One hot topic much debated by the major political parties has been whether to impose rent controls, but it seems this policy is now firmly off the table under Labour.
In Scotland, rent controls were brought in as a temporary measure, but are set to become law once the new Housing (Scotland) Bill is finalised, as a way of protecting tenants from skyrocketing rental costs. It is also an idea touted by numerous politicians in England, with London mayor Sadiq Khan being a particularly vocal proponent for the measure in the capital.
Earlier this year, it was thrust into the spotlight once more – ahead of the general election – when then Shadow Chancellor Rachel Reeves, who is now the Chancellor of the Exchequer, suggested that rent caps could be brought in on a case-by-case basis in local areas.
The suggestion was criticised, as it was compared to the measures brought forward in Scotland, which while keeping rents low many also argued have deterred landlords and property investors from the market, thereby reducing housing supply in the rental sector and creating more problems for tenants.
What’s the latest on rent controls?
Under the new Labour government, housing minister Matthew Pennycook has now confirmed that the party does not plan to bring in rent controls in England, in response to a parliamentary question posed by Conservative MP Kemi Badenoch.
Replying to Ms Badenoch’s question, Pennycook said: “The government does not support the introduction of rent controls.
“We have made clear that we intend to use the Renters’ Rights Bill to provide tenants with greater protections against unreasonable within-tenancy rent increases.”
The Renters’ Rights Bill, formerly known as the Rental Reform Bill under the Conservatives, is one of Labour’s major ambitions to pass through to law as soon as possible, with a significant focus from the party on the housing sector in general as well as reform in the private rented sector.
While rent controls are not on the agenda within this Bill, it does state on the topic of rent increases: “The bill would limit rent increases to once per year, and landlords would be required to give tenants two months’ notice before changing rent.”
Learning from history
The UK’s rental sector seeing some major price hikes over the past few years as a result of a combination of factors, from huge levels of tenant demand outpacing supply, as well as rising costs for landlords, including mortgage expenditure, leading to them passing the extra costs onto tenants.
On the surface, it might seem that the government imposing rent controls of some form would be beneficial, in that it would improve the financial positions of tenants, some of which may then have more chance of saving money to afford a deposit to buy a house.
However, opponents to the idea point out that, historically, rent controls or rent freezes have not had a long-term positive impact on the market, and are therefore not the answer to the problem of rising rents.
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), points out some of the unintended consequences of rent caps, adding that the new government “would be wise to learn the lessons of history and promise not to introduce rent controls in any form”.
Among other examples, she uses the relatively recent rent control policy in Scotland, saying: “In Scotland, the Green Party/SNP coalition introduced rent freezes and no-eviction policies in 2022 in an attempt to address the cost-of-living crisis.
“Rents were frozen until March 2023, at which point landlords could increase them by a maximum of 3%, or 6% if they appealed – and many did. In the past, they may have prioritised keeping good tenants happy in the knowledge that both parties had the ability to renegotiate terms if their financial positions changed.
“With the imposition of controls, landlords hiked rents whenever they could, fearful of future draconian regulation. The controls were abolished in March 2024. ONS figures show that during the year to March 2024, average monthly rents in Scotland went up by 10.5% to £947pcm – higher than the 9.1% rise in England and 9% rise in Wales.”
