It is common on talkboards and blogs discussing the Housing Benefit cuts to come across people keen on bringing back rent control for private tenancies – often expressing themselves very emphatically. This is a complete blind alley.
Rent control was first introduced in the UK in 1915 following the Glasgow Rent Strikes. It was wartime so the Government wasn’t minded to play nice while landlords were profiteering in areas around munitions factories. Additionally there was a real risk of Communist agitators spreading the strikes and crippling the war effort, perhaps even sparking full revolution. Marx had always reckoned Britain would be the first country to move to a dictatorship of the proletariat.
Rent control proved easier to introduce than to get rid of. Between the end of WW1 and 1988 a series of Rent Acts tweaked the system but the essentials remained the same: a Government quango set what rent could be charged and tenants had security of tenure. This had a number of consequences: the private rented sector dwindled; private landlords had no incentive to upgrade properties and ruthless landlords could make huge fortunes.
The private rented sector dwindled: while readers may think “So what – why should private capitalists make money letting housing?” this prevented a mature private housing market developing in the UK, unlike in other European countries.
Private landlords had no incentive to upgrade properties: during the twentieth century inside toilets, central heating, double glazing, damp proofing and improved insulation became standard in most housing. Private landlords had no incentive to even do the basic maintenance if they could get away with it, let alone upgrade their properties. The entire sector stayed in a WW1 condition.
Ruthless landlords could make huge fortunes:
Rent controls present huge benefits to ruthless, exploitative criminal landlords. In the 1940s and 50s Rachman bought up cheap properties in West London – principally Notting Hill – with sitting tenants. When some of these became vacant he let to socially marginalised black and Irish tenants on high rents. The new tenants were unable to enforce their legal rights due to racism, lack of access to the law and lack of alternative housing. They overcrowded – simply to afford the higher rents – and between a mix of racism, antisocial behaviour and bad maintenance the original sitting tenants soon left. Rachman grew hugely rich driving out sitting tenants and charging above market rents to socially vulnerable tenants.
Hoogstraten simplified the process. In the 1980s he bought cheap properties with sitting tenants – most by now elderly women – in Brighton and London. He paid criminals to terrorise the tenants out of their homes. He then sold the now vacant properties at their full market price.
So in the long term rent controls do more harm than good – but what about temporary or even localised controls to resolve some current problems? The problem is rent controls require security of tenure to have any effect and this reduces the value of a property by about two thirds. Most private rented properties have more debt secured against them than their value with a sitting tenant so rent controls would prompt a wave of bankruptcies and repossessions. Entertaining as it would be to watch the buy-to-let class going systematically bust it wouldn’t improve the housing environment.
The solutions to unacceptably high private sector rents are much more conventional and dull.
1) Rents are high because UK property prices are too high. Governments need to responsibly manage house prices, particularly increasing interest rates to dampen down housing booms. The Labour government failed to do this about 2002-03 and the previous Conservative government failed to do it in 1985-86. Hopefully future governments will have learnt the painful lesson and it won’t happen a third time.
2) More social housing to provide real competition to the private rented sector. I remember back in the 1990s in Liverpool social housing was relatively easily accessible; the private rented sector had to charge lower rents than the social sector to attract tenants.
3) An economic policy which spreads work out from the South East / M4 corridor. It’s easier to move the work north than the housing south.