The problem of indefinite tenancies and rent controls

by Matthew Wilkinson | no comments | Uncategorised

Sadiq Khan, in his bid for re-election in 2020, is reportedly planning to make introducing new rent controls the heart of his campaign. It’s worth saying at the outset that this isn’t a case of a straight forward proposal that Labour support and that the Conservatives will oppose, interestingly, the Labour Party in Wales has rejected rent controls in the past as they suggest that the measure reduces incentives to invest in new property. Since this is therefore not a partisan issue, it’s worth being more careful about introducing such policy.

The Residential Landlord’s Association have been vocal against rent controls, citing evidence from around the world that when rent controls are introduced and prices are decoupled from property value, there is a negative effect on both tenant and landlord.

In adjacent policy discussions, Labour Shadow housing secretary John Healy has suggested that “German Style” indefinite tenancies should be introduced as a matter of default. Whilst this might sound like a positive for the tenant, in the German system the tenant bears responsibility for the upkeep of the property, insurance, issues with boilers and so on; a substantial departure from the role of the responsible UK Landlord.

For many landlords, it’s a goal to keep longer term reliable tenants; turnover can involve many costs not just in maintenance and repair to the property, but also costs of finding new tenants and potential in lost rental income in the interim.

In both of these cases, whilst the policy might sound like it may have a short-term positive effect for tenants, in the longer-term this is simply going to reduce rental stock, and deter investors from London, resulting in less properties built; hence further upward price pressures. Energy would be better spent on building new homes and getting more people onto the property ladder, whilst encouraging responsible and ethical Landlords who do right by their tenants!