Think tank the Institute of Economic Affairs (IEA) has published a report criticising rent controls – saying they result in higher rents for new tenants, as well as diminish both housing supply and quality.
This makes it harder for tenants to find new homes, while landlords are discouraged from boosting supply by purchasing new properties.
The paper was by Dr Konstantin Kholodilin, senior researcher at the German Institute for Economic Research, who analysed 196 studies spanning six decades and almost 100 countries.
He said: “Rent control effectively reduces rents in the controlled sector but does it a high price.
“Tenants occupying the rent-controlled dwellings benefit the most, at least in the short run, while newcomers lose from rent control.
“In the long run, rent control can undermine the rental sector forcing landlords to convert their dwellings and tenants to become homeowners.”
The Scottish National Party has previously imposed rent caps at 3% per year, while tenants north of the border can still challenge unjust rent increases.
London Mayor Sadiq Khan is also pro-rent controls, though the leadership appears to be more cautious about them.
Dr Kristian Niemietz, the IEA’s editorial director, said: “Economists are a notoriously divided profession: ask three economists, and you get four opinions. But there are exceptions to this, and the study of rent controls is one of them.
“This is an area where the empirical evidence really overwhelmingly points in the same direction.
“The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce mobility among private tenants, and lead to a misallocation of the existing rental housing stock, is as close to a consensus as economic research can realistically get.”
Ben Twomey, chief executive of tenant campaign group Generation Rent, responded to the paper.
He said: “Listed among the IEA’s apparent down-sides of rent control is ‘forcing…tenants to become homeowners’… Yes please! That’s what so many of us would want and are unable to do because of soaring rents.
“The briefing also mentions how rent controls could reduce ‘residential mobility’, which might be a problem in other countries but in England the typical renter spends less than three years in their home so more stability to put down roots would be a welcome change.
“It is also claimed the quality of homes will not improve or may get worse under rent control models. About a million privately rented homes currently don’t meet the decent homes standard and more than 1 in 10 private renters are living with potentially life-threatening hazards – all in the absence of rent controls. Regulation outside the scope of rent control is needed to fix that.”
He went on to note that “rent controls will not solve everything”, adding that more affordable homes need to be built.
