It was David Brent in The Office who uttered the immortal, and utterly bemusing, line, “A good idea is a good idea forever.”
By that logic, “A bad idea is a bad idea forever”, however it would seem that when it comes to the private rental sector, that doesn’t stop would-be governments or potential policy-makers suggesting ‘bad ideas’ and hoping that they somehow turn our good this time.
Take the ongoing proposals – specifically emanating from the Labour party – about introducing rental controls in the private rental sector, whereby the government (not the market) would decide what a ‘fair’ rent for a property is, and landlords would not be able to deviate from this.
We are all uncertain just how widespread such a policy might be spread – would it be confined to the major UK cities or would it be nationwide? In Berlin authorities have just introduced a five-year freeze of rents, and so perhaps we have a modern example to track, but my view is that to go down this route would be, without doubt, a ‘bad idea’ and would ultimately make the housing situation far worse.
The big question is whether any individual making such a decision to introduce rent freezes might actually ask the industry first how it might be impacted? Or indeed, whether they might ask anyone who lived through the last period when this was tried and failed miserably?
If they would, I would be able to tell them what an utter disaster it was. This was the 1974 Rent Acts which not only froze rents but reassessed existing rents as ‘fair’. To say this was a draconian and ill-thought through policy would be a gross understatement – indeed, this legislation effectively ruined the private rental sector for something close to two decades, inducing a fall in private rental tenure from the high 20 per cent to only 8 per cent.
Now, if such an end-goal is the aim of any government introducing a rental freeze, then go right ahead because it’s likely to work perfectly. However, given the housing situation in this country, I cannot imagine any government would want to make a bad situation worse. Hang about – that is exactly what I can imagine, if that government perceives that the market cannot be trusted to set rents at the ‘right levels’.
Landlords are already under sizeable pressure, and it is remarkable how strong the sector still is, given the weight of the change and regulation placed upon them. However, a rents freeze is likely to be the straw that breaks the camel’s back for many private landlords – take away their ability to increase rents (and let’s not forget landlords are pretty loathe to do this anyway, especially if they value their tenants) and you make the property investment exceedingly difficult to maintain.
At the time, in 1974, the Act was a reaction to significant media focus on slum landlords. Do they still exist in 2019? Of course, but in far fewer numbers and they are slowly but surely being weeded out. Introduce a rental freeze and we actually create an environment that will embolden such poor tenancies and properties, because supply will drop, and tenants will have far fewer options to choose from.
We must truly be careful of what we wish for here. Such a seismic change could have devastating consequences again – as an industry we need to shout long and hard about this otherwise, the changes we have seen in recent years, are likely to be dwarfed by the changes we will see in the future.
Bob Young, chief executive, Fleet Mortgages