The end of the liberalisation of the private rented housing sector?

Door keys. PhotoMix-Company CC0 Creative Commons

The introduction of policies to limit rent increases in the private sector internationally signal the reversal of a decades-long trend towards the sector’s liberalisation, according to a report by LSE London for the Residential Landlords Association. 

The report [link] looked at changes in rent regulation in a number of countries. This is in light of concern about whether the private rented sector is suitable for its growing role as a mainstream form of tenure, especially given the number of families now living in this type of accommodation.

The researchers found that many European countries have some form of rent stabilisation policy in place whereby rents are initially set by the market, but rent rises within a tenancy are limited by a specific index. In these countries tenancies are usually indefinite, so the tenant can only be forced to leave under well specified conditions such as the non-payment of rent.

In Germany, France and Ireland an important innovation has been to identify pressure zones, where housing is in high demand, where rent controls have been tightened considerably in comparison with controls that already exist.

Within the UK, Scotland has introduced indefinite tenancies – albeit with some exceptions – and has also enabled local authorities to request the introduction of rent caps in areas with a high degree of housing pressure. In England, the government is consulting on three year tenancies, with pre-tenancy agreements about rent increases.

Professor Christine Whitehead, Professor Emeritus in Housing Economics and co-author of the report, said: “Our research suggests that it would be better to focus on putting in place a system which allows indefinite tenancies with a degree of rent stabilisation based on a suitable index alongside a much better enforcement system which tackles both poor landlords and tenants.

“We found that landlords would be happy to offer longer term security, as long as enforcement procedures are working properly.”

YouGov surveys have shown that the majority of people want there to be some control of the rents in the private rented sector in Great Britain.

Professor Whitehead said: “Good regulation should benefit both landlords and tenants, providing a more secure investment for landlords and investors while offering greater security to tenants. Bad regulation results in disincentives to supply rented accommodation, poorer tenants being excluded from the sector and ultimately worse conditions for everyone.”

The private rented sector has more than doubled since the turn of the century with one in five of all households living in privately rented accommodation, and well over one million landlords.