Former Tory Minister defends landlords charging market rent amid calls for rent controls

A former Tory cabinet minister has defended landlords renting out their properties at market price.

David Gauke, former Justice Secretary, has argued in Conservative Home the anti-landlord political climate means rent controls are being discussed as a solution to the housing crisis.

He claimed that rent prices are not the problem, but a symptom caused by a lack of supply.

Issue was hypocrisy

Mr Gauke says he posted on X, formerly Twitter, a statement which drew a lot of attention and criticism following the resignation of homelessness minister Rushanara Ali after she evicted tenants and then raised the rent on her property.

He wrote in Conservative Home: “My statement of landlords should be allowed to rent out their properties at the market price stimulated more of a debate than it might have done.

“There were plenty who agreed with the message, but there were two areas of criticism of my tweet.  The first was something of a misunderstanding of what I was saying, in that it was taken as purely a defence of Ali and that I had missed the point that, at the same time as ending one tenancy and replacing it with another shortly afterwards, Ali was part of a government that was legislating to ban such behaviour in the Renters’ Rights Bill.

“The issue was the hypocrisy.

“I agree.  To repeat my point, landlords should be allowed to rent out their properties at the market price.  This is statement both in defence of Ali’s actions as a landlord and a criticism of the contents of the Renters’ Rights Bill.  That is an easy position for me to hold, not so easy if you are part of the ministerial team taking the Bill through the Commons.  Ali’s position was untenable.”

Growing demands for greater intervention in the rental market

He added his second criticism of Rushanara Ali was more fundamental.

He wrote in Conservative Home: “In short, it was argued, landlords should not have the right to behave as Ali did. X being X, this was not exactly how these sentiments were expressed (lots of suggestions that landlords should be eradicated), but even if we ignore the more extreme contributions to the debate, this reflects growing demands for greater intervention in the rental market, particularly on cost.”

Mr Gauke emphasised it’s important to look at the context, with decades of stagnant wage growth whilst rents have increased.

He pointed out during the pandemic, rents fell, but since 2022, rents have grown strongly, especially in London, which leaves many renters spending a greater share of their income on housing.

He said it was “unsurprising” that rental costs were viewed as unfair, but argued that rent controls are not the answer.

Rent controls do more harm than good

Mr Gauke claimed rent controls are a policy that has been tried and tested and has shown they do more harm than good.

As reported by Property118, the rent cap in Scotland has been blamed for soaring rents, which have increased by 11.6%.

Mr Gauke said: “Rent control is the mullet hairstyle of policies, it is both very bad and back in fashion.

“It is a policy that has been tried many times, but invariably with adverse outcomes.

“There are beneficiaries in the short term, of course, namely those lucky enough to have a tenancy where the rent is suppressed but ultimately it is not just the rent that is suppressed but the supply of rental accommodation.

“Landlords decide either to sell their properties or cease to invest in their upkeep. This means that those seeking tenancies lose out and, in the longer run, the quality of rental properties declines.”

He added: “The point here is that market prices are very rarely, if ever, the cause of a problem but a symptom.  The issue with high rental prices in London, say, is that lots of people want to live there but there is not enough rental property that is available.  Market prices incentivise a response through a combination of reducing demand or increasing supply.

“It is on this latter point that we run into the real difficulty.  Despite the market signals, supply is not being increased.”

Government intervention has made it very hard to build houses

Mr Gauke added this was not a market failure but a regulatory one.

He wrote in Conservative Home: “Post-Grenfell regulations are resulting in additional costs on development and bottlenecks at the Building Safety Regulator.  The London Mayor also takes a very inflexible approach to affordable housing, only permitting developments that meet his stringent requirements.  This is a classic example of well-meaning policy having a perverse outcome.

“Affordable housing requirements essentially act as a tax on housing developers meaning that less housing is developed.  Plenty of studies show that building more houses make houses more affordable, regardless of whether those homes are intended to be “affordable” or otherwise.

“The consequence is that very little is being built in London at present, in a city where many of its residents are paying half of their income in rent.”

He went on to claim that “government intervention has made it very hard to build houses,” leading to further intervention that even ministers themselves often fail to follow.

Mr Gauke warned that more landlords will leave the market, leaving tenants with fewer options. He called on the government to “step back and properly focus on planning reform and to allow market participants to respond to price signals.”

The full article by Mr Gauke can be read by clicking here.