SiteSwitchText

SiteSwitchDismissText

Skip to content

Buy
Buy

Find the ideal house or apartment to buy. Let us guide you to your next home.
Properties for Sale in London

New Homes and Developments

Homes with Virtual Tours

Guide to Buying

Stamp Duty Calculator

Investment Opportunities

Private Clients

Prime Central London Team

London APAC Team
Rent
Rent

Find the ideal house or apartment to rent. Let us guide you to your next home.
Homes to Rent

New Homes & Developments

Homes with Virtual Tours

Guide to Renting

Renting Your Student Home

Guide to Student Rentals

Legal & Financial

Tenant Fees
Services
Services

Discover how we can help your residential property goals with integrated, data-led services.
View all Services
Sell

Market Appraisal

Selling Your Property

The Private Office

Private Clients

Prime Central London

Landlords

Why Choose CBRE

Lettings Market Appraisal

Guide to Renting your Flat to Students

Management Services

Corporate Letting Services

Landlord Fees

Tax Advice
Insights & Research
Insights & Research

Our research and thought leadership platform delivers actionable insights to help you make informed residential property decisions.
Explore Insights & Research
Area Guides

London Area Guides

University Area Guides

University Guides

Latest Research

Market Reports

News & Views

Property Transactions

Mortgages

Resources

Stamp Duty Calculator

Buy to Stamp Duty Calculator
About Us
Contact

Visit Another Country or Region

Hong Kong

France
Serbia
United Kingdom

Bahrain

Residential News & Views

Rent Controls: Solution or Setback?

Our Head of Residential Capital Markets, Andrew Saunderson, provides his views and insights on rent controls.

Rent Controls

The Private Rented Sector (PRS) plays a vital role in the UK housing market; it occupies almost a third of total stock in London and Manchester - 20% nationally - and has grown 14% over the past year to more than 78,000 units in the UK with almost 164,000 in the pipeline, according to BPF.

But, despite this growth, the demand for PRS still outweighs the supply of rental homes and rents are rising. Add to this private Buy to Let landlords exiting the market, the cost-of-living crisis, EPC requirements and recent regulation changes in Scotland, and we have a perfect storm of conditions that has sparked debate around the pros and cons of UK-wide rent controls and whether they have a role to play in resetting the balance.

As we know, demand is already far outstripping supply in the PRS, and imposing rent controls is likely to shrink supply even more. We’ve been here before; imposing rent controls on a market with a severe lack of supply only exacerbated the problem of the shrinking rental sector after WWI, deterring private landlords and forcing the Government to prolong rent controls for over 70 years. It would be naïve to ignore the lessons of the past and we must not underestimate the risk we currently face due to the lack of supply in the PRS.

Rent controls would also likely steer institutional investors away from the Build-To-Rent (BTR) sector to other markets due to concerns that rigid rent regulation does not adapt or align to unexpected economic changes, such as high inflation, thus impacting the return on investment. Again, we should look to lessons that others have learnt here. Results from a 2019 U.S. survey found that 34% of multifamily market participants in cities and states with rent control (or considering rent control) had already cut back on investment or development, and a further 49% were considering doing so. The maturity of the U.S. multifamily market suggests a similar, if not bigger, impact on UK BTR investor sentiment.

Poorer living conditions are also a valid concern. Landlords are already facing rising costs to maintain their properties as inflation increases and, given the majority of the PRS is owned by private buy-to-let landlords in the UK, introducing rent controls is likely to worsen this problem, in addition to meeting likely new minimum EPC requirements; landlords will deploy less capital to their assets, leaving tenants with fewer options and poor-quality homes.. Additional rent controls that narrow yields further will only discourage both private and institutional investors, especially at a time when interest rates are rising.

Although there are some short-term benefits of rent controls, it’s clear that they would not outweigh the long-term cost of supply shortages and the risk of poorly maintained stock. Implementing rent controls would risk reversing the growth of the PRS over recent years and halt development of the emerging BTR sector, which with increased build costs, is already struggling with viability.

Ultimately if the BTR sector is going to continue to grow it needs to continue to attract institutional investment and investors need predictability, and even the anticipation of future rent controls will deter investment. Once rent controls are embedded into legislation, it is very difficult to remove them, and even if they are removed, it’s likely to cause surges in rental prices as landlords reset the rent back to market levels.

The primary focus must be on fixing the chronic supply shortages, incentivising BTR investment, and reducing the barriers that exist within the planning framework. We are a long way off from hitting our housing targets, and the way to ensure housing security for the long-term is to focus on supply, not imposing rent controls.

Contacts

Andrew Saunderson

Head of UK Residential Capital Markets

Email

Item 0 Item 1 Item 2 Item 3 Item 4 Item 5

Properties for Sale in London
Properties for Rent in London
New Developments to Buy in London
New Developments to Rent in London
Houses for Sale in London
Flats for Sale in London
All Properties for Sale in UK
Register with Us
Landlords
Area Guides

Global Web Privacy and Cookie Notice
Our Response to Schrems II
CBRE Intranet
Privacy Notice
Client Money Handling Procedure
RICS Client Money Protection Scheme

Copyright © 2024 CBRE. All rights reserved.