Edinburgh City Council is very excited about Rent ControlsMake Text Bigger
Edinburgh City Council is very excited and pleased with itself. It has just approved action with a view to implementing rent controls.
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:
- 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).
- 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.
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