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More Regulation, Less Rentals?

More Regulation, Less Rentals?

Labour has announced policy that if they were to govern they would ban letting fees to tenants amongst other initiatives to “fix” the residential rental market. It defies logic why politicians continue to propose measures that are likely to deter investors from providing much needed capacity in residential rental accommodation. In the last year alone we have seen over 10% of our landlords sell their rental properties as talk of more regulation, and taxes make headlines and returns in the sector diminish.

Banning letting fees is a step back to an overregulated economy which flies in the face of the merits observed in free market policy and is yet another beat up on landlords. If there were more rental properties available a less regulated market is far better suited to determine, at any point in time, who pays letting fees and address other issues which are ultimately driven by a lack of choice due to overall supply shortfalls in housing stock itself a symptom of long-term housing policy missteps.

There is a host of costs associated with providing a professional letting service to the standard required by legislation and insurance obligations alike. Management companies have no capacity to absorb these costs and investors will naturally look to recover any additional costs they bear through increasing rents. This is how businesses work.

We would be better placed to start talking about what incentives or policy initiatives can encourage investors before even more exit as interest rates start to climb and other costs become more real. The sector is already awash with compliance measures and there are more than adequate avenues to ensure an equitable rental market via the myriad of laws and regulations coupled with the powers invested in the Tenancy Tribunal.

The private property investor’s contribution to housing is underappreciated and their ability to invest into more homes undervalued. What we need is for politicians to recognise that private investors are integral to alleviating the shortage of quality rental housing. The current approach favours restrictive measures and increasing regulation rather than policies that encourage investors to invest in supplying more housing in an equitable and profitable environment.

Perhaps it is time to start talking about having a quality tenants register and certificate. If policy focussed on creating good tenants with the likes of a tenants Warrant of Fitness the cost to identifying good tenants would reduce, which in turn would lower the cost of re-letting a property.


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