Welsh Rent Control: Consultation on Fair Rent & Housing
A new ‘fair rent and adequate housing’ consultation seems to reveal Welsh lawmakers are having second thoughts about rent control.
The Senedd kicked out a proposal for a rent freeze across Wales from the nationalist party Plaid Cymru in October.
But Labour housing minister Julie James has resurrected the idea as part of the paper Securing a Path towards Adequate Housing.
James is asking landlords and other property professionals to comment on her vision that everyone in Wales should have a safe, affordable home.
Affordability is a problem.
Her plan is part of a continuing process to regulate the private rental market in Wales.
The consultation paper explains that the Welsh population is growing slowly but ageing, with a fifth over 65.
The study says: “This indicates that in the future, there will be a growing number of people who will probably need to continue to rent properties beyond retirement age and will be dependent on a pension to pay rent.
“This means that affordability is likely to become more of an issue over the longer term than it is today.
“There will also be an increased reliance on the private rented sector, if earnings fail to keep pace with inflation in the housing market, meaning more people will be unable to achieve the income ratios required to secure a mortgage.”
How a rent freeze could work
Statistics show more than 230,000 people privately rent a home in Wales, paying an average rent of £614 a month - with rents rising 4.4 per cent in the year until the end of March.
James points out that a ‘fair rent’ has no universal definition and asks how to define a fair rent and what the unintended consequences of doing so might be. The paper suggests setting a fair rent of around 30 per cent of a household’s income could be considered affordable.
Alternatives to a rent freeze could include:
- Landlord registration schemes
- Regulation of letting agents
- Controls around evictions
- Dispute resolution mechanisms
- Deposit schemes
Most of these controls have been used in Wales and other countries with varying degrees of success.
James also puts forward financial models for capping rents.
A yield-based model would freeze rent increases at 10 per cent above the annual yield.
The formula would be:
Monthly rent =
Purchase price + Annual interest charge
For example, the calculation for a landlord paying £4,500 a year mortgage interest on a £100,000 property would be:
Monthly rent =
£100,000 + £4,500
This gives a rent cap of £870 a month for the property.
Other models cover caps for cost-based rents, energy performance and market value rents.
Housing policy failures
A briefing note published with the Green paper concedes that a national fair rent solution is improbable and that introducing rent controls may be an admission of the failure of previous housing policy.
The briefing note also discloses that the Welsh government intends to introduce a housing bill based on the consultation.
James said: “I am committed to using all the levers we have to ensure we maintain a viable private rented sector here in Wales, offering high quality and choice of accommodation, where landlords have confidence to invest in making improvements and tenants have greater certainty that longer-term costs of moving into or staying in a rental property will be affordable.”
The consultation proposals seem at odds with Labour Party policy.
London Mayor Sadiq Khan has repeatedly called on the party to back a rent freeze in the capital without success.
BBC Reality Check verdict
But last month, leader Sir Keir Starmer confirmed the party was not looking at rent controls or devolving related powers to mayors. However, such powers are already devolved to governments in Scotland and Wales.
Scotland has a 3 per cent cap on rent increases until September (2023). Speculation is rife that landlords and letting agents are preparing a legal challenge to overturn the legislation.
BBC Reality Check has examined Khan’s rent control claim that the arguments for rent control are ‘overwhelming’.
The verdict was that rent control has “helped existing tenants in areas with particularly fast-rising rent, but it can be at the expense of new renters. In some places, it has also led to a shortage of supply. While the arguments for rent control are not overwhelming, it is possible that a well-designed policy combined with significant new homebuilding could be effective.”
Update: we would like to inform you about a series of events to be held by the Welsh Government to gather evidence and views on adequate housing, fair rents, and affordability. These events aim to understand more about rents, tenant and landlord behaviour, affordability, and improving the supply and adequacy of housing over time.
The events will be held at the following locations and times:
- Llandudno on 6th July at Venue Cymru, Penrhyn Crescent, Llandudno, LL30 1BB:
- Carmarthen on 20th July at The Halliwell Conference Centre, College Road, Carmarthen, SA31 3EP:
- Cardiff on 25th July at Sophia Gardens Cricket Ground, Sophia Walk, Pontcanna, CF11 9XR:
Please note that the events aim to obtain a balanced representation of views from tenants and landlords/agents, so attendance may not be on a first-come-first-served basis. If you cannot attend an in-person event, online events will be held over the summer to provide further opportunities to give feedback. They will send an invitation to these online events for those interested.
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Investing in a private rented property can be achieved in a variety of ways. Sometimes landlords inherit a property that they then turn over to renting. Sometimes owners of properties become unintentional landlords because they are unable or unwilling to sell a property at the value the market currently dictates.