Rent increases could be capped under a new amendment to the Labor Code
Landlords could soon be subject to rent controls under the latest proposals being pushed through Parliament.
More than 30 MPs have signed an amendment to the government’s Renters’ Rights Bill, which would impose a cap on rent increases within lease agreements.
The changes would limit how much landlords can raise rents for existing tenants, limiting percentage increases to the lowest of inflation or average wage growth.
It has been signed by 31 MPs so far and is led by Paula Barker MP, who was Labor Housing Secretary until last year.
Barker said: “A measure to limit rent increases would stop landlords from using unaffordable rent increases as de facto no-fault evictions.
“By preventing landlords from raising rents for existing tenants by more than inflation or wage growth, my amendment to the Renters’ Rights Bill would help keep tenants in their homes.”
MPs will debate and vote on amendments to the Renters’ Rights Bill for the final time
The Renters’ Rights Bill returns to the House of Commons today for the report stage, with the expectation that it will finally become law later this year.
It also includes the removal of Section 21 ‘no-fault’ evictions, while the remaining grounds for eviction will require landlords to give tenants longer notice periods.
The bill stipulates that if a landlord wants to evict a tenant to sell or move back in, this may not happen in the first twelve months of the rental period. The landlord must also give the tenant four months’ notice.
Landlords will only be able to increase rents for existing leases once a year, via a statutory notice period under Article 13, and must give a notice period of at least two months.
For new leases, landlords are banned from accepting offers above the advertised price, in a bid to ban the practice of ‘rental bidding’.
Another amendment in the legislation supported by MPs would allow tenants to temporarily withhold rent, mediated by a third party, if a landlord fails to carry out essential repairs.
Who supports the rent ceiling?
A cap on rent increases has long been championed by tenant groups, who say they will prevent landlords from using unjust rent increases as de facto no-fault evictions.
Without them, they say there is a risk that unfair rent increases could be used to threaten or evict tenants once section 21 is scrapped.
Campaigners are hopeful that the amendment will be selected for debate by the Speaker, after the government previously tabled an amendment limit the amount of rent landlords can charge in advance.
Tom Darling, director of the Renters’ Reform Coalition, said: ‘Recent research from Shelter shows that almost two-thirds of working tenants are struggling to pay rent.
The Tenants’ Rights Act will bring some much-needed new protections, but in its current form it fails to address the affordability crisis at the heart of renting – a crisis that is making life miserable for millions of people and pushing families out of communities .
‘We call on all MPs to support this crucial amendment. A simple cap on rent increases would be extremely popular, keeping money in people’s pockets and helping keep renters in their homes.
“It is a major loophole that rent increases will continue to force tenants out of their homes.”
For: More than 30 MPs have signed an amendment that would cap rents within leases, a move backed by tenants’ groups and some of Britain’s biggest trade unions
Although tenant campaign groups support the changes, the National Residential Landlords Association says the changes would discourage landlords from investing in their properties, leading to fewer lower quality rental properties.
Meera Chindooroy, deputy director for campaigns, public affairs and policy, said: “Rent controls would discourage investment in the homes so many desperately need, at a time when demand for rental properties is massively outstripping supply.
‘While we welcome the government’s opposition to rent controls, tax measures that promote growth are essential to boost the supply of good quality new homes in the sector. Only this can address the affordability issues that many now face.”
Does rent control work?
Rent controls generally do more harm than good, according to a recent briefing paper from right-wing think tank the Institute for Economic Affairs.
The article reviewed 196 studies conducted over the past 60 years in almost 100 countries and concluded that rent control benefits existing tenants but comes at significant costs to wider society.
It typically leads to reduced maintenance expenditure, conversion to owner-occupied homes and the construction of fewer new properties, exacerbating existing housing shortages.
Over the summer, rental supply in Buenos Aires increased by almost 200 percent after Argentine President Javier Milei repealed rent control laws.
Rent controls could also create “excess demand” for housing, according to the IEA report.
This can mean that new residents find it difficult to find housing, which reduces labor mobility, increases discrimination against marginalized groups and stimulates black market activity.
The policy can also lead to people staying in their existing apartments longer than necessary, such as a mother staying in a large, rent-controlled apartment long after her children have moved out.
The lack of movement leads to a ‘misallocation’ of available property, resulting in further economic damage.
Dr. Konstantin A. Kholodilin, author of an article and senior researcher at the German Institute for Economic Research, said: ‘Rent control effectively reduces rents in the controlled sector, but does so at a high price.
“Renters who occupy rent-controlled housing benefit the most, at least in the short term, while newcomers lose out from rent control.
‘In the long term, rent control could undermine the rental sector, forcing landlords to renovate their properties and tenants to become homeowners.’
Opposition: The NRLA says rent controls would be a disaster for renters and discourage investment in rental properties
Dr. Kristian Niemietz, editor-in-chief of the Institute for Economic Affairs, added: ‘Economists are a notoriously divided profession: ask three economists and you’ll get four opinions. But there are exceptions to this, and the study of rent controls is one of them.
‘This is an area where the empirical evidence overwhelmingly points in the same direction.
‘The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce mobility among private renters and lead to misallocation of existing rental housing stock is as close to a consensus as economic research can realistically get. ‘
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