A common refrain from Conservatives and landlord groups is that when we last had rent controls during the mid-twentieth century, the private sector dwindled to house a mere tenth of the population. What they forget to mention is that during that period, social housing expanded, along with the Tories’ beloved home ownership. People had a choice over tenure that they don’t have now. And they don’t mention the fact that our housing crisis started after rent controls were abolished in the late 1980s.
So the empirical argument falls flat on its face straight away.
The standard economic argument against rent control is that an artificially lower price reduces the supply of homes, and at a time when we need to build more homes, this sort of intervention will undermine investment.
Consider first the homes that are currently rented out. There may be some landlords who get scared off by rent regulation, but if they really want to raise rent by more than inflation every year, they are probably bad at their job and shouldn’t be letting out property in the first place. The homes themselves will go back on the market – ideally with protections for any sitting tenants; supply remains the same.
With the homes that need to be built, a similar issue applies. Any solution to the housing crisis involves homes becoming cheaper, so investors in new homes must be prepared to accept that prices aren’t going to rise. If any investor gets scared off by rent regulation, they’re not the kind of investor we need.
Does the right kind of investor exist? Well, for a start the state can do a lot to build social housing and help bring people on low incomes into better quality homes that don’t require a huge subsidy to private landlords. It just needs an acceptance that investing in housing is a pretty good use of public money when housing shortages are holding back the rest of the economy.
There is also interest from institutional investors with pension pots and other money that needs to be put to work for the long term. A new campaign, Better Renting for Britain, launched today to promote Build to Rent as a way to house the growing numbers of private renters while expanding the supply of homes.
The coalition of housing associations and private developers are hoping to prove that the right kind of investor does indeed exist by highlighting the compatibility of longer term tenancies and inflation-linked rents with their free market approach – and the irrelevance of speculation to their business models. This has helpfully given the idea that regulation kills off investment a gentle kicking – and will presumably bolster Labour’s case.
We are a bit worried, however, that Build to Rent investors are feasting their eyes on swathes of publicly owned land to build their shiny new flats on. Despite all their insistence on market economics, they also want to be subsidised by diverting public land from social housing. Build to Rent models don’t pretend to deal with genuine affordability; these new private rented homes will be let at market rents and therefore presumably unaffordable for people on low incomes.
This approach will need a rethink – councils should not be dishing out taxpayer assets to profit-making organisations at the expense of the needier in society. The priority for public land should be the millions waiting for social housing – not the profits of investors asking for handouts.