Zoopla: Rent controls a step too far against regulatory backdrop

Real estate firm Zoopla has spoken out against rent controls, especially in the tough regulatory environment landlords operate in.

The Scottish government last week froze rents and banned landlords from evicting tenants until at least March 2023, in a bid to curb the impact of the cost-of-living crisis.

The UK government has taken a different approach, by capping the typical cost of energy at £2,500.

Writing in its Rental Market Report, Zoopla said: “In periods of fast rental growth, the topic of controlling or moderating rents often comes to the fore.

“There are many formats for these controls -often with the rent set at a market rate up front and successive increases linked to the rate of consumer price inflation or wage growth.

“The focus of the UK government is the taxation of landlords and regulations to improve standards of rental housing, rather than controlling rents.

“UK landlords have some of the toughest tax treatments and the upcoming Rental Reform Bill in England will improve the standard of homes but will also increase costs further for landlords.

“Against this regulatory backdrop, talk of possible rent controls will simply push more landlords to exit the sector, worsening the supply issue and ultimately cause rents to increase.”

The tougher conditions landlords have had to operate in the past few years – with changes like the elimination of mortgage income tax relief and the 3% stamp duty surcharge – have already been blamed on investors exiting the sector, hitting supply.

The Zoopla report added: “There is no real prospect of a significantly improved rental supply in the near term, as private landlords continue to sell off homes and renters stay put for longer.

“Higher mortgage rates will compound the pressure on demand, making it harder for would-be first-time buyers to stop renting and purchase a home.

“The imbalance in supply and demand is here to stay, and rents will continue to rise to above-average levels into 2023 across the more affordable markets.

“There is headroom for some renters to pay more -especially outside of London and the South East -where rental affordability will remain a drag on demand.”

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