I was expecting Jeremy Corbyn’s call for rent control to be met with the usual litany of ideological nonsense, so it’s been refreshing to discover that there is actually a nuanced debate about it. The nonsense comes mainly from the political right, who have pointed to the supposedly destructive effects of rent controls: cutting prices, they argue, must cut supply. The assumption is supported by a long string of economists, many of whom have been told it’s true during their first year of study. Empirical evidence on rent control shows just the opposite: the supply of rented housing is generally larger where rent control is in force. (See R. Arnott, 1995, “Time for revisionism on rent control?”, Journal of Economic Perspectives 9(1) 99-120.) There’s a balanced review of evidence in a recent Parliamentary Briefing.
Many writers still accept the questionable argument that ‘first-generation’ rent control in the UK made the sector shrink. In fact, rent control in the UK slowed the decline of a sector whose best-paying tenants were becoming owner occupiers or council tenants, leaving a poor residual population of tenants. When rent controls were lifted in 1957, the movement out of the sector became a waterfall. It happened partly because rent is not the main determinant of investment decisions, and partly because “rent control” is not just about rent; it’s about the protection of tenants, security and regulation. Cutting those protections is likely to reduce the supply of housing, as landlords sell up. The recent revival of the private sector reflects not the slow expansion after the deregulation of 1988, but a much more rapid expansation after 2001, reflecting a favourable combination of capital values and interest rates. That has been reinforced by the balance since 2008; as and when interest rates increase again, capital values will suffer and other investments will be more attractive.
Shelter’s position on rent control has attempted to look at a range of different policies which come under the general banner of rent control: some, they suggest, would be harmful, some would be beneficial, and some would make very little difference. While there’s obviously a need for tenant protection, the fundamental problem with the housing market is not about rents as such; it’s about access to housing, and that depends on supply. As long as there aren’t enough houses, and those that there are are in the wrong places, some people are going to be left out. Some people will be squeezed – high rents, poor conditions – and others will be left out altogether. Britain has millions more people than it used to have, and it needs millions more houses.