Rachel Reeves considering freeze of private rent?

[Locutus2000]

It's being widely reported suggesting the Guardians original article is correct.

Rachel Reeves is considering a one-year freeze on private rents to help tenants with the cost of living amongst the fallout from the Iran war.

I find the concept of rent control appealing but there's evidence they produce mixed results.

What does MN think? YABU - rent controls bad, YANBU - rent controls good

Obviously there is a ceiling to this behaviour. And I would suggest that 80% increase in one go is well above ceiling in any area.

with reform comes disruption; and some groups of people may suffer short term for long term gain. We’ve already seen this in the number of people evicted prior to 1st May- renters will be better off long term despite the disruption of the implementation.

How do you know renters will be better off long term! If the supply of private rentals continues to contract? We have lost 25% of supply since 2020. These kinds of reforms aren't going to help that issue and neither will freezing rents.

From the renters rights act? I know tenants will be better off because it ends no fault evictions, fixed term tenancies, limits the frequency of rent increases, bans bidding, ends rent in advance demands and protects against discrimination, amongst other advantages (having a pet!)

The rent control experiment in Scotland which is now finished led to a decrease in properties available. Approximately 44% of landlords reduced spending on improvements and maintenance. Rent control also made it more difficult for new renters to find a property because landlords sold up. Some landlords switched to short term holiday lets … especially in certain tourist areas. The reduction in rental properties could lead to higher rents.

This doesn't mean that it will automatically be overall better for renters if supply continues to decrease and rents continue to increase as a result of this. Ultimately people want a nice, affordable home to rent. If landlords end up quitting the sector or raising rents to cover additional costs associated with the bill then it could have a catastrophic impact on the sector.

It's the same with rent freezes. On paper, excellent for the tenant who obviously won't need to worry about rent increases. In reality, studies have consistently shown they adversely impact the sector and leave many renters worse off

Studies in rent control may show that but rent control isn’t common (for reasons you highlight) and RR potential plan isn’t rent control. It is freezing existing rents for 1 year.

I think pushing unprofessional underfunded landlords out of the sector is no bad thing. Their property can let by professional landlords or sold to an owner occupier.

if I were a landlord I’d be raising rents now, just at the sniff of such a policy. This government really is quite stupid.

Sorry, yes I did mean it included all rents, so social and private. But then I also meant that if I started claiming benefits, they would help cover my private rent.

I apologise as I really didnt explain myself very well, I was angry typing 🤣

Trying to out stupid the Greens won’t end well.

Working people pay rent

She isn't the first to attempt a temporary freeze either. Look at New Zealand in 2020 for example that imposed a 6 month freeze. It simply led to a delay in rent increases and destabilised the sector.

I think you need to be careful what you wish for. There are more renters than in 2020 and yet rental supply has dropped by quarter. What does this suggest? That small time landlords selling up only decreases supply and whether they're selling to professional landlords, owner occupiers or turning into short term lets, ultimately this isn't bringing down the number of renters in the sector but it is reducing the choice of homes available to them.

It has been tried before, we have actual proof that it backfires and hurts the people it wants to help the most. The same thing has happened with all price controls. It's just a desperate throw of the dice by an utterly useless, clueless and failing chancellor

https://www.thetimes.com/article/6fb2c425-04b9-4a16-9578-e9c7825ae726?shareToken=5059a4e768ffaedbe0a8a8e38813fc5b

I know, and I don't really begrudge the support. I'm just getting sick and tired of always being just outside of the threashold for everything and getting to the point where I can't squeeze anymore. Also, my mortgage is about to jump, so hearing of potential help for others is just making it a bitter pill to swallow for me.

Mortgage rates were kept at artificially low interest rates for years

I’m sure you’re better off having a mortgage in the long term

I fear for the rental market in the next few years. So many small landlords are selling up or planning to. Desperate to get out. It will be mainly the big landlord companies that survive. Rents will sky-rocket eventually.

Isn't floating this plan just going to encourage LLs to increase rents now while they can to counteract any rent freeze?

Its yet to be determined whether it economically a good idea to freeze rents but...it's simply factually incorrect to assume that landlords only increase rent in line with their mortgage repayments or maintenance costs.
Firstly, approx 75% of landlords in the UK do NOT have a mortgage.

Rent increases predominantly follow 'the market'. In other words, the maximum profit a landlord can make from a property.

Rents are higher in some parts of the country simply because landlords can charge those rents - the majority don't HAVE to charge those rents and wouldn't operate at a loss if they didn't. Neither do the vast majority of landlords HAVE to rent out property - its a choice to generate income and profit while retaining a growing asset.

We've buried our heads in the sand about housing for decades - we can tell ourselves we just need to build more houses but take a look at what's been built over the last decade - luxury apartments, often sitting empty, a safe investment vehicle for someone's portfolio.

Developers don't want to build affordable housing.
Landlords don't want to charge capped rents.
Homelessness and temp housing has increased massively.
The biggest cost for many councils is temp housing - pushing those councils into debt.
The number one biggest issue for the cost of living is housing.

Future generations will not only not be able to afford a home of their own - they'll be homeless when they can no longer work. Were already seeing this now.

Noone benefits from any of this (apart from landlords/property investors who will probably be fine).

But the new renters rights act means landlords can only raise rents once a year. So say she does this and it’s applicable from June 1 - any landlord who hasn’t raised rents in the past year will raise it before then. Otherwise it’s not really going to change anything is it?

she is such a stupid woman

I'm sure that will help my parents who after receiving their eviction notice this morning are ringing round every estate agent in their area (they are desperate not to have to change GP surgery due to continuity of care) and apparently being told nothing is available, there are 20 other people on their books waiting for anything new to be listed.

i’m not trying to help your parents- policy decisions aren’t based on individual circumstances but the impact as a whole, long and short term, balanced against alternatives and other influencing factors

The more she tinkers the more landlords will sell up. We’ve got rental properties and the demand when one becomes vacant is enormous. She just bumps the rent up and up for landlords

I think you are viewing this in a really strange way and as usual completely neglecting the the inconvenient truth regarding the cost of capital which actually explains completely why we have got to where we have got to.

Money doesn't grow on trees and anyone with money will always have a range of options. So right now the average BTL property is worth around 270k. A landlord could make £13.5k in interest alone by selling up and putting this money in the bank. No hassle with tenants, maintenance issues etc. Average rent is currently just over £16k. Can you see why landlords are leaving the sector in droves? The idea that those without mortgages should just be accepting lower rents is obviously nonsense. Half of all landlords are using their properties as a form of pension. Would you be happy to put your retirement fund in some underperforming investment because you don't need the money right now?

Cost of capital also explains why nobody including the government want to build affordable housing. It's too expensive. This is a global issue. Tell me, how would you resolve it?

This is a concern to small, btl, underfunded landlords.

they exist now. If they want to exit the market they can. They are not the only type of landlord. In many countries these landlords don’t even exist. If we are due a disruption to the rental market it wouldn’t be the first or last time. Small BTL landlords barely existed 40 years ago, so they’re not even a long standing part of the market.