Jeremy Corbyn’s proposed rent controls would “spell disaster for tenants”, landlords have warned, amid mounting concern from lenders and charities about Labour’s planned intervention in the housing market.
Even Shelter, the housing charity which until now has been sympathetic toward Labour’s housing policies, warned the moves could “exacerbate Britain’s housing crisis”.
A lengthening of tenancies to five years and inflation-linked controls on rent rises within those agreements is already established Labour policy. But Mr Corbyn, giving his address to party members in Brighton yesterday, suggested Labour would go further and directly limit rent based on models adopted in other countries.
Polly Neate, chief executive of Shelter, said this would result in a reduction of rental property.
Speaking on the Radio 4’s Today programme, she said: “What ends up happening is landlords will just sell because they can’t make any money.
“That actually exacerbates the crisis, because you end up with an even greater housing shortage.”
Buy-to-let investors swiftly echoed Ms Neate’s concerns.
David Smith, the policy director at the Residential Landlords’ Association, the biggest trade body for private landlords, branded the proposals a “disaster for tenants”. He said: “History proves rent controls stifle investment and reduce supply.
“This is what happened before controls were lifted in the 1980s and it led to a reduction in the quality of rented housing.
“Private sector rents are increasing by less than inflation and the call for rent controls is a diversion from the real need to increase the supply of rented housing. Instead of attacking landlords, the private rented sector should be seen as part of the solution to the housing crisis.”
Lenders are also unsettled. New rules recently introduced by the Prudential Regulation Authority require buy-to-let lenders to use rents as a key factor in gauging capital security. Rental controls would put this at risk, with unknown consequences for lenders’ existing books as well as future lending.
A spokesman for UK Finance, formerly the Council of Mortgage Lenders, said: “Buy-to-let lending has already begun to decline in response to regulatory and tax reforms, and the prospect of rent controls adds further uncertainty and risk.
“This could affect the supply of funding for the private rented sector, with potentially significant implications for landlords and tenants.”
Mortgage analyst Ray Boulger of John Charcol, the broker, said: “Currently lenders require a landlord to prove their rental income would cover a proportion of the repayments – typically between 125pc and 145pc – so any cap could play havoc.
“It’s one of those policies that has not been thought through in terms of unintended consequences.”
Individual landlords voiced other fears. Matthew Bennett, who owns a number of rental properties in south London, said controls could create a “black market” for renters.
“A lot of landlords would go underground,” he predicted. “Where there’s a will there’s a way and people will want to live where they want to live. They will come to an agreement with the landlord. That’s potentially dangerous.”
Mr Bennett added that the real way to fix the housing crisis was by building enough new stock, saying landlords are an easy target. “If Labour come into power I fear they will target landlords just for who they are. There would be no thought as to what we do for the economy.”
Landlord Graeme Cook, who owns 37 properties in the north of England, warned the policy would see all but the “safest” tenants being turned away.
He said previous incarnations of rental control encouraged tenants to take landlords to a tribunal. A similar situation today would mean landlords only want to take on tenants with a low risk of challenging them.
“You would go towards people you know will pass an affordability check,” he said. “Landlords would start to grill prospective tenants: ‘how much do you spend on haircuts? How much do you spend on holidays? I’m sorry, you can’t afford this property’.”
Private landlords have faced a series of changes in the past year, beginning the 3 percentage point stamp duty surcharge on additional property purchases introduced last year. Tax relief changes have also eaten into profits for higher-rate taxpayers, while tighter lending restrictions, due to be introduced this weekend, will make it harder for some to refinance.