Jeremy Corbyn thinks rent controls should be introduced in London. In February, the former Labour leader, who represents Islington North as an independent MP, said plans in the Renters’ Rights Bill do not go far enough and that rent controls are necessary.

He is not alone. Generation Rent are calling for rent controls in the UK. The Scottish government has introduced the Housing (Scottish) Bill to create long-term, localised rent controls, and Sadiq Khan, the mayor of London, is interested in the concept, too.

I do not agree with the approach. In my view, trying to manipulate the market — which is what rent control boils down to — would inevitably, lead to unintended consequences.

In the short-term, the biggest unintended consequence of rent control could well be an increase in asking rents. Since it will be more challenging for landlords to review rents in the future, they will need to set a very high rent at the start of the tenancy.

Rent control may also diminish supply.  The BTL market is resilient — as are the landlords who represent it.  But some of them will leave the market.  That will make it harder for prospective tenants to find a home.

And, if official prices no longer reflect reality, rent control may also lead to unregulated subletting – a market where increased rents may be more prevalent.

That’s quite apart from the fact that rent control undermines property owners’ human rights.

We know this because it has happened before.

On January 30, 2020, the Berlin parliament voted on the Act for the Restriction of Residential Rents in Berlin, better known as the Mietendeckel – a five-year rent freeze, with rents controlled both within and between tenancies.  The scheme led to predictable outcomes. Naturally, landlords withdrew from the market: the number of classified ads for rental properties fell by more than half.

Some landlords converted their rental properties into owner-occupied units; some modernised their properties to qualify for exemptions; some sold up altogether; others some left them vacant, hoping the regulations would be reversed. Not unexpectedly, new construction slowed as the private rental sector  became less attractive to invest in.  The caps made the city’s housing shortage much worse. Unsurprisingly, tenants stuck to their rent-capped apartments like glue. The reduction in the supply made it particularly hard for newcomers and young renters to find a new flat. Rents in nearby unregulated areas — like Potsdam and Brandenburg, just outside Berlin — rose sharply as supply in the capital shrank. Counterintuitively, some landlords did very well out of the regulation as demand shifted.

The rental market became hopelessly distorted. In a free market, rents reflect demand and scarcity.  But a dual market emerged in Berlin: a regulated sector with frozen rents — and an unregulated sector where prices soared, making newer rental properties even less affordable.

Berlin is not an isolated example of these black-market shenanigans, either — they are a feature of New York’s two-tier market, too (in New York City some apartments have their rents capped by a board).  There, rental caps have spawned workarounds — illegal sublets and under-the-table payments for stabilised leases known as “key money”.  Hard data’s tricky to find, but anecdotal evidence points to a shadow market filling the gap between capped supply and desperate demand.

As well as New York, Corbyn likes to raise San Francisco as an example of a market that has a form of rent control. There, rent control has discouraged landlords from building. A 2017 study from Stanford economists found rent control reduced the supply of rental housing in San Francisco by about 15 per cent.  With fewer units available, tenant demand has concentrated on the uncontrolled rental market. This pushed market-rate rents higher as supply failed to meet demand.  While rent-controlled buildings saw a 25 per cent decrease in tenant turnover, market-rate rents in San Francisco rose faster than in comparable cities without rent control.  The study noted that rent control increased income inequality among renters by favouring incumbents over new arrivals. This entrenched a divide between “housing haves” and “have-nots,” disproportionately burdening younger, mobile, or lower-income renters who missed the rent-control window.

What’s most infuriating is that we should already know all this — we don’t even need to look abroad to see that rent control doesn’t work.  The UK experimented with rent controls with the Increase of Rent and Mortgage Interest Act of 1915, which froze rent during the First World War. These controls persisted post-war, evolving into the 1957 Rent Act (which capped rents for most private tenancies) and the 1965 Rent Act, which saw rent officers, rather than the market, set rents. 1977’s Rent Act consolidated controls, covering nearly all private rented homes built before 1945 (a huge proportion of the stock).  Artificially low rents left landlords with little incentive (or cash flow…) to maintain properties — “fair rents” didn’t account for rising costs of repairs, taxes, or inflation, especially in a period of high inflation. By the 1970s, urban areas like London, Liverpool, and Manchester were riddled with dilapidated rental properties — leaking roofs, outdated plumbing, and no central heating were common.

The 1976 English House Condition Survey (EHCS) found that private rented homes were in worse condition than owner-occupied properties or council housing, with 30 per cent deemed “unfit” for habitation.  No wonder that between 1914 and 1979, the private rented sector shrank from about 90 per cent of UK housing in 1914, to just 11 per cent by 1981.

But if it achieves nothing else, calls for Rent Control suggestion highlights how little, comparatively, landlords have to fear from the upcoming Renters’ Rights Bill, the ban on section 21s, and a once-a-year limit on rent increases.

Martin Sims is the distribution director of Molo