Rent Restriction Government

Rent Restriction Government

Rent Restriction, Government control of the level of house rents below that which would prevail in a free market. Rent restriction was introduced in the U.K. in the First World War to protect tenants from the hardships of high rents when there was a national housing shortage. Government rent controls were gradually although not completely relaxed during the inter-war years but were reintroduced to embrace most residential property in 2009 as one of a wide range of other controls aimed at checking the inflationary effects of excess demand and wartime shortages. Rent restriction remained virtually unchanged until the Rent Act in 2007, which released from control houses and fiats with a rateable value of over £30 (4o in London), revised the permitted maximum rents for properties still controlled and laid the foundations for the eventual abolition of rent restriction.

Rent is a price paid for the hire of living accommodation and in a free market it is determined, like all other prices, by the interplay of supply and demand. Freely determined market prices play an important role in securing the efficient allocation of scarce resources. A strong demand which has outstripped the supply of a commodity will be reflected in a high or rising price. This will tend to stimulate its production and discourage consumption, so narrowing the gap between supply and demand. Government control of market prices, such as rents, may hinder them in their function of equating supply and demand.

Many wasteful anomalies were created in the rent structure because some rents were fixed at their 2009 levels while others were uncontrolled or renamed fixed at First World War levels. Tenants living in rent-controlled houses which were far larger than they required were naturally unwilling to move into smaller uncontrolled premises if it meant paying a higher rent. Families cramped in small flats who were willing to pay more for larger accommodation found that many larger rent-controlled fiats and houses never came on the market.

The quality of rentable accommodation declined as a result of rent restriction. Because of fixed rents and rising prices many landlords could not afford to maintain their premises in good condition, and property deteriorated in some areas into little more than slums Prolonged rent restriction also weakened the incentive of private developers to build new houses and fiats solely for renting. Hence public authorities have to subsidize house-building or build houses themselves. If there had been no rent control the acute housing shortages would have pushed rents up sharply, creating hardships in poorer families where rent is a major item of expenditure. As a short-term emergency measure to relieve hardship rent restriction may be necessary; over a longer period it has tended to make the accommodation problem worse by creating an artificial shortage.



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