Rent controls: lessons from international experience
Yesterday, the Residential Landlords Association published a new LSE London report by Christine Whitehead and Peter Williams on changes in rent regulation in a number of countries (click here to view report). The starting point for this research was the growing concern about whether the private rented sector is suitable for its growing role as a mainstream tenure especially given the large numbers of family households that are now living there. One expression of this concern is that YouGov surveys show that a significant majority of respondents want there to be some control over rents in the private rented sector. The report looks to international experience to ask whether there are lessons to be learned about how these types of concern are being addressed in other countries.
The research shows that:
- regulation of the PRS is a live issue in many countries. As in England, this is mainly a result of rapidly growing private rented sectors in pressured housing markets;
- many European countries have some form of rent stabilisation policy in place by which rents are initially set by the market but rent rises within a tenancy are limited by a specified index. Moreover, in these countries, tenancies are usually indefinite – so the tenant can only be forced to leave under well specified conditions, such as non-payment of rent;
- in some countries, notably Germany, France, Ireland and, within the UK, Scotland, policies have been introduced to tighten the regulatory and rent determination regimes;
- in Germany, France and Ireland an important innovation has been to identify pressure zones where rent controls have been tightened considerably as compared to the established regime.
In Germany and Ireland, the numbers of identified pressure zones appear to have extended into less pressured areas. In France on the other hand this tighter regulation has been limited to Paris and Lille. In Scotland, where legislation similar to Ireland has been introduced, no zones have yet been identified.
In countries with far more market-oriented regimes there is also evidence of pressure to increase regulation. In New Zealand for instance, where the current system looks very similar to the UK, there have been moves to provide longer tenancies. In Canada and the USA there is increasing discussion mainly at local level.
As part of the project we also talked to a range of stakeholders about the situation in England. Three themes emerged: the need for greater security of tenure, greater certainty about rent increases and better regulatory enforcement on both sides. In particular, many landlords would be happy to offer longer term security, as long as enforcement procedures are working properly.
Overall therefore what for decades had generally been a fairly clear trajectory towards liberalisation appears now to have been reversed in the face of growing housing pressure – and growing private rented sectors. Within the UK, Scotland has already gone some way down that route and the government is now consulting on three year tenancies for England with pre-tenancy agreement about rent increases.
Our research suggests that it would be better to focus on putting in place a system which allows indefinite tenancies with a degree of rent stabilisation based on a suitable index alongside a much better enforcement system which tackles difficulties caused by both troublesome landlords and tenants.
Click here to view a downloadable PDF of the report.