Rent Controls Cause Investors To Flee, Study Finds, Giving London Politicians Much To Ponder

A new study has found investors would be less likely to commit capital to markets subject to rent control, as London's mayoralty reiterated its commitment to rent control policies.

The Assessment of Scotland’s Rent Freeze and Impacts Report, released by the Scottish Property Federation in association with researcher Rettie & Co. in April, said that rent controls will in fact disrupt the future supply of new homes for rent.

Scotland introduced a six-month rent freeze and then a 3% rent cap on the Scottish build-to-rent market last September and extended the cap in April.

The Scottish Property Federation is a long-term opponent of rent controls and said of the 14 BTR investors interviewed for the report, that nine judged Scotland to be unattractive, including four that viewed the country as uninvestable under current conditions.

“The impact of the emergency legislation on the BTR market over the last six months is clear. The lack of long-term policy certainty means investors largely view Scotland as a risk, compared with more stable locations in other parts of the UK,” Scottish Property Federation Director David Melhuish said.

If investors chose to put their money elsewhere, that will impact the number of rental homes being built, according to the the report.

London's Labour Mayor Sadiq Khan is hoping a change of administration could finally allow him to freeze private rents in London.

Earlier this month he once again called on the government to allow him to put in place rent controls as a way to ease fast-rising costs, freezing private rents for two years.

City Hall analysis, based on estimates from adviser Savills, previously speculated that such a move would save tenants an average £881 in the first year and just over £2,100 in the second year, as Khan argued that the proportion of Londoners renting privately has more than doubled since 1990.

Currently the Greater London Authority has no power to implement rent control, and it would have to be granted such powers by central government. The Conservative party opposes rent control, but Labour is odds-on favourite to win a majority at the next election with bookmakers. The party has not expressed an opinion on rent control yet.