Rent rises could possibly be capped beneath new modification to Labour invoice
- MPs debating on amendments to the Renters’ Rights Bill for the final time today
Landlords could find they are soon subject to rent controls under the latest proposals being pushed through parliament.
More than 30 MPs have signed an amendment to the Government’s Renters’ Rights Bill, which would impose a cap on rent rises within tenancies.
The changes would restrict how much landlords can raise rents on sitting tenants, limiting percentage increases to the lowest of either inflation or average wage growth.
It has so far been signed by 31 MPs, and is being led by Paula Barker MP, who was until last year a Labour shadow housing minister.
Barker said: ‘A measure to limit rent rises would stop landlords from using unaffordable rent hikes as de facto no fault evictions.
‘By preventing landlords from raising the rent for sitting tenants by more than inflation or wage growth, my amendment to the Renters’ Rights Bill would help keep renters in their homes.’
MPs are set to debate and vote on amendments to the Renters’ Rights Bill for the final time
The Renters’ Rights Bill returns to the House of Commons for its Report Stage today with the expectation it will eventually become law later this year.
It will also include the scrapping of Section 21 ‘no fault’ evictions, while the remaining grounds for eviction will require landlords to give tenants longer notice periods.
The bill sets out that if a landlord wants to evict a tenant in order to sell the property or move back in, this cannot happen in the first 12 months of the tenancy. The landlord will also need to give the tenant four months’ notice.
Landlords will only be able to increase rents for existing tenancies once a year, via a statutory Section 13 notice, and will have to give at least two months’ notice.
For new tenancies, landlords will not be allowed to accept offers above the advertised price, in an attempt to prohibit the practice of ‘rental bidding’.
Another amendment to the legislation being backed by MPs is allowing renters to temporarily withhold rent, mediated by a third party, when a landlord fails to make essential repairs.
Who supports the rent cap?
A cap on rent increases has long been championed by renter groups, which say they will prevent landlords from using unjust rent hikes as de-facto no fault evictions.
Without them, they say there is a risk that unfair rent hikes could be used to threaten or evict tenants once section 21 has been scrapped.
Campaigners are hopeful that the amendment will be selected by the Speaker for debate, after the government previously introduced an amendment to limit the amount of rent landlords can demand in advance.
Tom Darling, director at the Renters’ Reform Coalition, said: ‘Recent research by Shelter shows nearly two thirds of working renters struggle to afford the rent.
‘The Renters’ Rights Bill will bring in some much-needed new protections, but as it stands it fails to address the affordability crisis at the heart of renting – a crisis which is making life miserable for millions and pushing families out of communities.
‘We are calling on all MPs to back this crucial amendment. A simple cap on rent increases would be hugely popular, keep money in people’s pockets and help keep renters in their homes.
‘It’s a major loophole in the legislation that rent increases will continue to be able to force renters out of their homes.’
In favour: more than 30 MPs have signed an amendment which would cap rents within tenancies, a measure backed by renter groups and some of the UK’s largest unions
However, while renter campaign groups support the amendments, the National Residential Landlords Association argues the amendments would discourage landlords from investing in their properties, leading to fewer and poorer-quality rented homes.
Meera Chindooroy, deputy director for campaigns, public affairs and policy said: ‘Rent controls would discourage investment in the homes to rent so many desperately need, at a time when the demand for rental accommodation is massively outstripping supply.
‘Whilst we welcome the Government’s opposition to rent controls, pro-growth tax measures are essential to stimulate the supply of new, decent-quality housing in the sector. Only this will address the affordability challenges so many now face.’
Do rent controls work?
Rent controls tend to do more harm than good, according to a recent briefing paper from right-leaning think tank the Institute of Economic Affairs.
The paper reviewed 196 studies undertaken over 60 years spanning almost 100 countries and found that rent control benefits existing tenants, but at a significant cost to the broader society.
It typically leads to less maintenance spending, conversion to owner-occupation, and the construction of fewer new properties, exacerbating existing housing shortages.
In the summer rental supply in Buenos Aires jumped by almost 200 per cent following Argentinian President Javier Milei’s repeal of rent control laws.
According to the IEA report, rent controls can also create ‘excess demand’ for housing.
This can result in new residents finding it difficult to locate places to live, which decreases labour mobility, increases discrimination against marginalised groups, and boosts black market activity.
The policy can also result in people staying in their existing apartments for longer than they should, such as a mother remaining in a large rent-controlled apartment long after her children have moved out.
The lack of movement leads to a ‘misallocation’ of available properties, resulting in further economic damage.
Dr Konstantin A. Kholodilin, paper author and senior researcher at the German Institute for Economic Research said: ‘Rent control effectively reduces rents in the controlled sector, but does it at a high price.
‘Tenants occupying the rent-controlled dwellings benefit the most, at least in the short run, while newcomers lose from rent control.
‘In the long run, rent control can undermine the rental sector forcing landlords to convert their dwellings and tenants to become homeowners.’
Opposition: The NRLA says rent controls would be a disaster for tenants and would discourage investment in the homes to rent
Dr Kristian Niemietz, editorial director of the Institute of Economic Affairs added: ‘Economists are a notoriously divided profession: ask three economists, and you get four opinions. But there are exceptions to this, and the study of rent controls is one of them.
‘This is an area where the empirical evidence really overwhelmingly points in the same direction.
‘The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce mobility among private tenants, and lead to a misallocation of the existing rental housing stock, is as close to a consensus as economic research can realistically get.’
