Why the Welsh Labour government should go further on rent controls

The recently announced co-operation agreement between Welsh Labour and Plaid Cymru offers much hope. The deal will see the two parties work together to pass a range of progressive policies, such as free childcare, council tax reform, limiting holiday homes, and increasing the size and gender balance of the Senedd. If realised, it would see some of the biggest changes in Welsh public policy since the advent of devolution in 1999.

In the section on housing, the proposals reference rent controls. Notably, however, these fall short of a commitment to implement them. Instead, there is a pledge to publish a white paper that will explore “the role a system of fair rents (rent control) could have in making the private rental market affordable”.

The Welsh government can and must go further than the current co-operation agreement suggests. To have a meaningful impact on tackling homelessness and poverty more generally, there must be a full commitment to introducing rent controls.

The Welsh housing crisis is causing havoc and is both a cultural and socio-economic issue. In some places in Gwynedd, at least one in five houses is a second home, which has priced many Welsh-speaking locals out of their home areas. In my own city of Cardiff, house prices have grown twice as fast as wages in the last 15 years, whilst prices grew by as much as 25% in Conwy and the Vale of Glamorgan last year alone. As a result, the housing crisis is fuelling poverty levels, which are already the highest in the UK.

Rent controls will undoubtedly cause much political debate and consternation from the right. In traditional economic thinking, they are argued to distort the free market through creating superficial prices that may not truly reflect the value of a property. It’s also argued that they drive down the quality of housing, and risk reducing the amount of overall stock. With the value of the buy-to-let market booming in Wales, and these types of houses rising faster in value than any other part of the UK last year, bodies representing landlords are unlikely to be shy about their opposition either.

What the opponents of rent controls often omit is that, at least in the medium term, they are a proven successful policy for reducing rents and addressing poverty. For example, in San Francisco, private renters paid £2.3bn less in rents between 1994 and 2016 when compared to non-controlled properties. Whereas the end of rent controls in Cambridge, Massachusetts, saw prices rise by an eye-watering 45%. As a policy, they offer a form of insurance against sudden rent hikes, so renters can stay in their communities without fear of having to move somewhere cheaper, whilst providing more financial stability.

Rather than just considering rent controls, the Welsh government should move quickly to begin trialling them and legislate for a model that works. It should, however, be noted that controls affecting only certain properties in an area risk creating a two-tier housing system. And caps on rent rises do nothing to address existing high rents. A more sustainable option is the model promoted by the Living Rent campaign in Scotland, which advocates for a points-based system for deciding rent prices, the creation of a Rent Affordability Index and a Living Rent Commission to oversee these regulations.

A challenge may be that rent controls incentivise landlords to sell properties or convert them into holiday lets to avoid price caps. Any rent control policy must therefore be matched with a radical housing agenda. This should include a programme of building social housing, perhaps even bringing properties into public ownership when sold off by landlords. This agenda must also include changes to planning laws that limit the conversion of rental properties for other purposes.

There will be much debate over rent controls in the coming months, but both Labour and Plaid Cymru should not be cowed by the dogma that surrounds them. There are many areas where governments intervene in pricing, such as the minimum wage, which was also once fiercely opposed by critics. So why should the price of rents be above regulation when the free market has so obviously failed?

The ambition of the aptly named Radical Action in Testing Times co-operation agreement will only be realised if it is matched by a bold delivery. The prize at the end of these policies is a fairer and more equal Wales which sets the pace for the rest of the UK to follow.

With the housing market completely out of control, rent controls can play an important part of an agenda that transforms housing from being a commodity driven by profit, to a fundamental right enjoyed by all.