting how much of many landlords’ largest expense, mortgage interest, can be offset against taxable profits, won’t be fully understood for a few more years but it is already clear it is reducing landlords’ appetite to increase the availability of rental property.”

Martin Stewart, director of The Money Group, said better rights for tenants is needed even if this doesn’t mean rent controls.

He said: “It is clear that we are in the midst of a housing crisis, particularly in London. It will require some creative thinking to get us out of this mess.

“I am not too sure whether the return to rent controls is the answer but leaving things as they are is also not the answer so something in between is probably where the answer lies. What is clear though is the need for better standards and rights for tenants.

“Unfortunately, buy-to-let was allowed to run ahead of itself and now we are seeing the inevitable pull back via taxation and regulatory changes.

“So, anything that moves the market toward larger, better regulated and controlled landlords and away from the amateur landlords should help improve conditions for private renters. If that becomes a reality it may be that we don’t need to discuss the government influencing a free market.”

Furthermore, Dilpreet Bhagrath, mortgage expert at online mortgage broker, Trussle, argued something needs to change because with rapidly increasing rents and rising living costs in London, home ownership can feel so out of reach for so many.

She added: “Steep rental costs are pricing Londoners out of neighbourhoods they grew up in. And some renters are putting their lives on hold and are delayed or prevented from getting onto the property ladder.

“Something needs to change to make home ownership more accessible to everyone. We’d welcome innovation to address the issues that currently exist amid our current housing crisis.

“This should also ensure that all groups are equally considered and served in the housing market. It’s crucial that our new Prime Minister takes into account the state of the housing market when drawing up new policies.”

Simon Glastonbury, director of mortgages at AK Partnership, said that rent control is not the answer and would cause a spike in landlords trying to sell properties. He said what is needed is better regulation and protection for tenants.

Glastonbury said: “Rent control may appear to some as a good thing, however where are the buyers going to come from?

“The fear for many within the industry is that more of these tenanted properties will be sold by the ‘accidental landlords’ which have been created over the last 20 years to overseas buyers who simply leave the property empty or use them on an occasional basis, again not helping the people who need them.

“The answer is to build more property, continue to relax planning regulations and make living outside of central London more affordable and accessible.

“Tenants need protection and regulation is going in the right direction, but we need to solve the issue of demand.”

Sign up to our daily email