tag:theconversation.com,2011:/fr/topics/rent-controls-16470/articlesRent controls – The Conversation2024-01-09T19:16:14Ztag:theconversation.com,2011:article/2185792024-01-09T19:16:14Z2024-01-09T19:16:14ZRent regulations are no silver bullet, but they would help make renting fairer<p>Virtually every week brings news of rising rents or a story of still more renters forced out of their homes by unmanageable rent increases. </p>
<p>The Australian Bureau of Statistics says rents climbed <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/monthly-consumer-price-index-indicator/latest-release">6.6%</a> in the year to October.</p>
<p>If you’re signing a new rent agreement the situation is worse, with landlords charging on average <a href="https://sqmresearch.com.au/weekly-rents.php?national=1&t=1">8.6%</a> more than they did a year ago, and far more – about <a href="https://sqmresearch.com.au/weekly-rents.php?region=nsw%3A%3ASydney&type=c&t=1">15%</a> more than a year ago – in the hotpots of Sydney and Melbourne.</p>
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<span class="caption">Michele Bullock expects rents to climb a further 10%.</span>
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<p>Reserve Bank Governor Michelle Bullock expects things to get worse before they get better. She says rents are likely to climb by a further <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/estimate/27447/toc_pdf/Economics%20Legislation%20Committee_2023_10_26_Official.pdf;fileType=application%2Fpdf#search=%22committees/estimate/27447/0000%22">10%</a> in the next six months or so before easing.</p>
<p>None of this need be inevitable. State and territory governments have the power to prevent outsized rent increases and de facto evictions by regulating rents, helping curb the overall rate of inflation in the process.</p>
<p>Research I helped conduct for Shelter NSW and the Tenants Union of NSW finds regulations to prevent excessive rent increases are <a href="https://files.tenants.org.au/policy/2023-11-RentRegulation-Sisson.pdf">increasingly common</a> throughout advanced economies including the United States, Canada and much of Europe.</p>
<p>It is often said that rent controls would make things worse for both landlords and tenants by <a href="https://www.businessthink.unsw.edu.au/articles/rent-freeze-viable-solution-housing-stress">reducing investment in rental properties</a>. But we found that, where designed well, they can help tenants by enhancing security of tenure and improving affordability. </p>
<h2>How do rent regulations work?</h2>
<p>There are a wide range of approaches, something that is often overlooked. </p>
<p>Some limit rent increases to a fixed percentage annually, ranging from 2% in Ireland to 10% in California. Some limit rent increases to the rate of inflation, although rising inflation has led many jurisdictions to place ceilings on such caps. </p>
<p>And most don’t regulate the initial rent for a tenancy but instead limit increases thereafter, allowing for “vacancy decontrol”.</p>
<p>So-called first-generation controls freeze rents, second-generation controls allow rents to increase gradually, and third-generation controls only limit rents within tenancies, allowing landlords unfettered increases when leasing to new tenants. This graph illustrates these differences. </p>
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<p>As the graph shows, third-generation controls are less about suppressing growth over time than protecting incumbent tenants from exorbitant increases. This means they are less likely to inhibit supply.</p>
<p>Almost all regulations allow for exceptional rent increases when landlords significantly upgrade rental properties or face increased operating costs. This helps to ensure maintenance is not discouraged. </p>
<p>Some regimes even completely exempt newly-built rental properties, either permanently or for several years, which has the downside of leaving a large chunk of the market unregulated.</p>
<h2>How could rent regulation help Australian renters?</h2>
<p>We examined five cases of recently introduced rent regulations – in Australia’s ACT, in Ireland, Oregon, Scotland, and St Paul, Minnesota. </p>
<p>Like most of Australia, all had little recent history of rent regulation. Each introduced its controls in the past decade, and all but Ireland in the past five years. </p>
<p>We examined how helpful each of these regulations might have been by comparing each with rent increases in Sydney.</p>
<p>Ireland’s rent cap is the strictest. It limits annual increases to the lesser of 2% or the annual rate of overall inflation annually in a number of designated “rent pressure zones”. </p>
<p>If this cap was in place in Sydney over the past year, a median renter would have saved $1,976. Ireland’s is the only second-generation regime among the five, with the rent cap applying even where tenancies change.</p>
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<p>The caps in Scotland and St Paul would have also held down increases in Sydney. Each limits annual increases to 3%, which would have saved the median Sydney renter $1,716 in the past twelve months. </p>
<p>However, Scotland allows exceptional increases to cover maintenance and increased costs of up to 6% and St Paul allows exceptional increases of up to 15% and exempts homes built in the past 20 years. Both “decontrol” between tenancies.</p>
<p>Oregon and the ACT are far more permissive. Oregon prevents rent increases greater than 10% or 7% plus inflation annually (whichever is lower) but excludes homes built in the last 15 years. </p>
<p>The ACT limits increases to 110% of the most recent annual increase in Canberra rents measured by the Australian Bureau of Statistics – a unique model internationally. </p>
<p>Neither would have constrained the median Sydney increase over the past 12 months, although each would have prevented the more excessive increases.</p>
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<p>Australia’s recent rent increases have been exceptional. </p>
<p>For most of the past decade, each one of the models examined would have permitted increases in line with or a good deal more than those in Sydney. </p>
<p>While they would have prevented unusually large increases, they would have left most landlords unaffected.</p>
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Read more:
<a href="https://theconversation.com/not-all-rent-control-policies-are-the-same-the-green-party-proposal-deserves-an-open-minded-debate-209039">Not all rent control policies are the same – the Green Party proposal deserves an open-minded debate</a>
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<p>One of the aims of Australia’s latest <a href="https://federalfinancialrelations.gov.au/sites/federalfinancialrelations.gov.au/files/2021-07/NHHA_Final.pdf">National Housing and Homelessness</a> Agreement is to encourage “security of tenure in the private rental market”. </p>
<p>Unlimited rent increases undermine security of tenure, building a case for Australia’s states and territories to regulate rents. </p>
<p>The examples we have examined show such regulations needn’t be at odds with efforts to increase supply. They show that while rent regulation is no silver bullet, it can help make renting more affordable and secure.</p><img src="https://counter.theconversation.com/content/218579/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alistair Sisson has received funding from the Tenants Union of NSW, Australian Council of Social Service, Shelter NSW, QShelter, National Shelter, Mission Australia and Australian Housing and Urban Research Institute. He is a member of Shelter NSW. </span></em></p>The five international models we examined would have prevented excessive rent increases and helped many renters stay in their homes.Alistair Sisson, Macquarie University Research Fellow, School of Social Sciences, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2090392023-07-05T00:32:24Z2023-07-05T00:32:24ZNot all rent control policies are the same – the Green Party proposal deserves an open-minded debate<figure><img src="https://images.theconversation.com/files/535676/original/file-20230704-25-96o30c.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5428%2C3594&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>The ink was barely dry on the Green Party’s recently unveiled “<a href="https://www.1news.co.nz/2023/07/02/green-party-pledges-landlord-register-rent-control-measures/">Pledge to Renters</a>” – which included annual rent increase limits, a rental warrant of fitness and a national register of landlords – before others were consigning it to the policy dustbin.</p>
<p>By Tuesday morning, the prime minister had emphatically <a href="https://www.teaomaori.news/pm-rules-out-greens-rental-cap">ruled out rent controls</a> as part of a potential Labour-Greens coalition after this year’s election: “International experience suggests […] a constraining effect on the number of rentals available,” he said.</p>
<p>The ACT Party housing spokesperson <a href="https://www.1news.co.nz/2023/07/02/greens-renters-policy-attacks-landlords-act/?cb_rec=contentv1_s_0_0_0_0_0_0_0_0_20_True_0">claimed the policy</a> “attacks landlords”, while the vice-president of the Property Investors Federation <a href="https://www.stuff.co.nz/national/politics/132464640/landlords-attack-logic-of-greens-proposed-3-cap-on-rent-rises">said</a> it would lead to a “black market” in rental deals. </p>
<p>Labelling the policy “economically illiterate”, National’s housing spokesperson Chris Bishop <a href="https://www.1news.co.nz/2023/07/02/greens-renters-policy-attacks-landlords-act/">said</a>: “Economists don’t agree on much but almost all agree rent controls […] are counterproductive.” </p>
<p>And it is true – social science research, and economics in particular, can be marshalled to argue against rent controls. One <a href="https://econjwatch.org/File+download/238/2009-01-jenkins-reach_concl.pdf">meta-analysis</a> of 60 studies, for example, found “economic research quite consistently and predominantly frowns on rent control”. </p>
<p>These arguments tend to converge around the notion that controls result in the opposite of their commonly stated objectives: reducing supply and lowering rather than increasing housing standards.</p>
<p>But some perspective is needed. Another <a href="https://www.lse.ac.uk/business/consulting/assets/documents/assessing-the-evidence-on-rent-control-from-an-international-perspective.pdf">international analysis</a> found the “strongly held but highly polarised views” about rent control are “rarely strongly evidence-based”. In fact, there is much more to the debate than many of the partisan arguments suggest.</p>
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<h2>The generation gap</h2>
<p>The research that exists tends to quibble with so-called “first generation” rent controls. These involve freezing rents, akin to the temporary measures put in place during the COVID-19 pandemic. </p>
<p>First generation rent control was especially popular in Europe and, to some extent, the United States during and shortly after the second world war. Some rent control dwellings from that time live on to this day, but they are rare.</p>
<p>Importantly, these measures involve sustaining rent freezes well below market levels – which is not something entertained by the Greens. </p>
<p>However, because the economic literature tends to focus on first generation rent controls – and because this highly partial focus comes to stand for all rent controls in public discussion – the Greens policy has been implicitly lumped in with only one kind of control.</p>
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<p>Research on second and third generation rent controls is less plentiful. But it contains more diversity of disciplinary perspectives – including public policy, sociology, geography and other research fields – and is more equivocal in its findings. </p>
<p>Mainstream economics is <a href="https://www.cambridge.org/nz/universitypress/subjects/economics/history-economic-thought-and-methodology/behind-model-constructive-critique-economic-modeling?format=HB&isbn=9781107069664">famously enamoured with formal models</a> based on assumptions that lead to good theory, but which often run into trouble when applied to the complex social and political systems that shape us.</p>
<p>When we begin to incorporate those complexities in our analysis, the world of rent control looks more varied. As the same comparative study that found a lack of evidence-based perspectives put it: “the impact of rent control depends on its form and economic context […] plus crucially the nature of the welfare system in place”.</p>
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<h2>Not a blunt instrument</h2>
<p>The Greens’ proposal most closely resembles second generation rent controls. These allow for rent increases, but within specified limits (a maximum 3% annual increase under the Greens’ proposal). And only under certain circumstances (such as making significant improvements to the dwelling) can landlords increase rents beyond those limits. </p>
<p>Third generation rent controls, by comparison, only apply <em>within</em> a single tenancy, whereas second generation controls apply <em>within and between</em> tenancies. So, a landlord cannot opportunistically increase the rent, above the specified limit, before a new tenancy begins. </p>
<p>Rent control need not be a blunt instrument. It can include any number of provisions to overcome or ameliorate anticipated perverse outcomes. </p>
<p>Around the world, there’s a range of locally tailored variations of rent control policies. <a href="https://www.lse.ac.uk/business/consulting/assets/documents/assessing-the-evidence-on-rent-control-from-an-international-perspective.pdf">Canada, France, Germany and the Netherlands</a>, for example, each have different approaches to stabilising rent increases for part of their rental housing stock.</p>
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<h2>More informed debate needed</h2>
<p>A big part of the problem with New Zealand’s rent control “debate” is that it misses these kinds of nuance. A better discussion would involve looking at what kind of rent control might work, for what purpose, and with what trade-offs.</p>
<p>This is especially important in the context of the country’s rental affordability problem and wealth distribution disparities underpinned by the current housing system. </p>
<p>As was reported earlier this year, <a href="https://www.stats.govt.nz/news/housing-affordability-more-challenging-for-renters-than-homeowners/">Stats NZ figures show</a> renters are experiencing the housing affordability crisis worse than homeowners. In the year to June 2022, one in four renting households were spending more than 40% of their disposable income on housing costs, compared with one in five mortgaged households.</p>
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<p>Average weekly rents also increased faster than mortgage payments over the past 15 years – by 93%, compared with 48.8%. Given these realities, some kind of policy response is surely logical.</p>
<p>A modest proposal such as the Greens’ policy deserves more than blank rejection. As a <a href="https://www.tandfonline.com/doi/pdf/10.1080/02723638.2021.1958473">recent study</a> of the “mythology” of rent control put it, we ought “to take the trouble to look closely at different kinds of rent control”.</p>
<p>If it is understood as multidimensional, not monolithic, such a policy might at least be seen as one legitimate approach to improving renters’ lives.</p><img src="https://counter.theconversation.com/content/209039/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Baker does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite the claims of landlords and politicians, there is no economic consensus against rent controls. A more nuanced debate would help, given the scale of New Zealand’s housing affordability problem.Tom Baker, Associate Professor in Human Geography, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1764602022-02-08T17:59:10Z2022-02-08T17:59:10ZWhy the NZ government is right to rule out rent controls as a housing crisis solution<figure><img src="https://images.theconversation.com/files/444928/original/file-20220208-13-14nv158.jpg?ixlib=rb-1.1.0&rect=13%2C0%2C2989%2C1985&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Having floated the prospect of introducing <a href="https://www.stuff.co.nz/life-style/homed/renting/127672790/nothing-off-the-table-as-government-considers-rent-controls-to-tackle-unaffordable-housing">rent controls</a> just last week, it seems the government has already ditched the proposal. </p>
<p>In tentatively raising the idea, Associate Minister for Housing Poto Williams pointed out the need for policy solutions to the problem of rapidly rising housing costs. However, Prime Minister Jacinda Ardern has now <a href="https://www.newshub.co.nz/home/politics/2022/02/jacinda-ardern-says-government-not-considering-rent-controls-after-poto-williams-floated-idea.html?">adamantly stated</a>: “We are not considering rent controls.” </p>
<p>There will undoubtedly be some disappointment at this, given the state of New Zealand’s housing and rental markets. In the year to September 2021, <a href="https://www.stats.govt.nz/information-releases/rental-price-indexes-september-2021">rental rates rose</a> between 3.2% and 7.8%, while <a href="https://www.stats.govt.nz/information-releases/labour-market-statistics-december-2021-quarter">annual wage growth</a> was just 2.6%. </p>
<p>On the face of it, controlling rents might be an attractive option for a government looking to tackle declining housing affordability. Unfortunately, the evidence does not support the use of these policies. </p>
<p>Economists have carefully studied rent-control policies for more than 50 years and found they are often ineffective, poorly targeted, and with many unintended consequences. </p>
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<img alt="San Francisco streets and apartments" src="https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444931/original/file-20220208-17-rn7co8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">An expansion of rent control in San Francisco in 1994 led to a 25% decline in available rental units.</span>
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<h2>What rent control can’t control</h2>
<p>While rent-control policies vary from place to place, one way or another they aim to limit increases in housing costs. For example, New York was once famous for essentially holding rents frozen in time (recall <a href="https://www.looper.com/419439/how-monica-can-really-afford-the-apartment-in-friends/">Monica’s apartment</a> in the TV show Friends). Rents in Sweden are negotiated between tenant and landlord associations, and rental rates in Germany are tied to rents on similar housing units.</p>
<p>In the first place, rent control certainly seems to lower the cost of affected rentals. Studies using data from New York in the 1960s show tenants in rent-controlled apartments <a href="https://doi.org/10.1016/0094-1190(89)90027-2">paid less for their housing</a> than tenants in similar non-controlled apartments.</p>
<p>Similarly, studies of the <a href="https://doi.org/10.1016/j.jue.2006.06.004">end of rent control in Massachusetts</a> in 1995 and the <a href="https://doi.org/10.1016/j.regsciurbeco.2021.103737">introduction of rent control in Germany in 2015</a> both show reduced rental rates paid by tenants, although these effects appear to have been short-lived.</p>
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<p>Many other studies, however, show the response of landlords to rent control undermines the goals of the policies. One <a href="https://doi.org/10.1257/aer.20181289">careful analysis</a> of San Francisco, for example, found an expansion of rent control in 1994 led to a 25% decline in available rental units among the newly rent-controlled apartments. </p>
<p>Rather than lease their units at sub-market rates, landlords either sold property into the owner-occupied market or demolished and reconstructed the apartments to escape rent control. Unfortunately, many apartments that had previously been rented by low-income tenants then shifted into the hands of higher-income tenants and homeowners. </p>
<p>A further problem is that controls can lead to higher rents on non-controlled housing. Research suggests landlords may <a href="https://doi.org/10.1006/juec.1999.2163">compensate for losses</a> on their rent-controlled units by raising rents on units not covered by rent controls. Although controls may keep a lid on the cost of individual rentals, they’re unlikely to reduce housing costs overall.</p>
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<img alt="Manhattan apartments" src="https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=368&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=368&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=368&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=463&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=463&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444933/original/file-20220208-13-3gksth.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=463&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">One study of New York showed many tenants were ‘mismatched’ with their rent-controlled apartments.</span>
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<h2>Good for some, but not all</h2>
<p>There’s no doubt rent-controlled houses are great for tenants – if they can find them. In Sweden, rent-controlled apartments are in <a href="https://www.bbc.com/news/business-58317555">such great demand</a> the government manages decade-long waiting lists of prospective tenants. </p>
<p>Of course, renters won’t simply wait in the cold, so existing tenants sublet their apartments to new tenants (without government permission) at prices much closer to market rates. Landlords are also known to charge what are called “<a href="https://www.jstor.org/stable/24862527">key payments</a>” before possession of a rental changes hands.</p>
<p>Part of the reason it’s so hard to find rent-controlled housing is that tenants tend to stick around for much longer than they otherwise would. Studies from <a href="https://www.frbsf.org/community-development/files/increasing-access-to-affordable-housing-in-silicon-valley.pdf">San Francisco</a> and <a href="https://doi.org/10.1016/S0094-1190(02)00502-8">Denmark</a> show rent control significantly reduces the likelihood of a tenant moving out of their apartment. </p>
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Read more:
<a href="https://theconversation.com/five-ways-landlords-unfairly-control-peoples-lives-129511">Five ways landlords unfairly control people's lives</a>
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<p>While those tenants might be quite happy staying put, there are costs involved. A <a href="https://www.jstor.org/stable/3132277">2003 study of New York</a> showed many tenants and dwellings were “mismatched”, with their rent-controlled apartments too big, too small or too far from the right amenities. </p>
<p>Tenants subject to rent control can face <a href="https://doi.org/10.1016/j.jue.2005.03.002">longer commute times</a> and are <a href="https://doi.org/10.1016/j.jpubeco.2004.11.003">less likely to search for work</a> outside their local area if they become unemployed. </p>
<p>Another potential problem is that rent control may discourage landlords from maintaining properties, leading to lower-quality housing for tenants. Massachusetts landlords subject to rent control <a href="https://doi.org/10.1016/j.jue.2006.06.004">skimped on upkeep</a>, failing to maintain paint, plaster or damaged floors and walls. </p>
<p>In New York, landlords allowed housing quality to <a href="https://doi.org/10.1086/261917">deteriorate faster</a> when the difference between market rents and controlled rents was larger. </p>
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Read more:
<a href="https://theconversation.com/rents-can-and-should-be-reduced-or-suspended-for-the-coronavirus-pandemic-135929">Rents can and should be reduced or suspended for the coronavirus pandemic</a>
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<h2>Housing supply remains the best solution</h2>
<p>Rent controls could exacerbate New Zealand’s housing issues. Rental accommodation may be harder to find, no less expensive, and in worse condition than many rentals are already today. But this begs the question of what the government should do instead.</p>
<p>The goal should be well-targeted policies that do not significantly disrupt the functioning of the rental housing market. Policies that too readily interfere with the rental market are likely to be worse for tenants than they are for landlords.</p>
<p>Subsidies for low-income households are one possible solution. But, as has been argued elsewhere, accommodation subsidies <a href="https://www.interest.co.nz/opinion/88223/eric-crampton-says-government-needs-take-steps-encourage-councils-get-new-housing">tend to raise rents</a> further when housing supply is limited. </p>
<p>Rather, the government needs to work faster on fixing the various roadblocks to increasing New Zealand’s housing supply. While this poses significant challenges, they cannot be avoided with a quick-fix policy like rent control.</p>
<p>And while previous governments should have started work on housing supply 20 years ago, the next best time to get started is today.</p><img src="https://counter.theconversation.com/content/176460/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James Graham does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While the idea of rent controls can seem attractive at first glance, the evidence suggests the government is right to be sceptical of their ability to help ease the housing crisis.James Graham, Lecturer in Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1356942020-04-12T20:12:53Z2020-04-12T20:12:53ZAustralia had rent control in wartime. War on coronavirus demands the same response<p>The COVID-19 pandemic is likened to a “war on two fronts” by senior government figures, including Prime Minister <a href="https://www.theaustralian.com.au/inquirer/coronavirus-albaneses-attacks-on-crisis-plan-could-backfire/news-story/22d042de2adceb9046bfc2f21ed5df39">Scott Morrison</a> and Treasurer <a href="https://www.skynews.com.au/details/_6145839019001">Josh Frydenberg</a>. On one front is the pandemic, which threatens to put unprecedented strain on the health system; on the other front, the lockdown is devastating the economy and employment.</p>
<p>These impacts have prompted debate about <a href="https://theconversation.com/lessons-from-the-great-depression-how-to-prevent-evictions-in-an-economic-crisis-134644">protection of renters</a>. During the second world war Australia implemented rent control, protecting tenancies for decades afterwards. In this coronavirus “war”, governments should take inspiration from the past and again implement rent control.</p>
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Read more:
<a href="https://theconversation.com/rents-can-and-should-be-reduced-or-suspended-for-the-coronavirus-pandemic-135929">Rents can and should be reduced or suspended for the coronavirus pandemic</a>
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<p>We have already seen governments adopt other “wartime” measures. Commonwealth and state governments have joined forces in a national cabinet, <a href="https://www.afr.com/politics/federal/national-cabinet-creates-a-new-federal-model-20200318-p54bar">likened to the wartime cabinet</a> Australia had <a href="https://www.aph.gov.au/About_Parliament/House_of_Representatives/Powers_practice_and_procedure/Practice7/HTML/Chapter2/Cabinet">during the second world war</a>.</p>
<p>Images of thousands of Australians queuing for welfare <a href="https://www.smh.com.au/national/covid-19-crisis-what-will-australia-look-like-on-the-other-side-20200327-p54ei6.html">evoke memories of hardship not seen since the Great Depression</a> and then the war. The <a href="https://theconversation.com/vital-signs-scott-morrison-is-steering-in-the-right-direction-but-were-going-to-need-a-bigger-boat-135209">scale of stimulus</a> is unlike anything seen in Australia before, eclipsing the Global Financial Crisis stimulus package.</p>
<h2>Renters already have it tough</h2>
<p>Renters are a sizeable and vulnerable cohort. <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/2071.0%7E2016%7EMain%20Features%7ESnapshot%20of%20Australia,%202016%7E2">Almost one in three Australians</a> live in rental properties. In Australia, renting has increased from a low of <a href="https://www.ausstats.abs.gov.au/ausstats/free.nsf/0/75A73F3CE603A32ECA2574CE00168284/$File/Census%2086%20-%20Cross-Classified%20Characteristics%20of%20Persons%20and%20Dwellings,%20Australia.pdf">25% of households in 1986</a> to <a href="https://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/0">31% in 2016</a>.</p>
<p>Not only are more Australians in rentals, but they are renting for longer. However, as tenancy is less secure than ownership, <a href="https://apo.org.au/node/302980">housing insecurity is a growing problem</a>.</p>
<p>Renters are typically financially worse off than home owners. Based on my analysis of 2016 Census data, the unemployment rate among renters was 10.9% compared to 5.2% for owners.</p>
<p>Renters also generally have lower incomes. My census analysis has found almost half of renters earned less than A$649 a week, compared with only 31% of owners with a mortgage. (Comparisons of renters with outright owners can be misleading, as outright owners have much lower housing costs.)</p>
<p>Lower incomes mean a higher proportion of income is spent on housing. Households with a mortgage spend an average of <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4130.02017-18?OpenDocument">15.9% of household income on housing compared to 20.2% for private renters</a>. Further, <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4130.0%7E2017-18%7EMain%20Features%7EHousing%20Affordability%7E5">43% of low-income renters experience housing affordability stress</a> (<a href="https://theconversation.com/housing-affordability-stress-affects-one-in-nine-households-but-which-ones-are-really-struggling-96103">defined</a> as a household in the bottom 40% for income spending over 30% of income on housing).</p>
<p>These renters are highly vulnerable to the impacts of the pandemic.</p>
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Read more:
<a href="https://theconversation.com/private-renters-are-doing-it-tough-in-outer-suburbs-of-sydney-and-melbourne-120427">Private renters are doing it tough in outer suburbs of Sydney and Melbourne</a>
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<h2>COVID-19 is making it way tougher</h2>
<p>The economic crisis gripping Australia will <a href="https://www.abc.net.au/news/2020-03-30/coronavirus-wage-subsidies-government-businesses-workers/12103108">affect an estimated 6 million jobs</a>. But almost 1 million <a href="https://bcec.edu.au/assets/2020/03/BCEC-COVID19-Brief-3-Job-Seekers-and-Keepers_FINAL.pdf">casuals are ineligible</a> for the federal government’s <a href="https://www.abc.net.au/news/2020-03-30/coronavirus-wage-subsidies-government-businesses-workers/12103108">$A130 billion wage subsidy</a> paid to businesses to retain workers. </p>
<p>Disproportionate numbers of renters work in these casual jobs. Their already high rates of financial stress are likely to increase as they lose the income they rely on to pay the rent.</p>
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Read more:
<a href="https://theconversation.com/coronavirus-puts-casual-workers-at-risk-of-homelessness-unless-they-get-more-support-133782">Coronavirus puts casual workers at risk of homelessness unless they get more support</a>
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<p>As business revenues plunge, there are also <a href="https://theconversation.com/the-case-for-a-rent-holiday-for-businesses-on-the-coronavirus-economic-frontline-134890">calls for commercial landlords to provide rent holidays</a>. At least one <a href="https://www.abc.net.au/news/2020-03-28/coronavirus-rental-crisis-looms-renters-landlords-under-pressure/12096388">major retailer has refused to pay rent</a>. To save businesses, the national cabinet last week <a href="https://www.pm.gov.au/media/update-coronavirus-measures-070420">announced</a> a mandatory code of conduct for commercial tenancies, reducing rents proportionate to reduced turnover.</p>
<p>Home owners are able to seek relief from banks, who are offering to <a href="https://www.abc.net.au/news/2020-03-26/are-banks-freezing-mortgages-banks-putting-payments-on-hold/12090642">freeze housing mortgages</a>. Banks are still capitalising interest, meaning owners face extended loan periods or increased payments following the freeze.</p>
<p>To date, the national cabinet has only agreed on an <a href="https://www.pm.gov.au/media/press-conference-australian-parliament-house-act-13">eviction moratorium for residential tenancies</a>. It’s welcome but could simply shift payment or eviction into the future for households unable to pay rent – the moratorium <a href="https://www.abc.net.au/news/2020-04-01/coronavirus-eviction-moratorium-in-australia-what-does-it-mean/12105188">does not waive the requirement to pay rent</a>. Some landlords are <a href="https://www.theage.com.au/national/victoria/landlords-rush-to-throw-out-tenants-in-eviction-ban-confusion-20200408-p54idq.html">rushing to evict</a> before state and territory governments follow <a href="https://www.sbs.com.au/news/what-happens-if-the-coronavirus-pandemic-impacts-your-ability-to-pay-rent">early mover Tasmania</a> in putting the moratorium into effect. </p>
<h2>A warlike crisis calls for a wartime responses</h2>
<p>During the Great Depression, calls for greater protection for renters resulted in policies <a href="https://theconversation.com/lessons-from-the-great-depression-how-to-prevent-evictions-in-an-economic-crisis-134644">like rent control</a> at state level. Australia’s entry into the second world war ushered in a national approach. </p>
<p>The Menzies government introduced rent control in 1939. Curtin’s wartime cabinet strengthened rent control in 1941, fixing rents at 1940 levels. Independent tribunals administered rent variations.</p>
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Read more:
<a href="https://theconversation.com/explainer-what-are-rent-controls-and-who-benefits-from-them-56841">Explainer: what are rent controls – and who benefits from them?</a>
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<p>Rent control left a lasting legacy. States took responsibility for rent control in 1948, implementing their own schemes. </p>
<p>In Victoria, rent control sat alongside public housing, offering two strong forms of protection to renters from 1938 to the mid-1950s, when both were wound back, in favour of home ownership. Despite this, rent control remained in force in Victoria, <a href="https://web.archive.org/web/20091021174301/http://www.consumer.vic.gov.au/CA256902000FE154/Lookup/CAV_Publications_Consultations_Reviews_3/$file/Landlord_and_Tenant_Act_Options_Paper.pdf">protecting thousands of tenancies until the 1980s</a>.</p>
<p>The situation today is remarkably similar to that of the 1940s. In recent years growing numbers of Australians have found themselves in precarious rentals. While home ownership soared from the 1950s, in recent decades ownership rates have fallen as housing unaffordability has risen. </p>
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Read more:
<a href="https://theconversation.com/fall-in-ageing-australians-home-ownership-rates-looms-as-seismic-shock-for-housing-policy-120651">Fall in ageing Australians' home-ownership rates looms as seismic shock for housing policy</a>
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<p>In 2016 <a href="https://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/2?opendocument">rental rates in Victoria</a> reached <a href="https://www.ausstats.abs.gov.au/ausstats/free.nsf/0/FF413B498C06BB2ECA25787900179E63/$File/1961%20Census%20-%20Volume%20II%20-%20Part%20IV%20VICTORIA%20Characteristics%20of%20Dwellings%20and%20Householders.pdf">highs not seen since the late 1950s</a>, when virtually all rents were controlled. Low-income households have been <a href="https://theconversation.com/growing-numbers-of-renters-are-trapped-for-years-in-homes-they-cant-afford-125216">spending unsustainable amounts on rent</a> even before the pandemic hit.</p>
<p>This “war on two fronts” will push many to the brink. A moratorium on evictions will delay the pain, but not avoid it. The national cabinet should take inspiration from Australia’s wartime cabinet and regulate rents nation-wide.</p>
<p>The <a href="https://www.business.gov.au/Risk-management/Emergency-management/Coronavirus-information-and-support-for-business/Relief-for-commercial-tenancies">lowering of commercial rents under the new code of conduct</a> will prevent many business bankruptcies. Setting residential rents at affordable levels would also protect millions of vulnerable Australians. Such a policy would be consistent with Finance Minister Mathias Cormann’s concept of “<a href="https://www.theguardian.com/australia-news/2020/mar/29/australia-open-to-uk-style-wage-subsidy-to-ease-coronavirus-pain-cormann-says">spread[ing] the pain as fairly and equitably as possible</a>” by sharing the losses with landlords.</p>
<p>Regulating rents would leave a lasting positive impact on Australia. We would come out of this crisis with a fairer rental system than we started with. And hundreds of thousands, if not millions, would be spared the stress of facing the threat of eviction.</p><img src="https://counter.theconversation.com/content/135694/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Liam Davies receives funding from an Australian Government Research Training Program Stipend Scholarship, and an AHURI Housing Postgraduate Scholarship Top-up. He is a member of PIA Victoria.</span></em></p>Government action to control rents isn’t unprecedented. Menzies did it in the second world and subsequent state measures kept rents in check for decades. Now extreme circumstances justify it again.Liam Davies, PhD Candidate, Centre for Urban Research, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1155892019-04-18T12:55:35Z2019-04-18T12:55:35ZLandlords will be forbidden from evicting tenants for no reason – but reform has only just begun<figure><img src="https://images.theconversation.com/files/269990/original/file-20190418-28103-jwn7fs.jpg?ixlib=rb-1.1.0&rect=0%2C32%2C5463%2C3604&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">No place like home. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/brick-houses-on-panoramic-shot-muswell-285246164?src=A1xaQbH2jMwQ7eDNWhucIg-1-22">Shutterstock.</a></span></figcaption></figure><p>Change is coming. Soon, private tenants in England will have the security <a href="https://www.tandfonline.com/doi/abs/10.1080/13676261.2016.1184241">they need</a> to call their rented house a home. The UK government <a href="https://www.gov.uk/government/news/government-announces-end-to-unfair-evictions">has announced</a> plans to abolish “no fault” Section 21 evictions in England, meaning that landlords will no longer be able to evict tenants without a legitimate reason. </p>
<p>Nearly <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/774820/2017-18_EHS_Headline_Report.pdf">one in five households in England</a> live in the private rented sector. At present, no fault evictions cause significant insecurity for tenants, as well as negative impacts on <a href="https://housingevidence.ac.uk/publications/housing-insecurity-and-mental-health-an-evidence-review/">mental health</a> and <a href="https://housingevidence.ac.uk/wp-content/uploads/2018/08/R2018_06_01_Frustrated_Housing_Aspirations_of_Gen_Rent.pdf">well-being</a>. So an end to Section 21 will have a real, positive impact on millions of households, preventing them from being uprooted at short notice. It could also help to <a href="http://england.shelter.org.uk/professional_resources/policy_and_research/sustain/downloads/6424_Sustain_Final_Report_for_web_opt.pdf">prevent homelessness</a>, since <a href="https://www.homeless.org.uk/sites/default/files/site-attachments/HL-in-Numbers-The%20single%20biggest%20cause.pdf">the biggest single cause</a> is the ending of a tenancy in the private sector. </p>
<p>As <a href="https://www.theguardian.com/society/2018/jun/09/more-than-1m-families-waiting-for-social-housing-in-england">waiting lists</a> for social housing grow, the private rented sector is accommodating more vulnerable and low-income households, as well as growing numbers of families with children. Yet <a href="https://housingevidence.ac.uk/wp-content/uploads/2018/08/R2018_06_01_Frustrated_Housing_Aspirations_of_Gen_Rent.pdf">research shows</a> that insecure tenancies aren’t the only challenge facing private tenants. Poor quality and unaffordable housing remain key concerns, right across the UK. </p>
<h2>A state of disrepair</h2>
<p>The latest government statistics show that <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/774820/2017-18_EHS_Headline_Report.pdf">one in four privately rented houses</a> in England did not meet <a href="https://www.gov.uk/government/publications/a-decent-home-definition-and-guidance">the government’s own standards</a> for decent homes. This means that around 1.1m private renters are living in homes which contain dangerous hazards, are not in a reasonable state of repair, or lack suitable heating. </p>
<p>With Section 21 in place, tenants are vulnerable to “<a href="https://www.bbc.co.uk/news/newsbeat-47613386">revenge evictions</a>” if they complain about poor conditions in their homes. Citizens Advice found that tenants had a <a href="https://www.citizensadvice.org.uk/about-us/policy/policy-research-topics/housing-policy-research/Touch-and-go/">46% chance</a> of being served a Section 21 notice if they complained to the local council about their landlord. </p>
<p>Ending Section 21 should give tenants more confidence to speak out against dangers, without the threat of losing their home. But this will depend on whether councils have the funding needed to enforce standards and compel landlords to carry out repairs. </p>
<p>Historically, enforcement has been <a href="https://research.rla.org.uk/wp-content/uploads/post-code-lottery-enforcement-prs.pdf">a postcode lottery</a> and landlords are rarely prosecuted. In the context of austerity, where local councils have seen spending cuts of <a href="https://www.bbc.co.uk/news/uk-england-46988310">up to 40%</a> since 2009/10, there’s little to indicate that more consistent enforcement will be possible.</p>
<h2>Rent controls and reclamation</h2>
<p>Tenants also face issues of affordability; particularly vulnerable, <a href="http://www.nationwidefoundation.org.uk/wp-content/uploads/2018/09/Private-Rented-Sector-report.pdf">single parent families and low-income renters</a>. This issue has worsened due to <a href="https://theconversation.com/housing-benefit-freeze-still-driving-tenants-from-their-homes-despite-universal-credit-reforms-110332">the housing benefit freeze</a>, which has kept allowances at the same rate since 2016, while rents have continued to rise, meaning families are facing considerable hardships. </p>
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Read more:
<a href="https://theconversation.com/housing-benefit-freeze-still-driving-tenants-from-their-homes-despite-universal-credit-reforms-110332">Housing benefit freeze still driving tenants from their homes, despite Universal Credit reforms</a>
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<p>Even with the reforms to Section 21, it would still be possible for landlords to take advantage of affordability issues, and unreasonably increase the rent to force tenants out of their home. Appropriate safeguards must be in place to stop this from happening.</p>
<p>Rent stabilisation measures – like those in place <a href="http://lselondonhousing.org/2018/10/rent-controls-lessons-from-international-experience/">across much of Europe</a> – are one solution. These measures, which can restrict when rent can be increased, or by how much, are even supported by <a href="https://research.rla.org.uk/wp-content/uploads/Longer-Term-Tenancies-and-the-Private-Rented-Sector.pdf">nine out of ten landlords</a> in England and Wales. </p>
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<img alt="" src="https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=345&fit=crop&dpr=1 600w, https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=345&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=345&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=434&fit=crop&dpr=1 754w, https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=434&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/269992/original/file-20190418-28100-1lhbaku.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=434&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Berlin is well known for its rent controls.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-central-berlin-on-bright-1082554628?src=cMVhvGqds3l54wrm4PMFkQ-1-23">Shutterstock.</a></span>
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<p>Reforms need to be introduced carefully, to minimise any unintended consequences. For example, landlords might become more risk averse, which could lead to <a href="https://england.shelter.org.uk/__data/assets/pdf_file/0009/1581687/Stop_DSS_Discrimination_-_Ending_prejudice_against_renters_on_housing_benefit.pdf">greater discrimination</a> against tenants who claim benefits. Or, they could decide to let their property on <a href="https://research.rla.org.uk/report/long-term-lets-short-term-lets-airbnb-new-buy-to-let/">Airbnb</a> instead. </p>
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Read more:
<a href="https://theconversation.com/airbnb-and-the-short-term-rental-revolution-how-english-cities-are-suffering-101720">Airbnb and the short-term rental revolution – how English cities are suffering</a>
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<p>So the <a href="https://www.gov.uk/government/consultations/overcoming-the-barriers-to-longer-tenancies-in-the-private-rented-sector">government’s proposed reforms</a> to the <a href="https://www.gov.uk/government/consultations/considering-the-case-for-a-housing-court-call-for-evidence">court process</a> and <a href="https://www.rla.org.uk/landlord/documents/rent_arrears/section8.shtml">Section 8</a> are vital, to give landlords confidence that they can reclaim possession of their property quickly, for legitimate reasons. This will help to ensure that good landlords have the support needed to continue letting out safe and secure homes. </p>
<h2>Learning from Scotland</h2>
<p>Clearly, ending Section 21 is only the first step on a long path of reforms needed to modernise the private rented sector. But English lawmakers can look to Scotland for a good example of how to tackle all the different challenges facing the private rented sector in a joined-up way. </p>
<p>There, all new private tenancies since December 2017 are “<a href="https://scotland.shelter.org.uk/get_advice/advice_topics/renting_rights/renting_from_a_private_landlord/the_private_residential_tenancy">private residential tenancies</a>”. They are open-ended, meaning the tenant can remain in the property as long as they wish, unless the landlord uses one of the 18 grounds for eviction, such as wishing to sell the property. When this happens, the amount of notice required varies depending on how long the tenant has lived there and the grounds for eviction used.</p>
<p>Rent increases are restricted to once a year, and can be referred to a “rent officer” to adjudicate. Local authorities can also apply to the Scottish government to <a href="https://scotland.shelter.org.uk/__data/assets/pdf_file/0011/1527590/Shelter_RentReport_May18_screen3_1.pdf/_nocache">limit rent increases</a> in specific areas.</p>
<p>Private tenants can take complaints to <a href="https://blog.scotland.shelter.org.uk/tribunal-wins-private-tenants-show-powers-new-rules/">the new housing tribunal</a> for free, without needing a solicitor to represent them. It is designed to be less adversarial than the court process. Among its many powers, the tribunal can serve a Repairing Standard Enforcement Order on landlords, which specifies work the landlord must undertake to ensure the property meets the <a href="https://www.gov.scot/publications/repairing-standard/">“repairing standard”</a>. </p>
<p>Though these reforms are still in their infancy, and by no means perfect, they show how security of tenure is only one element of a modernised sector. Other parts of the UK would do well to learn from the different approaches, all while collecting evidence on what works, sharing experiences and supporting tenants and landlords to understand their new rights and responsibilities.</p>
<p>Ending the “no fault” ground for eviction is <a href="https://www.tandfonline.com/doi/abs/10.1080/13676261.2016.1184241">vital for tenants</a> to be able to put down roots, feel settled and make their private rented property a home. But reform can’t stop there.</p><img src="https://counter.theconversation.com/content/115589/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Simcock receives funding from the Residential Landlords Association to undertake research on welfare reforms and the impact of Universal Credit on the private rented sector. Tom previously worked for the Residential Landlords Association as a Senior Researcher.
Tom is a member of the Housing Studies Association Executive Committee. </span></em></p><p class="fine-print"><em><span>Kim McKee is a Co-investigator within the UK Collaborative Centre for Housing Evidence. It is an independent housing evidence centre which is funded by the Economic and Social Research Council, the Arts and Humanities Research Council and the Joseph Rowntree Foundation. Kim has also previously received research funding from the Leverhulme Trust, the Carnegie Trust and the Scottish Government to research issues relating to housing inequalities and housing aspirations.</span></em></p>Housing laws in England can still leave tenants without proper protection, but the latest reforms offer hope for the future.Tom Simcock, Research Fellow, Edge Hill UniversityKim McKee, Senior Lecturer, Social Policy and Housing, University of StirlingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/592042016-05-13T13:22:23Z2016-05-13T13:22:23ZBerlin has banned homeowners from renting out flats on Airbnb — here’s why<figure><img src="https://images.theconversation.com/files/122170/original/image-20160511-18144-154cp2w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">from www.shutterstock.com</span></span></figcaption></figure><p>Anyone planning a weekend getaway to Berlin may have received a nasty shock, when <a href="http://www.bbc.co.uk/news/technology-36185271">the city announced</a> that it has banned residents from renting out their flats to tourists through <a href="https://www.airbnb.co.uk/">Airbnb</a>. The move comes as a result of acute housing shortages, unprecedented population growth and marked changes in Europe’s housing system.</p>
<p>Berlin has long been a go-to city for creatives. Even when it was partitioned into East and West, the city attracted an alternative crowd. And when Berlin’s population shrank – particularly <a href="https://www.statistik-berlin-brandenburg.de/publikationen/stat_berichte/2007/AI3_j06-B.pdf">between 2000 and 2012</a> – the resulting surplus of cheap accommodation drew young artists, musicians and hipsters who were <a href="http://www.theguardian.com/world/2015/aug/01/creative-young-brits-quit-london-affordable-berlin">being priced out</a> of London, Amsterdam or Paris, due to prohibitive house price inflation and ever-increasing rental costs. </p>
<p>Berlin has remained affordable because of a law pithily known as Zweckentfremdungsverbotsverordnung, which <a href="https://www.berlin.de/ba-friedrichshain-kreuzberg/politik-und-verwaltung/aemter/amt-fuer-buergerdienste/wohnungsamt/artikel.158012.php">prevents owners</a> from changing the use of properties. This makes it difficult to convert residential buildings into commercial property, and has protected much of the city’s housing stock from development since the second world war. Similar by-laws also exist in other large German cities, such as Hamburg and Munich. </p>
<h2>Housing squeeze</h2>
<p>Two years ago, Berlin’s parliament altered this law to include short-term leases on “guest-flats”. This made the short-term leasing of entire flats illegal, with breaches punishable by a €100,000 (£78,000) fine. After a two-year notice period, the ban came into effect in May. Under the new law, it’s still legal to rent out rooms in one’s own flat – but they can take up no more than 50% of the floor space. </p>
<p>German research has revealed that buying and renting flats to tourists – via online agencies such as Airbnb and Wimdu – has become highly profitable, with some businesses managing hundreds of properties. Partly as a result of this, Berlin – which once had a surplus of accommodation – now finds itself with a severe and growing shortage.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/122340/original/image-20160512-16422-cpa3st.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">No vacancy.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/julienaksoy/8382144679/sizes/l">Julienaksoy/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>The city is expected to grow by about <a href="http://www.thelocal.de/20150707/politicians-struggle-to-keep-pace-with-berlins-growth">45,000 inhabitants each year</a> – and that’s before accounting for the 30,000 and 60,000 refugees who have arrived in the <a href="http://www.stadtentwicklung.berlin.de/staedtebau/baukultur/berlin-award/index_en.shtml">last two years respectively</a>.</p>
<p>To address these pressures, the city plans to build an additional 220,000 dwellings over the next decade. According to Berlin resident and director of the UrbanPlus planning consultancy Thomas Knorr-Siedow, the planning department intends to <a href="http://www.stadtentwicklung.berlin.de/wohnen/index_en.shtml">bring on 20,000 dwellings annually</a>, of which some 6,000 are to be built by municipal housing companies. </p>
<p>Planning bodies will help ensure that a third of all new housing is affordable, in line with Berlin’s <a href="http://www.citylab.com/housing/2015/07/berlins-brand-new-rent-control-laws-are-already-working/398087/">rent control arrangements</a>. And it is thought that Berlin has about 20,000 “guest-flats”, which – if made available for normal letting – could supply one year’s demand.</p>
<h2>Making a racket</h2>
<p>Housing is not the only factor feeding into this change. Besides the loss of permanent rented flats, short-term letting to tourists is <a href="http://www.dailymail.co.uk/travel/travel_news/article-2729841/Visitors-think-kind-Disneyland-Berliners-call-tourist-free-zones-silent-suitcase-wheels-backlash-against-partying-holidaymakers.html">seen as a nuisance</a> by locals, who complain that stag and hen parties, mass pub-crawls and noisy all-night partying seriously denigrate the quality of life in Berlin’s central neighbourhoods. </p>
<p>Other cities are sitting up and taking note of this approach: for example, Amsterdam is currently engaged in trying to limit Airbnb rentals, too. Here, entire flats can now only be let out at the times when the owners would be on holiday, and have a vacant flat anyway. City authorities enforce a rule which limits short-term holiday rentals, using automated computer systems to monitor online advertising.</p>
<p>Richard Ronald, Professor of Urban Studies at the University of Amsterdam <a href="http://www.uva.nl/over-de-uva/organisatie/medewerkers/content/r/o/r.ronald/r.ronald.html">observes that</a>:</p>
<blockquote>
<p>The city of Amsterdam has struggled with the rise of Airbnb, and while it initially sought to regulate growth, it has increasingly been <a href="http://www.dutchnews.nl/news/archives/2016/02/amsterdam-to-spend-e1m-on-illegal-airbnb-clampdown/">forced to crack down</a> on the sector. In the context of Amsterdam’s large, but very tight rental housing supply, there have been concerns over landlords switching properties from regular contracts to short-term tourist lets. At the same time, tax avoidance and illegal subletting, especially among social tenants, has also been a concern.</p>
</blockquote>
<p>What’s more, Amsterdam is a relatively small city, which is also a highly popular tourist destination, so it has long sought to maximise its tourist tax income, which is levied via hotels and hostels. Unregulated tourist lets impact on that income.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/tLOvhsnO3-s?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>As Ronald’s animation (above) articulates, the real story here is the transformation of Europe’s housing system. Since the financial crisis of 2008, there has been a rapid expansion of private renting across Europe, resulting, in part, from the demise of home ownership. Young people often find themselves unable to secure a mortgage, or to rent from social landlords whose housing stocks have been depleted through subsidised or open market sales, so they have to rent privately. </p>
<p>In tourist hot-spots such as London, Barcelona, Berlin, Edinburgh and Amsterdam, a battle for the rental market has broken out, with housing and planning authorities coming under ever-increasing pressure to act on behalf of residents. Berlin, with its long tradition of rent control, has responded with this novel regulation. This move is likely to push housing back up the agenda right across Europe – especially in cities trying to balance a growing demand for rented accommodation, with a vibrant tourist sector.</p><img src="https://counter.theconversation.com/content/59204/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Douglas Robertson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Noisy tourists are putting a strain on Berlin’s rental market.Douglas Robertson, Professor of Sociology, Social Policy and Criminology , University of StirlingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/529372016-03-30T11:50:40Z2016-03-30T11:50:40ZWhy New York-style rent controls would not work in London<figure><img src="https://images.theconversation.com/files/116661/original/image-20160329-18939-z7drvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Dumb-o.</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>Unaffordable rents have put New York City’s fabled diversity and creativity at risk. They have forced artists, small businesses and lower-income households out of the central areas, leaving them a <a href="http://thedailybanter.com/2015/07/the-rich-have-now-made-it-impossible-to-live-in-new-york-city/">monocultural wasteland of bankers and businessmen</a>. Those who stay are crammed into ever more cramped and unsanitary accommodation, while those who now commute from distant suburbs make this the country’s <a href="http://abc7ny.com/traffic/9-of-the-nations-worst-bottlenecks-are-right-here/1095908/">capital of gridlock</a>.</p>
<p>To avoid a descent into the cosmopolitan elitism of <a href="http://www.tokyoweekender.com/2016/01/soaring-tokyo-real-estate-prices-leave-average-buyers-on-the-ground-floor/">Tokyo</a> or <a href="http://world.time.com/2013/08/19/while-the-rest-of-north-korea-struggles-pyongyangs-fortunate-few-go-shopping/">Pyongyang</a>, where only the richest and most powerful get to live in the big city, New York clings firmly to a system of rent controls. Rent increases on apartments are capped for longstanding tenants, <a href="http://www.theguardian.com/us-news/2015/aug/19/new-york-rent-controlled-homes">and “stabilised” when tenancies change hands</a> to keep them at or below the rate of inflation. But a closer look at the model shows why it can’t be easily exported elsewhere, especially in London.</p>
<h2>Build, or they won’t come</h2>
<p>To keep its rent control system working, NYC mayor Bill de Blasio is having to spend heavily to get more homes built, promising 200,000 more affordable units <a href="http://www1.nyc.gov/site/housing/index.page">in the next ten years</a>. This increase in supply is essential because, as economists <a href="https://theconversation.com/explainer-what-are-rent-controls-and-who-benefits-from-them-56841">have long pointed out</a>, capping rents below the market level reduces the amount of property offered by private landlords, while boosting demand for it. </p>
<p>The availability of private rented accommodation declined sharply across Europe (especially the UK) <a href="http://www.parliament.uk/briefing-papers/sn06747.pdf">through most of the 20th century</a>, when rent controls were in place. This forced governments to step in and provide social housing. </p>
<p>The <a href="http://www.iea.org.uk/sites/default/files/publications/files/DP_Rent%20ceilings.pdf">standard free-market argument</a> against rent controls is that when they cap rents below their market value, it leaves too many tenants chasing too few properties. This also leads to a decline in quality as landlords seek to cut costs. And controls that curb rent increases for existing tenants can lead to landlords setting a deliberately high rent when a new tenant moves in or whenever a tenancy changes. </p>
<p>If applied only to residential property, rent controls can also lead to landlords using punitive commercial rent increases to protect their profits. This results in small shops and businesses being driven out, <a href="http://newamericamedia.org/2014/07/high-rents-push-nycs-chinatown-merchants-to-think-creatively.php">as in New York’s Chinatown</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/116669/original/image-20160329-13709-wrp7jg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Chinatown in New York.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/japp1967/8629390503/in/photolist-e9xT9T-838Fy-bGXHnX-6z2SpX-q8rSyi-6955WJ-6h4LWr-bGS8w-4xSjoU-dpuBfw-838JK-88vx8C-niXQ4L-bu3U6h-5ohkro-48fhAs-aa4M86-e8Ku4L-M5Ghy-8WeSb-66FiB5-qn5QT2-51zTuw-fUX254-iTsEvY-bGXESe-85myc9-8eyiLm-bGSeY-k4YzWE-fUX3Hp-bGXFJT-7i1Xpn-85iptn-dpuscM-haLQMU-6c58WG-nUofY-h3kLi7-seXAP-5ebtwm-EnTMEA-p2udka-c2xm9J-bu3SYb-oejcRw-4DJKsn-7y9BuS-bqyHxB-dcZTPF">Juan Alberto Puentes Puertas</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>But, even though removing controls would make more private rented housing available, it tends to be accompanied by greater insecurity and much <a href="http://www.civitas.org.uk/pdf/thefutureofprivaterenting">higher costs for tenants</a>. It also doesn’t allow governments to withdraw from the housing market. Instead they have to help out the growing number of families that can’t afford all their rent, and can’t move somewhere cheaper without compressing their children or losing access to their work. For example, in the UK, housing benefit is one of the <a href="http://www.bbc.co.uk/news/business-34290727">largest and fastest-growing welfare expenditures</a>. It exceeds £25 billion a year, despite numerous attempts to rein it in. </p>
<h2>You can’t do that</h2>
<p>Although New York’s rent controls are pushing it down the global league of <a href="http://www.citylab.com/work/2015/03/mapping-the-global-super-rich/387307/">cities whose property is snapped-up by the super-rich</a>, they haven’t prevented a steep rise in rents <a href="http://ny.curbed.com/archives/2015/10/31/manhattan_rents_rise_faster_than_ever_before.php">across the central districts</a> since 2008. Advocates say that’s because they don’t apply widely enough; critics that they’re squeezing supply. </p>
<p>The increases allowed on rent-controlled apartments can still force out those whose incomes <a href="http://citylimits.org/2015/03/09/nycs-endangered-species-a-rent-controlled-apartment/">don’t keep pace</a>, while tenants with stabilised rents are sometimes <a href="http://www.nytimes.com/2014/02/25/nyregion/in-new-york-push-for-market-rate-housing-pits-landlords-against-tenants.html?_r=2">intimidated by landlords</a> who want them to leave so they can charge new tenants more.</p>
<p>But there’s a bigger reason why New York’s controls, in place since 1943, couldn’t be easily copied by cities that currently don’t have them. Where controls were lifted earlier, as in the UK, property investment has become a major plank in people’s <a href="http://www.ons.gov.uk/ons/rel/was/wealth-in-great-britain-wave-3/2010-2012/report--chapter-3--property-wealth.html">long-term investment and retirement plans</a>. </p>
<p>Many have borrowed to buy homes because the mortgage repayment is less than the rent on an equivalent property. Some have bought buy-to-let homes as a way to generate income. Imposing rent controls would upset their calculations, and cause particular problems for those who took high loan-to-value mortgages or mortgages they must pay back with buy-to-let income. </p>
<p>So while rent control might bring a sharp cut in housing benefit – <a href="http://www.housepricecrash.co.uk/forum/index.php?/topic/201851-landlords-l9bn-housing-benefit-fuelling-bubble/">40% of which goes to private landlords</a> – it is not a step the UK Treasury dares to take. Instead, its expanded help-to-buy scheme subsidises first-time buyers, which may even be <a href="http://blogs.lse.ac.uk/politicsandpolicy/help-to-buy-help-to-who/">contributing to a rise in house prices</a> and therefore rents. </p>
<p>The adverse long-term impact on house building means that even charities working with the homeless and the under-housed <a href="http://blog.shelter.org.uk/2015/01/should-i-support-rent-control-the-devil-is-in-the-detail/">are cautious about re-introducing controls</a>, without complementary steps to increase supply. New York’s property owners, meanwhile, accept the retention of controls because, without them, they’d be paying even more – to finance the Medicaid, food stamps and other subsidies that millions of tenants <a href="http://www.bloombergview.com/articles/2014-09-26/how-the-poor-can-afford-to-live-in-new-york">already need</a>, as so much of their income goes towards housing cost.</p><img src="https://counter.theconversation.com/content/52937/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Shipman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While New York clings firmly to its system of rent control, London’s housing market has changed too much to re-introduce them.Alan Shipman, Lecturer in Economics, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/568412016-03-29T12:19:30Z2016-03-29T12:19:30ZExplainer: what are rent controls – and who benefits from them?<p>New York, San Francisco and Stockholm have them. And now some Londoners are calling for them to curb rising rents. But what are rent controls and how do they work?</p>
<p>Rent controls can come in many flavours but they are all a form of <a href="http://economics.fundamentalfinance.com/price-ceiling.php">price ceiling</a> to cap the level of rent that landlords can charge. Generally, price ceilings lead to underproduction and black markets. Producers, where possible, switch their efforts to alternative goods that fetch better prices. Shortages and illegal trading of the regulated goods often follow.</p>
<p>Housing is a durable good, however, and most renters do not live in new homes. So it is tempting to think of the rental stock as rather fixed and therefore largely immune to the normal pernicious effects that price controls have on supply. </p>
<p>To some extent, this is true in the short run. But over the long run, it is generally not. Shortages in quantity and quality will eventually occur, though their manner and degree depends very much on the particulars of the rent control policy. The particulars also determine who wins and who loses. </p>
<h2>Different types</h2>
<p>Rent controls must grant renters greater security over their tenancy and also regulate the rents that they pay. Both are necessary, as otherwise landlords could force tenants to leave in spite of any security by raising their rents prohibitively. </p>
<p>Typically, the rents are controlled by a local rent board which decides on an annual basis how much a tenant’s rent may permissibly be increased. Almost always, these increases are lower than the growth rate of unregulated, market rents in the area. This keeps rents, for existing tenants at least, “affordable”. </p>
<p>It would be arduous (and boring) to create a taxonomy of all rent controls. But rent control is one of the few policies in economics where there is little disagreement over their unintended consequences – the effects are readily observable in the many markets where rent control has been enacted.</p>
<p>A key issue is whether rents are regulated for existing tenants only – or for new tenants as well. In <a href="http://blog.sfgate.com/ontheblock/2015/08/25/the-best-and-worst-of-san-franciscos-rent-control/">San Francisco</a>, rents are unregulated for new tenants, but incumbents have the right to renew at a regulated increase in rents. In <a href="http://www.nycrgb.org/html/resources/faq/rentcontrol.html">New York City</a> or <a href="http://www.emeraldinsight.com/doi/abs/10.1108/17538271111137903">Stockholm</a>, apartments themselves are regulated; rents are more or less determined by a board and are (more or less) independent of the length of current tenancy. </p>
<p>This difference in approach is reflected in the market. In San Francisco, rents for new tenants are very high, in part because landlords know that they may not be able to increase them later. In NYC and Stockholm, rents for regulated apartments are quite low. And in NYC only a fraction of the rental stock falls under rent control. Many rentals are completely unregulated.</p>
<h2>Finders keepers</h2>
<p>Both approaches heavily disincentivise renters from relocating. In San Francisco, for example, a tenant who has been living in their apartment for years would likely have to pay a substantially higher rent should they move to a different apartment and begin a new lease. </p>
<p>In Stockholm and New York City, rent controls have had unintended knock-on effects on the market as a whole. For different reasons, in both cities there is a shortage of rent controlled apartments. In Stockholm, apartments are rationed by the government. Waiting lists for apartments <a href="http://www.smartgrowthseattle.org/letter-stockholm-rent-control/">are long</a>. In New York, landlords have greater autonomy over who they rent a controlled apartment to: it is “finders-keepers”, <a href="http://www.criticalcommons.org/Members/Ghent/clips/the%20apartment_rent%20control.mp4">and the finding is very tough</a>.</p>
<h2>Disrepair</h2>
<p>Shortages are not always immediately apparent. Suppose a city, London, were to impose controls on all rentals. At first, there wouldn’t be much of a change in the rental stock; perhaps a slight reduction in the number of buy-to-lets. </p>
<p>Over time, though, the rental stock would decrease. From the beginning, regulated rentals will be under-maintained. Because landlords are poorly compensated for any improvements under rent control, they lack the incentive to upgrade or even perhaps make repairs. In fact, disrepair may help them get rid of an incumbent tenant – an attractive option under San Francisco-style controls. </p>
<p>There are also knock-on effects for the owner-occupied housing market, which is not regulated. If rent is capped, the buy-to-let market would likely cool down. Owner-occupiers, because of the value they get from living in their home, would be willing to pay more than prospective landlords. Rental homes, where and when possible would be sold into owner-occupancy as a result.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/116619/original/image-20160329-13688-1apltcn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">NYC has long rent control waiting lists.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/scottdavies/5614406098/in/photolist-9y8ik9-6DDZRV-mzFP4D-a4GUD1-6L2GiN-hqU253-6DJbwU-4cfszn-PfZbf-fmof8a-6bAvRa-aBMgsj-ri9gB4-8Ufj9d-pGJgFM-PyQpT-6NofQw-dMps9f-4dUAch-dnoEXb-hEMz6X-pYrnDH-5JeD4b-9CuJAC-5pvNxY-2k9kJY-9nov6M-8UeRQW-oJNt46-4EwYx4-8UeTV7-9YChQR-NN1Yy-nNDy5j-ahhEJY-5pvXkS-zyRaq-82BnaR-3J4FFn-8UeRD5-5vWMjw-7DiK5X-7YvCYn-8UfhhW-6De6T7-2u3mae-h2f1n-8wPNuM-3yrd8K-5epd66">Scott Davies</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>In NYC and Stockholm, where much of the regulated rental stock is in multi-storey buildings owned by a single legal entity, conversion to owner-occupancy is relatively rare. In London, however, where much of the rental stock <a href="http://www.countrywide.co.uk/news/2014/countrywide-quarterly-lettings-index-q1-2014/">is individually owned</a>, homes would move rather easily into the owner-occupied sector. This may be good for renters who are willing and able to buy a similar home, as house prices will generally be lower. But it will be much tougher for those not ready to buy.</p>
<h2>Fewer options</h2>
<p>The consequences of rent control are not as simple as: “Renters win, landlords lose.” This is sort of true initially. But would-be landlords (investors who have not yet bought) lose nothing. They can move their money to alternative investments if the return on being a landlord is not high enough. </p>
<p>Meanwhile, future renters lose. Investors have many choices over assets to invest in but renters have fewer options; they either rent or own. For many renters, switching to owning is not possible or would be financially difficult. And so they will end up bearing the costs of the price ceiling.</p>
<p>Of course, rent control need not lead to scarcity if the government is willing to step in and subsidise construction. But then it becomes the public purse that bears the costs of rent regulation.</p>
<p>There are times and places where rent control may nevertheless be good policy. It may be warranted in war time, particularly if other parts of the economy, such as housing construction, are being simultaneously regulated. In fact, both NYC and London had rent controls <a href="http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1583&context=clr">during World War II</a>. But this may lead to those renters that enjoy the controls during the war becoming a vocal constituency for maintaining the policy, with the long-term unintended consequences this brings.</p><img src="https://counter.theconversation.com/content/56841/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Halket is supported by the UK Economic and Social Research Council through the Centre for Microdata Methods and Practice (CeMMAP grant number ES/I034021/1) and through an ESRC transformative research grant, grant number ES/M000486/1. He is affiliated with the Centre for Microdata Methods and Practice and the Institute for Fiscal Studies. This article does not reflect the views of the research councils, the Centre for Microdata Methods and Practice or the Institute for Fiscal Studies.</span></em></p>Why putting a price ceiling on rent is not the answer to a city’s housing problems.Jonathan Halket, Lecturer in Economics, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/495622015-10-30T10:06:29Z2015-10-30T10:06:29ZIs one of the largest real estate deals in American history a requiem for middle-class New York?<p>It’s easy to overlook the brick residential towers of Stuyvesant Town/Peter Cooper Village on Manhattan’s East Side. </p>
<p>Designed to be uniform and rather bland, the 80-acre development gives little outward sign of the fierce conflicts over housing affordability that have rocked this neighborhood since the early 2000s.</p>
<p>But the latest chapter of this story took place last week, when Blackstone Group LP and Ivanhoe Cambridge, Inc announced they would acquire the site in a <a href="http://www.bloomberg.com/news/articles/2015-10-20/blackstone-to-buy-manhattan-s-stuyvesant-town-for-5-3-billion-ifzjecx2">deal worth US$5.3 billion</a>. </p>
<p>Because the deal ensured that 5,000 of the 11,000 units would remain affordable for the next 20 years, many touted it as a <a href="http://www.nytimes.com/2015/10/22/nyregion/residents-exhale-after-stuyvesant-town-is-sold.html?_r=0">victory for tenants</a>. </p>
<p>However, the sale likely seals the end of Stuyvesant Town as a bastion for middle-class housing in New York City. In a city where over 40% of tenants are burdened by exorbitant rent (<a href="http://www.wsj.com/articles/new-picture-of-rent-burden-on-tenants-in-stabilized-apartments-1434016801">which consumes over 30% of household income</a>) – and where the share of rent-stabilized units has decreased from <a href="http://furmancenter.org/files/FurmanCenter_FactBrief_RentStabilization_June2014.pdf">62.7% to 47.2% between 1981 and 2011</a> – this matters.</p>
<p>My colleagues and I have spent the past four years researching the Stuyvesant Town community. And while a real estate transaction of this magnitude is bound to make headlines, the roots of declining affordability in New York and Stuyvesant Town run much deeper. </p>
<h2>Two generations, born and raised</h2>
<p>In fact, Stuyvesant Town was built at the expense of a crumbling – but vibrant – neighborhood. </p>
<p>During World War II, the administration of New York City Mayor Fiorello La Guardia grappled with the looming problem of housing returning veterans and their families. City Housing Commissioner Robert Moses argued that the shortage of affordable housing provided a perfect opportunity to clear blighted neighborhoods. Moses’ eventual plans for Stuyvesant Town displaced 3,100 families in what was then known as the <a href="http://www.nytimes.com/2006/09/03/opinion/nyregionopinions/03CIzipp.html">Gashouse District</a>, a working-class neighborhood with schools, churches and local jobs. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=188&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=188&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=188&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=237&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=237&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100220/original/image-20151029-15355-e7tm6r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=237&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An arial view of the Gaslight District (on the left), which, in the 1940s, was cleared to make way for Stuyvesant Town (pictured on the right).</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/hyperakt/4314758942">Hyperakt/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<p>New York built Stuyvesant Town in collaboration with the insurance firm Metropolitan Life. The city cleared the land and provided a 25-year tax abatement; in return, MetLife built and operated the new housing development, which opened in 1947. </p>
<p>Stuyvesant Town spans the area between 14th and 23rd Streets, and between First Avenue and the East River. The 110 buildings included a total of 11,250 apartments, designed to hold approximately 24,000 people. While urban critics argued the complex would be too large to succeed, the buildings quickly filled to capacity. </p>
<p>MetLife was required to keep all apartments rent-stabilized for as long as their tax abatement lasted. However, the city gave them the green light to exclude African-American families from the apartments. </p>
<p><a href="http://bit.ly/1O5OBKa">According to MetLife chair Fred Ecker</a> in 1943, “Negroes and whites don’t mix. If we brought them into the development it would be to the detriment of the city, too, because it would depress all the surrounding property.”</p>
<p>Partly as a result of tenant protests, this discriminatory practice was overturned <a href="http://www.nytimes.com/2010/11/22/nyregion/22stuyvesant.html">in 1950</a>. For the next half-century, the predominantly middle-class neighborhood would remain relatively unchanged, stabilized by a combination of rent regulation, consistent ownership and the development’s vanilla reputation.</p>
<p>By the 1990s, two generations had been born and raised in Stuyvesant Town. Many of the residents had “aged in place,” and the buildings had become an uneasy mix of elderly old-timers, young urban professionals and NYU students.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=417&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=417&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=417&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=524&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=524&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100375/original/image-20151030-16542-au8212.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=524&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The west side of Stuyvesant Town lines First Avenue.</span>
<span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/4/42/StuyTown.jpg">David Shankbone/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The families we’ve spoken with reminisce fondly about the neighborhood’s green spaces, playgrounds and community cohesion. A plaque located in the development even commemorates Fred Ecker, noting how he “brought into being this project…that families of moderate means might live in health, comfort, and dignity in parklike communities and that a pattern might be set of private enterprise productively devoted to public service.” </p>
<h2>Is there even a middle class in Lower Manhattan?</h2>
<p>Yet by 2000, these principles began to look increasingly old-fashioned compared to what was happening elsewhere in Manhattan. The Lower East Side was gentrifying, with growing demands for new development. Successive city administrations were looking to bolster New York’s global reputation by emphasizing its appeal to financial capital, and were governing the city as if it were <a href="http://www.nytimes.com/2003/01/08/nyregion/mayor-says-new-york-is-worth-the-cost.html">a private company</a>. </p>
<p>The combination of these circumstances made Manhattan’s middle-class population increasingly expendable: surely, the thinking went, they could find adequate housing in the outer boroughs.</p>
<p>Based on all of these pressures, it’s remarkable that Stuyvesant Town’s character remained unchanged for as long as it did. In 2006, MetLife’s management made the decision to divest, and put the complex up for sale. </p>
<p>The sale attracted developers lured by the prospect of obtaining a large Manhattan property with rental rolls well under market value. The tenants <a href="http://www.tandfonline.com/doi/full/10.1080/14616718.2014.931717">assembled a bid to protect their space in the city</a>, but eventually fell US$1 billion short of the sale price.</p>
<p>Tishman Speyer and BlackRock Investments ended up purchasing Stuyvesant Town for $5.4 billion, in what is still the largest residential real estate transaction in American history. This sale price was inflated by the housing bubble, and by the belief that the rent-stabilized units could be shifted to market-rate prices at an aggressive pace, either by evicting ineligible tenants or renovating the units. They were mistaken; by 2010 Tishman Speyer defaulted on their loans and relinquished control of the properties.</p>
<p>If there’s a victory for tenants, it’s that the planned purchase of Stuyvesant Town by Blackstone Group marks the end of five years of uncertainty since Tishman defaulted. However, it’s <em>not</em> a victory for affordability. Only one-third of the units will remain rent-regulated, and for just 20 years. It is highly doubtful that these units will remain rent-stabilized after that point, meaning Stuy Town’s legacy as an affordable oasis for moderate-income families is lost to history. </p>
<p>Even now, definitions of affordability and moderate-income are being warped by New York’s housing market. Blackstone will reserve 4,500 of Stuyvesant Town’s units as “affordable” for families with incomes under $128,210. An additional 500 units will be set aside for families with incomes under $62,150. </p>
<p>Rent stabilization policies are controversial, but were historically effective in helping ease the pressure for renters in high-cost housing markets. High demand for living in the Big Apple collides with the limited housing supply, resulting in an increased cost of living. In particular, Manhattan housing costs more than <em>four times</em> the national average, meaning that middle-income families are <a href="http://council.nyc.gov/html/action/acpdfs/middle_Class_squeeze.pdf">feeling the pinch</a>. </p>
<p>What the Stuyvesant Town sale shows us is that in this era, policy interventions like rent stabilization are becoming harder to sustain. Until new housing can be built to cater for seemingly endless demand, the definition of moderate-income in New York City will continue to rise. </p>
<p>Stuyvesant Town’s tenants are no longer GIs or their families – let alone the working classes of the old Gashouse District. And within a generation, the development’s middle class – if it can even be called that – will look very different indeed.</p><img src="https://counter.theconversation.com/content/49562/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Glass does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Sure, a chunk of Stuyvesant Town’s units will remain affordable for 20 years. But what happens after that?Michael Glass, Lecturer of Urban Studies at University of Pittsburgh, University of PittsburghLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/408772015-04-29T08:34:20Z2015-04-29T08:34:20ZLabour’s rent control plans may have unintended consequences<p>Ed Miliband <a href="http://www.theguardian.com/politics/2015/apr/25/ed-miliband-peg-private-rent-rises-to-inflation">has pledged</a> that Labour would introduce three-year tenancy agreements for private renters under which their rent increases would be capped at the rate of inflation. The Conservatives quickly rounded on the idea of re-introducing rent controls, with London mayor Boris Johnson <a href="http://www.telegraph.co.uk/news/politics/ed-miliband/11564637/Miliband-could-savage-our-cities-faster-than-any-bomb.html">writing in The Daily Telegraph</a> that it was “an idiotic way to tackle the problem of high rents”.</p>
<p>The history of rent control in the UK has been problematic. Designed to maintain affordability, limits to rent rises introduced in the Increase of Rent and Mortgage Interest (War Restrictions) Act 1915. This <a href="http://www.parliament.uk/business/publications/research/briefing-papers/SN06747/the-historical-context-of-rent-control-in-the-private-rented-sector">was designed</a> to be short term but was kept in force after World War I in some form until 1989. It reduced the investment attractiveness of the private rented sector leading <a href="http://www.theguardian.com/housing-network/2012/feb/22/private-rental-sector-dominate-housing">not only to its decline</a> but also creating a significant drop in the quality of private rented accommodation. </p>
<p>Since the abolition of rent control in the 1980s, the private rented sector in Britain has increased in size. The period between 2003 and 2008 saw a boom in the sector <a href="http://eu.wiley.com/WileyCDA/WileyTitle/productCd-0470672331.html">with investors taking advantage</a> of buy-to-let mortgages and households choosing private renting as the cost of owner-occupation rose sharply and there were fewer opportunities to enter social renting. </p>
<p>However, rents in the private sector have also increased and in some locations have become unaffordable for large sections of the population. The latest data from of the <a href="http://www.theguardian.com/money/2015/apr/24/private-tenants-facing-highest-rent-increases-in-more-than-18-months">Office of National Statistics</a> found that private rents increased by 2.1% between March 2014 and March 2015 It would therefore seem attractive – as Labour is suggesting – to limit rent increases to be in line with inflation. </p>
<h2>Knock-on effects</h2>
<p>Rent prices will reflect the housing demand and supply balance in any market. Given the rise in population, particularly acute in London where there is little change to housing supply, it would not be surprising to see large rent increases if nothing is done.</p>
<p>In this case, Labour’s proposed inflation-only cap on rent rises could have a quick impact. First, above inflation rent rises technically remove excess demand at certain rent brackets, because people are priced out of areas or types of housing. If levels of rent are kept lower through rent controls, demand at that level could keep building up. Second, there may be an impact on supply with fewer investors wanting to lease properties to tenants due to poorer returns on their investments.</p>
<p>Ahead of its introduction, investors in the private rental sector could decide to sell their houses, and remove sitting tenants, who currently have limited rights to security of tenure. But this could also add to the supply in the owner-occupied market and reducing price increases in this sector. This might be a good outcome since there is a <a href="http://www.thisismoney.co.uk/money/mortgageshome/article-2955383/Shortage-homes-pushes-asking-prices-higher-regions-says-Rightmove.html">shortage of homes for sale</a> in many locations. Any new source of supply might also reduce speculators buying in the hope of making a quick profit.</p>
<h2>Supply still critical</h2>
<p>This remains a key issue – that there is still a <a href="http://cep.lse.ac.uk/pubs/download/cp382.pdf">lack of supply of housing</a> of every tenure type, particularly in areas of acute demand. Labour’s proposed policy to limit rent increases in line with inflation over three years does not address this issue. </p>
<p>Another option could be to address the issues on the supply side: increasing the construction of new homes <a href="http://www.economicsonline.co.uk/Competitive_markets/The_housing_market.html">should lead</a> to lower rates of house price appreciation. It could also reduce upward pressure on rents, and potentially reduce or limit increases in the cost of housing benefit where tenants are in receipt of this benefit. </p>
<p>These tenants in receipt of housing benefit will probably still concentrate in what remains of social housing. But the overall housing shortage could mean any policy that limits rental increases in the private sector would have spill over effects across the housing market.</p>
<p>Given that the private rented sector is made up overwhelmingly of small investors with limited numbers of rental properties, consideration also needs to be given to the cost of enforcement and compliance with such a rent control policy. Some landlords may ignore the new regulations or find ways around them while better landlords might decide to leave the sector – another unfortunate unintended consequence.</p><img src="https://counter.theconversation.com/content/40877/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael White receives funding from the Department of Communities and Local Government but the views expressed in this article are his own.</span></em></p>Miliband’s plans to stop landlords hiking up rents won’t fix the housing supply problem.Michael White, Director, Real Estate Economics and Investment Research Group, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.