Government strategies to reduce pressure on the rental market are crucial, says Dorian Gonsalves.
As the 2015 General Election gets closer, Dorian Gonsalves, Belvoir’s Director of Commercial and Franchising, warns of the impact of rental caps and asks for governments to attack the problem of reducing tenant demand in a pressurised market.
“In recent months many organisations and individuals have come around to the idea that rents across the country are escalating out of control and are reinforcing the need for rental controls,” says Dorian. “Sadly 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 problem, 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 suitably analysed, the call for rental controls due to rents spiralling out of control proves to be a inconsistent argument.
“The current lack of housing stock in the UK leaves the PRS unable to fulfil tenant demand and more specifically, demand for social housing. Is it really the obligation of a private landlord who may be renting their house for a manner of reasons (such as moving to find work in another part of the country) to be held accountable and pushed to provide lower cost housing for the social sector?
“Enlarged demand for rental properties can be attributed to many factors. For example, looking at the National Office of Statistics, immigration figures have risen by 49% in the last ten years. Adding to this, family units are now smaller, with more divorced and single parents requiring somewhere to live as a family. The mortgage market is becoming progressively difficult to access as a result of the credit crunch, and if tenant demand is high rents will indeed grow, but as our statistics show, rents are definitely not out of control.
“Even though on the face of it rental controls may seem to be a solution to controlling forceful rental rises, the majority of studies show that rents are not rising adequately 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 sell their property or find a different use for it, which will basically make the problem of reduced supply worse.
“I believe that everyone is getting bored of vote-winning sound bites from politicians and now is the time for some joined up thinking between political parties to attack the true problem of high tenant demand. Labour has argued that Britain could learn from Germany, which introduced rent controls, but Germany has a much more plentiful supply of housing, and it is this that certainly reduces rents.
“The PRS operates in a free market and has done so effectively for a long time. Rather than damaging this, it makes much more sense to tackle the true problem of high demand. Successive governments have failed to provide long-term assertive new build policies and workable incentives that will enable first time buyers to satisfy their dreams of buying a property. Ultimately, it is this, rather than rental caps, that will help to decrease tenant demand and keep rents lower.”