Rent control is a popular policy. Landlords as a whole are unpopular. Rents are high, and paying the rent is often resented. Like controlling rail fares, there is no evidence it works as hoped. Indeed, there is plenty of evidence from around the world that well intended rent control policies cut the supply of housing and end up making the problem worse.
The market for rented residential property is tied up with the market for owner occupied policy in the UK. Owner occupation remains the dominant form of tenure, even after the decline in home ownership in recent years. Landlords have to buy homes to let out in the same market as home owners. Sometimes a home owner becomes a landlord, choosing to rent out their home and move elsewhere rather than selling up. Some landlords are simply temporarily letting out their own home whilst they are away.
It is therefore difficult to blame buy to let landlords solely for the high price of UK housing. House prices have been chased up by four main factors. The first is rapid inward migration swelling demand for homes. The second is social change, allowing lenders to take more account of the woman as well as the man’s earnings in the typical couple buying a home together. The third is the acceptance of higher overall multiples of income for a mortgage, made just tolerable by a long period of low interest rates. The fourth is the decision of the Bank of England and commercial banks to allow massive bank balance sheet expansion and mortgage book expansion prior to 2007.
The main reason rents are high is that the capital value of homes is high for all those reasons. The way to get rents down is to work on both supply and demand. If there were more new homes to buy, that could curb rents. If fewer people came into the country or if fewer people wanted to form an additional household adding to demand, that could cut rents.
Current high home prices prevent many young people buying their own home. They end up either staying longer with their parents in the parental home, or rent something small that is just affordable, or share with others. The government is seeking to tackle the problem in three main ways. It wants to limit migration. It is making financial help available for home purchase. It is encouraging more building. This works better than rent control.
Rent control would mean fewer landlords and fewer homes to rent.