Gordon SimonSimon Gordon is a consultant to the
Residential Landlords Association.

The calls for
rent controls in the private rented sector are growing louder in response to
what are seen as excessively high rents, especially in London.

The reality
is that despite the myth their critics perpetuate that landlords are seeking to
profiteer from the accommodation they rent, they have in fact been increasing
rents far less than inflation, unlike the subsidised social housing sector.

contained within the 2011/12 English Housing Survey show that between 2008/09
and 2011/12 average weekly rents in the private rented sector increased from
£153 to £164, an increase of 7.2%. This equates to annual increases of 1.8%
over the four years.

Over the same period, social rents saw an
average 16.9% increase, from £71 to £83 equal to 4.2% a year. Inflation
measured using the Retail Price Index, which includes housing costs, over the
same four year period stood at 12.5%.

Whichever way
you look at it, rents across the private sector have, on average, been falling
in real terms. This is despite a shortage of properties in many areas and an
increase in demand caused by the lack of social housing and the difficulties
people face getting a first property because of higher deposits being required.

In response
many argue that what matters are not the proportions by which rents go up but
their actual levels, which are higher in the private sector compared to social
housing. The private rented sector would have less trouble cutting rents if it
were to enjoy the same subsidies that social rented houses do. The reality is
that the private and social rented markets serve two distinct purposes. Without
subsidy, rents in the private market need to be sufficient to ensure that
landlords can reinvest in new or existing properties.

Rent controls
would diminish the funds available for reinvestment and lead to a mass exodus
from the sector. As Grant Shapps MP as Housing Minister clearly explained:

controls, historically, resulted in the size of the private rented sector
shrinking from 55% of households in 1939 to just 8% in the late 1980s. Rent
controls also meant that many landlords could not afford to improve or maintain
their homes.”

Even Vince
Cable, not known for his right wing credentials, has previously told the Andrew
Marr programme that rent control: “creates more problems, it reduces supply.”

Rather than
seeking to interfere in the market, as some suggest, Ministers need to take
action to help the private rented sector to grow by supporting the army of
individuals and couples making up almost 90% of the country’s landlords since
it is only through growth that tenants then get genuine choices over the
housing options they have, increasing competition between landlords both on
price and quality.

Landlord bodies have come up with a
comprehensive package of measures that would achieve this, chief among which
would be securing a taxation system that properly recognises that renting a
property is a business and so encourages reinvestment. With every £1 invested
in the sector creating a £3.50 return for the economy, supporting private
rented housing growth would achieve the objectives of boosting supply, increasing
tenant choice, raising standards and keeping rents reasonable.

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