Labour 'could allow rent caps', Rachel Reeves says - but shadow chancellor warned that 'landlords would leave in droves'

18 May 2024, 07:03

Rachel Reeves has said that rent caps could be allowed to be set
Rachel Reeves has said that rent caps could be allowed to be set. Picture: Alamy

By Kit Heren

Labour could allow local councils to to cap rents in their areas, Rachel Reeves has hinted - but the shadow chancellor has been warned that the policy could see more landlords sell up.

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The measure would mean that landlords could only raise rents by a certain amount each year.

The policy is favoured by many on the left of politics, but in action has had mixed effects. Nicola Sturgeon's SNP tried the party in Scotland, and the policy saw many landlords selling up.

Labour has said that rent caps would not be a national policy if it gained power - but that local authorities could have power to decide themselves if they wanted to bring them in.

"Where that has happened, it’s not always delivered the results that people might want," Ms Reeves said.

Read more: Ministers accused of making 'major concessions to landlords' after renters reforms 'watered down'

Read more: 'It felt like an April Fool's at first': Tenants face illegal rent hikes or eviction as landlords sell to cover costs

Shadow chancellor Rachel Reeves
Shadow chancellor Rachel Reeves. Picture: Alamy

"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.”

Several Labour mayors - Sadiq Khan of London, Steve Rotheram of Liverpool, and Andy Burnham of Greater Manchester - have suggested that they would be in favour of rent controls.

But Paul Shamplina, the managing director of Landlord Action, warned that the policy could have unintended consequences.

"I think with regard to rent controls, I understand why it's in conversation - rents are becoming more unaffordable for tenants at the moment..." he told LBC's Clive Bull.

Landlords could 'leave in droves' if rent caps are set
Landlords could 'leave in droves' if rent caps are set. Picture: Alamy

"Tenants are paying the best part of 30, 35% of their wages towards rent so I can understand there is an affordability issue," he said. "It has been on the table... obviously with regard to the Labour government."

Mr Shamplina added: "The problem you've got is I mean, Scotland tried it and their rents went up at the moment with regard to the industry. You've got landlords leaving in their droves, for multiple of reasons.

"If rent caps came in, that could stifle investment with regard to lending. But of course, what would happen? The reality is that landlords would leave even quicker, in their droves."

A Conservative MP said the policy would amount to a "war on landlords".

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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.”

A spokesperson for Labour said in response: "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.”