A new report that evaluates the dozens of rent control schemes implemented over the past 60 years across the world has concluded that overall they are harmful to rental homes supply.
Undertaken by German academic Dr Konstantin Kholodilin (published) and published by the Institute of Economic Affairs (IEA), it has looked at how rent controls have impacted housing markets in different cities across the world.
It has been timed to counter the growing calls for rent controls by London Mayor Sadiq Khan, the Green Party in Wales and tenant advocacy groups such as Living Rent and Acorn.
The IEA report reveals that 56 out of the 65 studies it examined had reported schemes lowering rents in the short term.
But the unintended consequences that flowed from these schemes are also highlighted including how rent controls often create a ‘black market’ for rental properties outside the ’controlled market’; lower housing supply overall within the private rented sector; reduced housing quality and repairs and maintenance and also that fewer new rental homes were built.
Also, Kholodilin found that those who have rent-controlled homes tend to stay in them longer, reducing overall ‘churn’ within the market and therefore lowering supply.
Kholodilin, who works at the German Institute for Economic Research in Berlin says: “Rent control effectively reduces rents in the controlled sector, but does it a high price. “Tenants occupying the rent-controlled dwellings benefit the most, at least in the short run, while newcomers lose from rent control. “In the long run, rent control can undermine the rental sector forcing landlords to convert their dwellings and tenants to become homeowners.”
Dr Kristian Niemietz, IEA Editorial Director, adds: "Economists are a notoriously divided profession: ask three economists, and you get four opinions. But there are exceptions to this, and the study of rent controls is one of them.”
Living Rent recent said in a letter to the Scottish Government, he said: "We know what the opponents of these measures say: that the real issue is supply, and that rent controlswould inhibit that.
"It is not surprising that the people who make eye-watering profits from the situation as itcurrently is would be against change. It is also clear that these developers and landlords simply will not -and do not intend to - deliver the changes we need."
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