Government policies to reduce pressure on the rental market are vital, says Dorian Gonsalves
As the 2015 General Election draws nearer, Dorian Gonsalves, Belvoir’s Director of Commercial and Franchising, warns of the impact of potential rental caps and calls for governments to tackle the problem of reducing tenant demand in a pressurised market.
“In recent months various organisations and individuals have bought into the idea that rents across the country are spiralling out of control and are supporting the need for rental controls,” says Dorian. “Unfortunately many of these organisations have little or no experience of the private rental sector (PRS) and are using rental based statistics in the wrong way. This is a real concern, as there are many reasons why rent controls would be damaging and costly for tenants and landlords.
“Belvoir has 160 offices across the country and analysis of the Belvoir rental index for the past seven years shows an average increase in rents of just 4% across the entire period. When true statistics are correctly analysed, the call for rental controls due to rents spiralling out of control proves to be a flawed argument.
“The current shortage of housing stock in the UK leaves the PRS unable to satisfy tenant demand and more specifically, demand for social housing. Is it really the responsibility of a private landlord who may be renting their house for various reasons, such as moving to find work in another part of the country, to be held to account and forced to provide lower cost housing for the social sector?
“Increased demand for rental properties can be attributed to many factors. For example, according to the National Office of Statistics immigration figures have risen by 49% in the last ten years. In addition, family units are now smaller, with more divorced and single parents requiring family accommodation. The mortgage market has been increasingly difficult to access as a result of the credit crunch, and if tenant demand is high rents will indeed rise, but as our statistics show, rents are certainly not out of control.
“Although on the face of it rental controls may appear to be a solution to controlling aggressive rental rises, the majority of studies show that rents are not rising sufficiently to warrant this sort of drastic action. If landlords feel they are unable to cover the costs of owning a rental property due to rental controls they are likely to dispose of their property or find another use for it, which will simply exacerbate the problem of reduced supply.
“I believe that everyone is getting tired of vote-winning sound bites from politicians and now is the time for some joined up thinking between political parties to tackle the true problem of high tenant demand. Labour has argued that Britain could learn lessons from Germany, which implemented rent controls, but Germany has a much more abundant supply of housing, and it this that inevitably reduces rents.
“The PRS operates in a free market and has done so very successfully for a very long time. Rather than destroying this, it makes much more sense to tackle the true problem of high demand. Successive governments have failed to provide long-term aggressive new build policies and workable incentives that will enable first time buyers to fulfill their dreams of buying a property. Ultimately, it is this, rather than rental caps, that will help to reduce tenant demand and keep rents lower.”