Landlords face rent caps under Labour

An unposed portrait of Ms Reeves wearing sober clothes, speaking
Rachel Reeves told BBC Essex that local councils should be able to set rent caps - LEON NEAL/GETTY

Rachel Reeves, the shadow chancellor, has said she is in favour of councils having the power to cap rents.

The measure would mean local authorities could prevent landlords from raising rents above a set proportion every year.

A similar policy introduced in Scotland by Nicola Sturgeon drove landlords out of the market, reduced the supply of housing and forced up rents.

Labour has insisted it is not its policy “nationally” but did not rule out giving councils the power to introduce the controls.

A Treasury analysis released on Friday found that Labour’s spending plans will lead to a £38 billion black hole over the next four years – the equivalent of £2,100 for every working household.

Sir Keir Starmer’s proposed VAT raid on private schools will cost taxpayers because so many children will be forced out of private education into the state sector, the analysis suggested.

Jeremy Hunt, the Chancellor, said taxes would inevitably rise if Sir Keir wins the next election.

Ms Reeves’s comments will exacerbate fears that the “war on landlords” will persist under Labour, with owners having already faced successive tax raids under the Conservatives.

In an interview with BBC Radio Essex, Ms Reeves was asked if she would commit to “introducing some kind of cap on rents”.

Ms Reeves replied: “Where that has happened, it’s not always delivered the results that people might want.

“I think that should be up to local areas to decide, there may be the case for that in some local areas, but as a blanket approach, I’m not convinced by that.”

Tory MPs warned the shadow chancellor’s show of support for the “destructive” policy was a sign of things to come under Labour.

Councils are set to be given powers to double council tax on second homes. Labour is understood to want to close any loopholes that allow second home owners to avoid council tax.

A report commissioned by Labour proposed the use of rent controls, arguing payments should not be allowed to rise quicker than local prices or wages.

The policy was recommended by Stephen Cowan, the Labour leader of Hammersmith and Fulham council, in a report that said a “double lock” should be introduced, linking rent increases to the lowest of local wage growth and inflation.

It said rents should only be allowed to increase once a year, with tenants receiving at least four months’ notice.

Labour rejected the recommendation to introduce a cap and a spokesman admitted that such controls could reduce the supply of rental properties, making things harder for prospective tenants.

Rent controls have remained popular with Labour grandees, despite evidence suggesting that they tighten supply and push up prices.

Sadiq Khan, Andy Burnham and Steve Rotheram, the Labour mayors for London, Greater Manchester and Liverpool, have all called for rent freezes in England to reduce the burden on tenants.

Mr Khan has been demanding devolved powers to take matters into his own hands for years, and recently promised to build 6,000 rent-controlled homes for key workers.

Jonathan Gullis, the deputy Tory chairman, said: “Given the destructive impact of rent controls it beggars belief Rachel Reeves is contemplating introducing them in parts of the UK.

“This war on landlords is nothing but the same old Labour, all it will do is drive up costs for hardworking people.”

Backlash from landlords

Michael Gove’s Renters Reform Bill, a landmark piece of legislation featuring new protections for tenants, has already prompted a backlash from landlords.

The introduction of rent caps would also raise the prospect that landlords who use their rental income as their pension face being unable to keep up with the cost of living, especially if mortgage rates rise faster than the cap.

Critics have warned that the introduction of a cap on rents could also affect house prices, as landlords would flood the market when they sold off their properties.

Jessica Parry, who represents landlords in some legal disputes as a partner at Bryan Cave Leighton Paisner, the law firm, said rent controls increased the risk that tenants could exploit landlords.

Ms Parry told The Telegraph: “If you make it too difficult for landlords they will just leave the sector and it will drive rents up ultimately if you reduce supply.”

The SNP government introduced a rent cap of 3 per cent and an eviction ban in 2022, saying it would address the cost of living crisis.

The policy is widely seen to have backfired, as landlords increased prices by more than they otherwise would have done between tenants, when the cap did not apply.

Recent figures published by the office for national statistics showed average private rents had risen by 10.9 per cent in Scotland, compared to 8.8 per cent in England.

Separate figures published in March suggested Edinburgh and Glasgow were experiencing steeper increases than in London.

A survey last year found 17 per cent of landlords had sold or were considering selling properties, further restricting supply.

The cap was lifted in March this year, but the SNP is planning to introduce permanent measures through a new housing law. This week the Scottish Government declared a national housing emergency.

Paul Scully, the Tory MP and former London minister, said Ms Reeves’s remarks suggested she was “not over the detail” and risked being “pushed around” by local figures with “pet projects”, such as Mr Khan.

“He’s basically going to just have carte blanche to do what he wants, which is not going to help young people in London in any way, shape or form.”

He added: “It’s just an early example of the fact that Labour have just got away with so little scrutiny for years, and this is all now showing that as soon as you scratch the surface, they haven’t got a plan.”

Theresa Villiers, the former Tory environment secretary, said: “If Labour want to wind back the clock and introduce rent controls, this would lead to fewer rental properties and the quality of those rental homes would be poorer. This kind of Left-wing ideology would end up making life harder for renters, not easier.”

Hollow out the private rented sector

Greg Smith, the Tory MP for Buckingham, said: “Labour is a huge unknown. Where they are in power – London, Wales, Manchester – you see their true colours.

“Damaging rent caps that would hollow out the private rented sector leaving millions in housing crisis is very much in the Labour playbook.”

Ms Reeves’ comments came just a day after another shadow cabinet minister suggested Sir Keir’s core green energy pledge could cost almost 10 times more than the party has promised to spend.

Steve Reed appeared to mix up the £8.3 billion Labour has said it will invest in Great British Energy, a publicly owned company to generate green electricity and bring down bills, with the £82 billion that critics have said such a firm would need.

A Labour spokesman said: “As Rachel Reeves said, she does not believe rent controls are the right approach.

“While Labour believes action needs to be taken to address extortionate within tenancy rent rises, rent controls are not national Labour Party policy as we remain mindful of the risk they could pose to the availability of rental properties and the harmful impacts any reduction in supply would have on renters.

“In government, Labour would act where the Conservatives have failed to ensure fairness and security for renters, immediately abolishing Section 21, ending tenant bidding wars and extending Awaab’s law to the private rented sector.”