Edinburgh City Council is very excited about Rent Controls

by Dr Rosalind Beck

4 months ago

Edinburgh City Council is very excited about Rent Controls

Make Text Bigger
Edinburgh City Council is very excited about Rent Controls

Edinburgh City Council is very excited and pleased with itself. It has just approved action with a view to implementing rent controls.

https://www.commonspace.scot/articles/11326/hope-future-cross-party-rent-controls-breakthrough-edinburgh-city-council

It is possible that once this is established in Edinburgh other councils may follow suit and, as we all know, it is quite likely the idea could then catch on down south. At the national level, the reintroduction of rent controls is official Labour Party policy and at the London level, Mayor Sadiq Khan has also called for them. The ‘red Tories’ are quite likely to follow suit.

However, as Kristian Niemitz at the Institute of Economic Affairs has pointed out:

‘Most authors who call for rent controls do not present a detailed policy argument. They merely describe the problem of high rents, and then present rent controls as a self-evident solution. They tend to see the case for rent controls as so obvious that it requires no further explanation, and assume that opponents of rent control are either acting in bad faith, or are just not interested in the problem (see e.g. Dorling 2014) (https://iea.org.uk/wp-content/uploads/2016/09/The-key-to-affordable-housing-PDF.pdf).

There are many reasons why rents controls are not the answer for Edinburgh. There are even more pressing reasons why if these do go ahead in Edinburgh, there is even less reason for them being phased in in other areas of Scotland and the UK:

  1. Over the period 2010 to 2016, average rents in Scotland went up by around 2% each year. This is roughly in line with the CPI over this period. There are no ‘soaring’ rents in the vast majority of Scottish local authority areas with a few exceptions. Figures for 2015-2016 show that rents have stabilised and in many cases gone into reverse (http://www.gov.scot/Publications/2016/11/3295/1).
  2. When businesses – and renting out houses in the PRS IS a business – are hampered by having controls placed on what they can charge, they may just decide that it’s not worth the bother. Landlords in Scotland, like the rest of the UK, have already had the notorious Section 24 imposed on them – whereby they can face a potentially infinite tax rate – so shoving a lid on a boiling saucepan isn’t much of a solution. Many landlords will just sell up – landlords with only one rental property will find this very easy to do and if thousands of these properties are bought by first time buyers, these will be lost to the rental sector. At a time when the nation needs an exponential increase in housing of all tenures, there will be a contraction in the private rented sector (also due to the recent Government ‘war on landlords;’ with the negative environment serving as a disincentive to the expansion of supply).

As Niemitz further states:

‘…the ‘marginal landlord’ will exit the market, and the ‘marginal tenant’ will enter. There will be more people chasing fewer properties.’

With reduced supply in the rental sector, only those with the greatest means and who meet the best rental criteria will be able to access rented housing (landlords won’t have to take on the riskier tenants).  The logical conclusion is that those with the lowest net incomes in society will be pushed downwards and out into the realm of homelessness. The local government bill for temporary accommodation will rise everywhere along with all the social and psychological ills associated with this.

Edinburgh City Council is unfortunately falling into a trap by progressing a policy which has been shown in history to be highly destructive. It will cause much suffering and misery, with the quality and quantity of rental housing deteriorating as a direct result. Only then will the idiots in Town Hall reverse this stupid and ill-conceived measure; after the damage has been done.

Comments

Cautious Landlord

4 months ago

A worrying development. With a socialist pretend Tory govt there is every chance that this is just the beginning. S24 and all the other govt meddling resulting in rent increases it will prove irresistible to the muppet MPs to blame landlords again and further exacerbate the problem. Any landlords out there that have yet to increase their rents to at or around market level should do so now. Firstly, in case rent controls do come in and secondly to compound the evidence of rent rises so that the muppets have to start listening. Hey muppets how about just building some more house to rent and buy - make the ftb and tenants happy. Too long term for you ? Oh well don't bother then just keep bashing landlords.

Appalled Landlord

4 months ago

The graph you link does not show Edinburgh separately, it shows Lothian, an area of which Edinburgh is the principal settlement. This graph shows that the rent in Lothian increased by 25.1% between 2010 and 2016 - but only by 0.2% in the last year of that period, between 2015 and 2016. So what is the justification for rent control there now?

Rod Adams

4 months ago

Reply to the comment left by "Cautious Landlord" at "12/07/2017 - 19:24":

This is nothing to do with a Tory government or MPs it's brought about by the new housing act in Scotland delivered by our SNP government. The rent controls allowed set a limit on increases once a tenant is in place. The market still sets the initial rent. Don't get me wrong, I'm not supporting this.just clarifying the different situation in Scotland. The PRS here has bigger things to worry about than some fairly badly constituted and weak rent controls.

Regards,

Rod.

KATHY MILLER

4 months ago

Subject: Does rent control work? No, it actually increases rent prices for most people

http://uk.businessinsider.com/does-rent-control-work-no-it-actually-increases-rent-prices-for-most-people-2015-9
Rents are going up even for long term tenants now but the blame lays with government policies taxing landlords to the hilt. The way to level rents is incentives for longterm landlords

Cautious Landlord

4 months ago

Reply to the comment left by "Rod Adams" at "12/07/2017 - 20:01":

Hi Rod, I do appreciate what you are saying but the last two 'Tory' governments can't stop themselves nicking socialist policies - minimum wage, market intervention (energy) and most pertinently s24 (stolen from the Green Party manifesto). Not to mention anecdotal evidence of slippage to the left - dementia tax attacking the elderly, pension changes attacking the prudent and NI changes attacking the business/job creators (last two on hold for the time being). Trust me it will be too tempting for them when getting a hard time about rents going through the roof (because of s24 et al) to say 'don't worry tenants and populist voters we'll kick the landlords a bit more - cap the rents'. All the more tempting too given the recent fiasco where the majority was chucked away. Rent controls would be one thing all the muppets would agree on. You wait !

Rod Adams

4 months ago

The thing is the muppets (SNP ones, not Tory ones) have already passed legislation which provides for rent controls. But as I said, the PRS in Scotland has bigger things to worry about at the moment. I envisage that the new model tenancy which is hedged very much in the tenants favour lumped on top for the tax changes and the additional LBTT for 2nd properties is going to severely restrict the supply of private rented housing and will make landlords more reluctant to spend on property improvements. The end result will be a reduced supply of properties and lower quality of properties and the restricted supply will drive up rents. If rent controls are introduced on top of this the only winner will be the black market.

Regards,

Rod.

Cautious Landlord

4 months ago

Reply to the comment left by "Rod Adams" at "13/07/2017 - 09:45":

Agreed. You rightly point of a few of the obvious (to anyone with even the most basic business/economic or common sense ..therefore not MPs !) flaws of rent controls beyond their initial populist appeal. Sadly as usual it will be the poorest, most vulnerable and ironically those the misguided policy is meant to benefit that will suffer. Decent landlords who decide not to exit under rent controls will have the pick of decent model tenants, slum landlords will house the worst tenants in dangerous, unmaintained properties putting those people at risk and the middle tier of tenants will have nowhere to live. Maybe, just maybe a complete disaster in Scotland might help the cause in England and provide a model of how not to do it. Mind you the Ireland experience didn't stop them with s24. Must go now - have to increase the rents again !

Barry Fitzpatrick

4 months ago

"Only bombing would be worse than rent control" - Adam Smith Institute

Swedish economist Assar Lindbeck once wrote, “.... rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

In the late 1970s, a poll of American economists found that ninety-eight percent agreed that “a ceiling on rents reduces the quantity and quality of housing available.”

Michael Bond

4 months ago

Part of my portfolio consists of cottages in a pretty village which were bought by my ancestors about 250 years ago and which I inherited. Tight rent controls from 1915 meant that we stopped building (last build completed in 1914); and there was not enough rental income between 1915 and the early 1970s for even minimal maintenance. Once when my father had to renew the roof of a thatched cottage the cost was the equivalent of over 20 years' rent at the rate at which it was set.. I still haven't worked out how we paid for our cottages to be connected to mains drainage when it came to the village in the 1960s. In the early 1970s there was some relaxation of rent controls but only enough to stop things getting any worse. Since 1989 I have been catching up on maintenance, and my cottages are now almost all up to standard. Does the Anti-Landlord Alliance intend that I should no longer be able to keep them up to standard?

Dr Rosalind Beck

4 months ago

I showed this to Sarah Davidson from thisismoney and she referred me to a detailed article she wrote about this two years ago. She pointed out to me the cap they introduced has no fixed definition, so local Government can just decide whatever it likes. The article is here:

http://www.mortgageintroducer.com/lenders-concerned-over-scottish-rent-controls/#.WWc4Qm8rKUk

As Sarah says, it is likely that many landlords will pull out of the sector in these areas. In the article, however, someone is quoted saying they would like landlords to then expand and invest in these areas where rent increases are capped... dream on.

1 2 4

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

The RLA Campaigns Team is pleased to report the Government listened to us on UC