Buy-to-let (BTL) lender Landbay asked landlords: “How will you react when rent caps are introduced?”
Some 37% of respondents said they would stop investing in their properties.
Some of the proposals in the Renters’ Rights Bill include requiring landlords to give a two-month lead time when increasing rents, and giving tenants the right to challenge them through tribunals.
The bill is currently in the report stage at the House of Lords.
Rob Stanton, sales and distribution director at Landbay, said: “It’s really important that we go into the bill with our eyes open. Rent control always has unintended consequences – and let’s be frank, that is exactly what we are signing up for with the Renters’ Rights Bill.”
Referring to other cities where rent controls had been brought in, Stanton added: “We can see it in areas that have adopted it like Berlin, New York, and San Francisco.
“Trying to manipulate the market will lead to landlords leaving their properties untouched and not investing in them, potentially, lowering the quality of the housing stock. In a free market, rents reflect demand and scarcity. That will no longer be the case when the bill comes in.”
Landbay calculated that if landlords decided to stop investing in their existing properties, this would impact 1.75 million properties across England.
The impact of rent controls across the world
Landbay said when rent freezes were introduced to Berlin five years ago, this “distorted” the rental market and resulted in some landlords converting properties to owner-occupied dwellings. Others upgraded properties to qualify for exemptions, some sold up and others left properties vacant.
The lender said rental caps in New York City led to workarounds in the form of illegal sublets and “under-the-table payments”, creating a “two-tier market”.
In San Francisco, Landbay said rent controls had discouraged landlords from building, resulting in a decline in rental housing supply by around 15%.
A squeeze on rental supply?
Landbay looked at other ways landlords might react to the introduction of rent controls, finding that 16% were prepared to sell all of their rental properties and 12% would bend the rules to keep rents at a reasonable market level.
Stanton said: “Rent controls, while well-intentioned, risk driving landlords out of the market or into workarounds that undermine the very tenants they aim to protect. We’re staring at a future where quality rented housing dwindles. If 350,000 landlords, with roughly 750,000 properties, leave the private rented sector and landlords stop investing in 1.75 million properties, at least 44% of England’s remaining private rented sector will face neglect and under investment.
“The data from Berlin, from New York, and from San Francisco screams caution – capping rents distorts markets, slashes supply, and creates black markets. Landlords aren’t the enemy; they’re responding to a market being squeezed dry. Ignore the evidence, and we’ll all pay the price. This is very bad news for the government.”
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