The Impact of Rent Controls on the UK Housing Market

The UK housing market has been a topic of discussion in recent years, with many experts weighing in on the best ways to address the ongoing issues of affordability and availability. One proposal that has been put forth is the implementation of rent controls, which would limit the amount by which landlords can increase rents. However, not everyone is convinced that this is the right solution.

The Impact of Rent Controls on the UK Housing Market

The Argument Against Rent Controls

Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), has spoken out against rent controls, citing the lessons of history. In Scotland, the Green Party/SNP coalition introduced rent freezes and no-eviction policies in 2022, which had unintended consequences. Rents were frozen until March 2023, at which point landlords could increase them by a maximum of 3%, or 6% if they appealed. However, this led to a situation where landlords were unable to keep up with the rising costs of maintaining their properties, leading to a decrease in the quality of housing available.

The Impact on Landlords

The introduction of rent controls would likely have a significant impact on landlords, who would be unable to increase rents to keep up with rising costs. This could lead to a situation where landlords are forced to sell their properties, reducing the availability of housing in the market. According to a survey by Pegasus Insight, one in three landlords would sell their properties if rent controls were introduced.

The Alternative: Downsizing

Rather than introducing rent controls, some experts are suggesting that downsizing could be a more effective solution. Research by Rightmove has found that homeowners of five-bedroom properties without a mortgage could unlock almost £500,000 by downsizing to a smaller home. This could not only provide a cash boost for homeowners but also increase the availability of housing in the market.

The Benefits of Downsizing

Downsizing can have a number of benefits, not just for homeowners but also for the environment. According to Rightmove, downsizing from a five-bedroom less energy-efficient EPC E-rated house to a three-bedroom more energy-efficient EPC C-rated house could save homeowners an average of £3,806 a year in energy bills.

Conclusion

The debate over rent controls is a complex one, with valid arguments on both sides. However, it is clear that the introduction of rent controls could have unintended consequences, such as reducing the availability of housing in the market. Instead, downsizing could be a more effective solution, providing a cash boost for homeowners and increasing the availability of housing in the market.

Image: A house in the UK