Rent controls: arguments FOR and AGAINST
Nicola Sturgeon, the first minister of Scotland, announced a rent freeze for public and private properties and a complete ban on winter eviction of tenants. The rent freeze proposal has been pushed through by the Labour Party, the Green Party, and the Scottish Nationalists and is now law. What has happened in Scotland is that a rent freeze was announced under the Cost of Living (Tenant Protection) Bill 2022. It gives ministers provisional power to put a cap on rents for private and social tenants and student accommodation. The Bill also places a moratorium on evictions.
The minister said emergency legislation to protect tenants from the cost-of-living crisis would be brought forward. She added that the devolved government is not able to tackle rising energy bills. That’s why it has intervened as a matter of housing policy. This emergency legislation aimed at protecting tenants comes shortly after a proposal on the same lines was introduced by SNP and Scottish Green MSPs. It recommended a freeze on rents for two years until the scheduled rent control bill, which is to be introduced in 2024.
What Does The Rent Cap Mean
This rent freeze is aimed at controlling in-tenancy rent hikes. It has initially been set at zero percent until March 31, 2023. Ministers can vary the rent cap while it is in force. The measures can be extended further for two six-month periods. The damages for unlawful evictions have been increased. Landlords can be fined a maximum of 36 months’ worth of rent.
The move to freeze rent comes after years of campaigning from the tenants’ union ‘Living Rent’ and just two months after SNP and Scottish Greens ministers voted down plans for a rent freeze. The bill will benefit most tenants. In some situations where the landlords can prove that they are facing increased costs (mortgages, for instance), they will be allowed to increase rents by up to three percent. The bill can be reviewed at the end of March 2023.
Tenants’ Rights Minister Patrick Harvie has firmly supported the rent freeze. He says: “I am pleased that Parliament has passed this Bill to support tenants through the current cost of living crisis. People who rent their homes are more likely to live in poverty or be on low incomes than other people, and many will be anxious about keeping up payments on their homes as their everyday expenses rise.”
“With this Bill now law, tenants in the social or private rented sector, or student accommodation, will have stability in their homes and housing costs. The bill was opposed by Tories. MSP Miles Briggs said: “Scotland is in the grip of a housing crisis, but the SNP-Greens’ railroading rent controls through Parliament this week will do nothing to alleviate that. He said it would harm those who are homeless at present and have the lowest incomes.
Who Gains From Rent Freeze?
Undoubtedly, tenants are the biggest gainers. The decision to cap rents means prospective tenants can look for more properties in their budget. Tenants are keen to have measures that can keep rents down for longer terms. They also call for property-linked controls and want to stop landlords from hiking rents when a tenancy ends or when a new tenant moves in.
Will England follow suit this winter?
Rents in London are extremely high as a percentage of earnings compared to other parts of the country and private rents rose on average by a whopping 38% between 2005 and 2016. According to Mr Khan the arguments for rent control are “overwhelming” and it is vital the Government acts to improve the quality of millions of lives. Londoners seem to agree with him. A recent survey confirmed that 68% of Londoners were in favour of capping the amount private landlords could charge tenants. But is rent control really the answer to renters' problems?
The argument against capping rental levels has always been that it will impact supply as landlords, unable to make a profit, take their properties off the market. As the majority of private landlords only own one property this is a distinct possibility, especially as higher taxes are already eating away at profitability in the buy-to-rent market. This would certainly add to the problems tenants already have in finding a suitable home to rent. Build-to-rent developers may also take a step back from the London market if they can’t make the figures add up on new developments. However, the rental market’s loss could be the house buyer’s gain if there is a sudden flood of former rental housing onto the market.
In other major cities such as New York and Berlin, rent control has been in place for decades. The lesson to learn from the experience in these markets is that in tandem with bringing in rent control, it is important to provide a supply of social housing to mop up the shortfall in private rentals when some landlords, inevitably, decide to quit the market.
Mr. Khan has invited Karen Buck, the MP behind the Homes (Fitness for Habitation) Bill, to work with James Murray, the deputy mayor for housing and residential development, to work up proposals for future rent control laws. This is clearly not as straightforward as it may at first appear and the additional social housing that Sadiq Khan has also pledged to provide for London must be brought into the mix, otherwise, rent control could be completely self-defeating and simply hurt the people it is intended to support.
So will London follow the lead of other major cities around the world and become the first place in the UK to enforce a rental cap?
Personally, I think not and the protection English tenants have will probably end at the cap on fuel bills to March 2023.
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