Just last week the Mayor of London, Sadiq Khan, demanded an array of devolved powers which would allow him to control rents in the capital. While the idea has been ridiculed by many people as the latest in a sustained PR campaign in favour of rent controls, might the tide be turning? Are rent controls now inevitable in the UK?
Rental rates are rising
The first thing to say is that rents are rising in the UK and will continue to do so for a variety of reasons:-
• Growing population
• Subdued new build numbers
• Lack of social housing
• Fluid employment market
We know that the buy to let industry is now huge in the UK and has recently attracted the attention of politicians looking to milk further tax income. Quite how this strategy sits with the need for more private rental properties funded by private investors is unclear.
Life after Brexit
Even though Brexit is grabbing the headlines, yet again, the idea that immigration to the UK will fall off a cliff is a red herring. Yes, there have been significant numbers moving around the European Union under the “free movement” banner. However, once Brexit is agreed the worst-case scenario is that those looking to move to the UK will be processed by the non-European immigration system. This is a system which has been extremely successful over the years.
New build numbers
It is common knowledge that demand for new build properties continues to be far greater than the supply of new build properties. We have seen politicians using smoke and mirrors over the years to hoodwink the electorate into thinking there are billions and billions of pounds being poured into this sector. Yes, funding has been increased but announcing the same funding two, three or even four times just muddies the water.
The budget cupboard is bare and we are unlikely to see a major increase in the number of new build properties in the UK in the short term.
Time and time again we have mentioned social housing and the right to buy scheme introduced back in the 1980s. While critics believe this may well have kickstarted the UK homeownership trend it also the depleted the social housing portfolios of local authorities right across the UK. Housing associations and improving local authority investment in social housing is helping. However, with demand far greater than supply it will take some time to replenish social housing stocks.
Fluid employment market
Demand for private rental properties tends to revolve around employment hotspots. While the “mobile employment market” forecast many years ago is still in its relative early days, many people are now been forced into short-term contracts and moving on a regular basis for work opportunities. It is obviously risky to buy a property if you expect to be working elsewhere in the short to medium term hence growing short term interest in the private rental market.
Politicians across the spectrum have been promising rent controls to differing degrees for many years now. We seem to be at a stage where the electorate is taking it for granted that rent controls will be instigated sooner rather than later. This has placed politicians in a very difficult situation; either they deliver on their promises and curry favour with the electorate or they renege on their promises and lose votes. Which way do you think the politicians will jump?