New research: regulating rents to make renting stable doesn’t pose a risk to the market

There has been a pretty fierce debate raging about the best way to regulate rents in England.

It’s been a pretty polarised debate so far. One side has called for tough legal caps to drastically cut rents, with the other side suggesting that any attempt to increase in regulation will lead to absolute catastrophe.

The strength of feeling on both sides is easy to understand – there’s a lot at stake. But far too much of the debate has been over-simplistic and has muddled the issues. Not enough of it has been based on good evidence of what the actual consequences of new regulation could be.

The reason for this is pretty simple: there hasn’t been very much good quality evidence. Shelter has previously commissioned some research on how landlords might cope with more predictable rents, but it was clear to us that more research was needed.

So earlier in the year Shelter commissioned Cambridge University’s Centre for Housing and Planning Research to look at the impact that different forms of rent regulation would actually have. We’ve published the results of their research today.

It’s the best available evidence on what might happen if we regulated rents in different ways. It suggests that new regulation could make renting more stable without incurring significant risk of unwanted side effects, but also that introducing hard rent controls to cut rents is very risky.

Not all rent regulation is the same

The expressions ‘rent control’, ‘rent caps’ and ‘rent regulation’ have been used interchangeably in much of the debate, as though they all the same thing. But not all rent regulation is the same.

In fact there are lots of different ways that you can regulate rents – and they all do different things. Broadly, there are two things that you might want to achieve through rent regulation:

  • Making renting cheaper
  • Making renting more secure and stable

The first of these is fairly self-explanatory. You could try to make renting cheaper by trying to force landlords to cut the amount of rent they charge or – at the very least – put heavy limits on how much they can increase it.

But you might wonder why you’d need to regulate rents to make renting more secure – surely longer tenancies could be introduced without rent controls? But in practice, it doesn’t work like that.

Short term tenancies are the norm, so renters currently have a minimum of only six months’ protection from an arbitrary eviction. That’s not enough for renters, particularly for families with children who face financial hardship and the prospect of their child being forced to move schools as a result of losing their home at the end of each short tenancy. And a quarter of all families with children are now private renters. So we’ve campaigned to extend the length of tenancies to five years – giving renters the security to put down roots and keep their kids in the same schools.

But longer tenancies on their own are meaningless if landlords are free to whack up the rent tomorrow. To a renting family, doubling the rent overnight is the same as ending the tenancy, so there has to be some degree of rent control during a longer tenancy for it to be secure. We’ve argued for five year tenancies, during which time the rent could only go up by inflation. This would be a form of soft, or second generation, rent control.

The results

The research finds that the impact of making renting stable through five year tenancies with limited rent increases doesn’t pose a significant risk of any unintended negative consequences. Introducing these tenancies would revolutionise renting and guarantee children in renting households a more stable childhood. This research shows that the government can get on and do this without fearing adverse consequences.

However, the research also found that trying to significantly cut – or even freeze – rents by introducing hard rent controls is risky, and could lead to serious negative consequences for renters both in the short and long term.

No one can say exactly what the impact would be, but we know from past experience at home and overseas what the risks are. Hard rent controls can:

  • Lead to an increase in evictions, as landlords try to sell their properties
  • Make it harder for families with no other options to find a rented home
  • Lead to a growth in the black market and deterioration of conditions in rented homes
  • Undermine private house building, making it harder to tackle the housing shortage

Shelter is not interested in protecting landlords’ profits, or preserving the size of the private rented sector as an end in itself. We believe that everyone deserves a decent, secure home that they can afford – whether they rent or own it.

The effect of any regulatory change on the market becomes a concern for Shelter if it may mean that fewer people are able to access a safe, secure and affordable home. Shelter could clearly not support something that risks making things worse for our clients, many of whom already struggle to find a decent place to rent.

Improving renting alone is not enough. There’s an urgent need for government action to tackle the housing shortage, which is the underlying cause of our affordability crisis. And we need to make sure housing benefit is protected so that renters don’t face further hardship in the meantime. But we do also need to make renting better, now.

This research is the best evidence available that the security and stability of private renting in England could be completely overhauled without serious risk. But it also shows that there is no shortcut to making renting more affordable – and that trying to do so with crude legal measures risks actually making things worse for the very people we want to help.

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