More than a third of landlords would stop investing in their properties if rent controls were introduced by the government. This is according to buy-to-let lender Landbay.
The Renters’ Rights Bill introduces stricter controls on rent increases, requiring landlords to give a two-month lead time – and tenants gain the right to challenge rent increases through tribunals.
The Landbay survey asked landlords, how they would react to the introduction of rent caps. More than a third (37%) told Landbay they would stop investing in their properties.
Given there are 4.7 million properties in England’s private rented sector, the lender believes the implications would be huge.
Landbay’s research suggests that 1.75 million properties will no longer receive the levels of investment they currently do if the Renters’ Rights Bill became law.
Landbay sales and distribution director Rob Stanton commented: “It’s really important that we go into the Bill with our eyes open. Rent control always has unintended consequences – and let’s be frank, that is exactly what we are signing up for with the Renters’ Rights Bill.
“We can see it in areas that have adopted it like Berlin, New York, and San Francisco. Trying to manipulate the market will lead to landlords leaving their properties untouched and not investing in them, potentially, lowering the quality of the housing stock.”
He added: “In a free market, rents reflect demand and scarcity. That will no longer be the case when the Bill comes in.”
Landbay’s research pointed to the fact that five years ago, the Berlin parliament voted to freeze rents in Berlin for five years, with rents controlled both within and between tenancies. The rental market was distorted. Landlords withdrew from the market. Some converted their rental properties into owner-occupied units; some modernised properties to qualify for exemptions; some sold up; others left properties vacant, in the hope that regulations would be reversed.
New construction slowed as the PRS became a less attractive sector in which to invest. Existing tenants stuck to their rent-capped apartments and the reduction in the supply made it harder for newcomers and young renters to find a new flat.
Landbay also looked into other potential side-effects of the rent control measures within the Bill. Roughly one in six landlords (16%) say they will sell all their rental properties if the bill goes through – meaning approximately 750,000 properties across England would drop out of the sector.
Approximately one in eight (12%) landlords admitted they would bend the rules to keep rents at a reasonable market level.
Stanton said: “Rent controls, while well-intentioned, risk driving landlords out of the market or into workarounds that undermine the very tenants they aim to protect. We’re staring at a future where quality rented housing dwindles. If 350,000 landlords, with roughly 750,000 properties, leave the private rented sector, and landlords stop investing in 1,750,000 properties, at least 44% of England’s remaining private rented sector will face neglect and under investment.”
