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Buy-to-let market braced as Corbyn pledges rent controls

Buy-to-let market braced as Corbyn pledges rent controls

A future Labour government will bring in controls on private rents to protect tenants, Jeremy Corbyn has announced, prompting criticism from letting agents and concern for the buy-to-let mortgage market.

Speaking today (Wednesday, 27 September) at the Labour Party’s conference in Brighton, the opposition leader said rent controls had been introduced in cities across the world and he wanted the UK to follow their lead.

He said: “We will insist that every home is fit for human habitation, a proposal this Tory government voted down. And we will control rents - when the younger generation’s housing costs are three times more than those of their grandparents, that is not sustainable.

“Rent controls exist in many cities across the world, and I want our cities to have those powers too - and tenants to have those protections. 

“We also need to tax undeveloped land held by developers and have the power to compulsorily purchase. As Ed Miliband said: ‘use it or lose it’. Families need homes.”

Rent controls, which cap the amount that a landlord can charge in rent, have been introduced in cities such as New York and Paris.

Mayor of London Sadiq Khan has backed their introduction in the capital, where average rents reached 74 per cent of disposable income in 2016, according to Landbay.

Those in favour of the policy say it would prevent tenants from being exploited and boost the economy by allowing people to spend more of their disposable income on other goods and services.

It could also improve productivity by ensuring people are able to live closer to their workplace rather than having to travel long distances.

But opponents of the policy argue that it would ultimately harm the most disadvantaged by encouraging landlords to leave the market, limiting supply while pushing up demand.

Instead, they claim high rents are a consequence of limited supply and a market signal that more housing needs to be built.

Although Labour has previously also pledged to increase the rate of housebuilding, the supply of housing would inevitably continue to lag behind demand in the short term.

David Cox, chief executive at ARLA Propertymark, the professional body for letting agents, said: “Whenever and wherever rent controls are introduced, the quantity of available housing reduces significantly, and the conditions in privately rented properties deteriorate dramatically.

"Landlords, agents, and successive governments over the last 30 years have worked hard to improve the conditions of rented properties and this is like taking two steps backwards. 

“Rent control is not the answer – to bring rent costs down we need a concerted house building effort to increase stock in line with ever-growing demand.”

Mike Richards, director at London-based Mortgage Concepts Associates, said rent controls would be “another death knell for the buy-to-let market”.

He said: “If we have got landlords at the moment who have been hit by everything the current government has thrown at them, restricting or controlling rents is going to be the final nail in the coffin.