A rent cap or control is usually a form of government control that seek to limit rental amounts either via capping annual increases to a certain figure, preventing rents from being increased during a tenancy or creating a rent ceiling for properties.
Rent controls are not a new thing, in the UK we have had lots of regulations to private rental market however most were abolished in the late 80s. In Europe, Paris has rent caps (rents can’t be 20% more than the average for an area) and in February 2020, Berlin introduced a five-year rent cap for all apartments built before 2014, but Germany’s constitutional court overturned Berlin’s rental controls in April 2021. The court ruled that the city’s government did not have the authority to enact such laws.
Bristol and a rent cap
Mayor Marvin Rees has stated he wants to pilot rent controls in Bristol and is inviting residents to give their views at an online summit in March. New rent controls would require the central government to grant Mayor Rees and Bristol City Council special powers, either permanently or on a pilot basis. Bristol City Council states there are over 134,000 people currently renting privately in Bristol, this represents almost one-third of the population. Over the last decade, private rents in Bristol have increased by 52%, while wages have only risen by 24% On average, Bristol residents now need almost nine times their annual salary to buy a house. "The summit aims to start a conversation with the community about what rent control for Bristol could look like, reviewing examples of how it has proven to be effective in other countries and considering the best system for our city"
Rent controls are usually introduced with the best intentions. To protect tenants and protect against rapid and steep rent rises, principally the Berlin rent cap was designed to protect tenants from exploitative landlords taking advantage of the number of tech start-ups coming to the city but it was overturned a year into its five-year agenda.
Average rents in the southwest went up by 3.1 per cent in the year ending December 2021, according to the Office for National Statistics. In England as a whole, rents prices rose by 1.8 per cent - so the southwest's rent is increasing faster than most other regions. Surely a rent cap can help?
However, as has been the case with Berlin, rent controls can come with unintended consequences.
The Ifo Institute, an economic research group found that the effect of rent controls had a dramatic effect on the supply of properties when the number of properties listed to rent had more than halved since 2017. Tenants who were on capped rents moved less and when they did, landlords tended to sell the properties rather than re-let them. A survey* found (one year on after Berlin rent controls) that while Berlin's average rent did indeed drop in the first year, by 7.8%, the number of new flats on the market eligible for a rent reduction had dropped too — by some 30%
The ultimate problem for both supporters and people against rent controls is still housing shortage.
How would the UK housing market deal with rent controls?
When the UK had a rent cap in the 1970s, many landlords went bust. There are concerns that any controls in the UK's current, oversubscribed housing market, would cause the private rental sector to dry up almost completely, leading to more deprivation in some areas, as tenants find it difficult to rent property at all. Previously in the 70s / 80s social housing could help with housing shortages but with it now largely sold off this isn’t an option so housing scarcity could increase, making the housing crisis much worse than it already is.
Bad housing and ever-increasing rent for poorly maintained properties aren’t something anyone should have to suffer, but if a rent cap is to be considered then housing charities like Shelter and Generation Rent have expressed opinions that a rental cap should be considered as part of a much wider package of housing reform.
We moved from having the most heavy-handed regulated private rental market to having one of the most deregulated, uncontrolled systems anywhere in a few short decades. Arguments on both sides have merit but rather than going from one extreme to another most opinions from both sides of the argument seem to be we should be finding modern, sustainable methods of preventing rents spiralling out of peoples’ reach rather than heavy-handed reforms.
For further reading;
*Survey by property ad portal ImmoScout24 https://www.dw.com/en/berlins-revolutionary-rent-cap-success-or-flop/a-56664706)