news | 1 month ago | Steve Cox, chief commercial officer at Fleet Mortgages

‘Supply, supply, supply' has to be the mantra, not rent control

Anyone working with landlord borrowers will be acutely aware of the range of conflicts they are attempting to deal with at any time, and indeed, the range of future disputes that may (or may not) be coming over the horizon.

Now you might well suggest that it’s best just to try and deal with present issues rather than worry yourself sick about what might happen next — and you’d be right, but given the long-term investment horizon of most landlords, it would be somewhat odd for them not to be looking ahead.

Landlords in Scotland, for example, have already experienced the impact of rental controls on their property, and while these will have come to an end at the beginning of April, there is already plenty to suggest they might be back in the not so distant future. Indeed, the Scottish Government has already published its plans to bring in longer-term rental controls for the PRS within its Housing (Scotland) Bill. This will put the onus on local councils to assess and ascertain rents in their local areas and to determine whether rent increases are allowed and at what percentage.

Landlords in London will be acutely aware that the mayor Sadiq Khan has been a strong advocate of rental controls, and you have to wonder what that might mean if he is returned as mayor this year, and if a Labour government also wins at the next general election. 

In Wales, social landlords can only raise rents by up to 6.7%, and while at the moment, the PRS is not in the same position, there was a consultation on the proposal last year.

You might understand why this is an issue that raises concerns among all PRS stakeholders, but particularly landlord borrowers, their advisers, and we as the lenders who provide them with the funding they need to either purchase or refinance.

To say we are not advocates of rental controls would be an understatement. Speak to many property stakeholders within the Scottish market and they will say it has done nothing to tackle the major problem of the PRS there or anywhere else in the UK — finding enough supply to meet tenancy demand. 

What rental controls have traditionally done is take away a mechanism for landlords to actually stay invested because they take away a huge element of control. As we’ve seen over recent years, when landlords face issues in making a profit, they are much more likely to seek an exit from their investment, which logically, reduces supply even further.

At the moment these measures have only been enacted in limited parts of the country, but a more widespread approach would more than likely have the same impact. And again, that could be telling for a PRS sector which, as we know, is already struggling to find the supply to meet the demand that exists.

It seems somewhat baffling to be following policy that does nothing to encourage landlords to add to portfolios and to supply, but actually makes their lives even more difficult and encourages them to sell up, ultimately resulting in less choice and less competition. How might that be in tenant’s favour?

We have said for many years that we need government policy that recognises the importance of the PRS and maintaining its level of supply.

I understand why certain politicians want rent controls but, given the lack of social housing and other tenure options, the high cost and difficulty of buying a home, and the lack of housebuilding for both owner-occupation and PRS, the UK property market is in no position to be able to introduce them — the inevitable result of doing so would be to make the position worse rather than better. 

'Supply, supply, supply' has to be the mantra, not rent control. Our population growth alone tells you that what we have isn’t enough, and that forcing landlords to accept a level of rent for potentially many years is unlikely to make them stick around. If you can’t cover your costs and make a profit, then what options are left to you?

Of course, we should be hopeful that common sense prevails. It didn’t in Scotland, and it may not do again, but a full review of its results there should hopefully stop the rest of the country from repeating the same mistakes.

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