Can Rent Controls Work in Bristol?25 Oct 2023
Rent controls have more drawbacks than benefits, and experiences in the UK tell us to stay away from them. If we want to make renting cheaper for tenants, we need measures that attract landlords, not the opposite.
The call for action
Rental prices are going up fast in Bristol and yes, rent controls can prevent this, but the knock-on effects would far outweigh the benefits of the measure. The recent report by the Bristol Living Rent Commission highlights that rent controls won't work unless substantial investments are made in social housing. There is such a tremendous deficit in social housing that it is unlikely to get solved in the short term.
Furthermore, Rent Controls push landlords out of the market and deters new investments, squeezing supply even more and defeating the very purpose of the measure, as the recent developments in Ireland demonstrate.
More strikingly, Scotland has become the region with fastest growth in rents as a direct consequence of rent controls, backfiring on tenants who end up paying more than before!
To explain these unintended consequences, there are some solid reasons why the UK is not suited for rent controls.
If others can do it, why not us?
On a political level, France, Germany and Scandinavia are often mentioned as champions of rent controls, where they have been successful to some extent. This is because government intervention is welcome in these countries -even expected- but in a free market like the UK, intervention is not seen with a good eye by investors. The recent court battle launched in Scotland is enlightening is that regard.
More importantly, the rental market in France and Germany is dominated by large players like big corporations or government agencies that own thousands of properties. They can take the hit of rent controls because they can spread the losses (e.g. interest rate hikes) across their portfolio.
This doesn't apply to the UK, where 85% of landlords own between one and four properties. If they have a mortgage and/or face increasing costs, rent controls will hit them hard, and some will have no other option but to sell and leave the market. Any letting agent in Bristol will confirm this.
When digging a bit in history, rent controls have failed in UK in the 60ies already. More recently, a study by the NRLA warns that a third of landlords could leave the sector if faced with rent controls. The last thing the market needs right now is another measure that scares landlords away, and the recent U-turn of the Labour party against rent controls seems to be a step in the right direction.
So if rent controls are not suitable for the UK, what is there to do?
Embrace the market
To prevent rents from going up, we need more properties to rent, that means more landlords investing in the sector. As an online letting agency, Rent Happily offers a solution that works for both parties.By embracing the property license, we are able to increase the revenues for landlords whilst reducing the rent per tenant, as shown in our recent article.
This is a winner for landlords and tenants, as well as for the rental market in Bristol, as it also increases supply, thus lowering pressure on rents.