Deputies not keen on rent controls

Tuesday 25 January 2022

A suggestion by the island's most senior politician that it may be necessary to reintroduce statutory rent controls on properties appears to have little support among other deputies.

Deputy Peter Ferbrache, the President of the Policy & Resources Committee, said recently that the States should look at the possibility of legal controls on rents charged as a potential solution to increasing costs in the rental market.

Rent controls are usually statutory powers used by governments to limit how much landlords can charge tenants based on the size and other characteristics of a property. This creates a ceiling on the rental price a prospective tenant can anticipate paying.

Rent controls were used extensively in Guernsey in the immediate post-war period but are not used at all now.

Pictured: Deputy Peter Ferbrache said he was open to looking again at statutory controls on rental costs. 

At a public hearing held by the Scrutiny Management Committee, Deputy Ferbrache said: "Rents have increased significantly over the last 12 months - way beyond inflation. I don’t think that can be sustained going forward.

"We have to look at, for example, whether we need some kind of rent control mechanism - a new rent control mechanism - so that people can afford to rent reasonable properties at a reasonable price."

Deputy Ferbrache acknowledged that in the past rent controls came to be seen as increasingly ineffective and "may not be practical because we know what happened previously". 

Several deputies interviewed by Express said they had serious concerns about reintroducing rent controls in principle and in practice and suggested they would cause more problems in the housing market than they would solve. 

Pictured: Deputy Victoria Oliver spoke of other jurisdictions' bad experiences of rent controls.

"I’m not really for them," said Deputy Victoria Oliver, President of the Development & Planning Authority.

"I’ve seen them in other places where they’ve actually been detrimental to the market. You’ve got to be so careful how you introduce them and how you actually apply them.”

Deputy Nick Moakes, a member of the Guernsey Party, agreed with Deputy Oliver. 

“I think rent controls sound good. I think some people would say: 'this is great - my rent will go down'. But I think intrinsically they’re a bad idea," said Deputy Moakes.

“The cost of renting and buying a property is down to supply and demand. The problem we have on the island is that there aren’t enough properties for people to rent or buy.

“Governments take a big risk when they get themselves involved in markets and dictate where a market goes.”

Pictured: Deputy Nick Moakes said the States should not attempt to set rental prices in the housing market.

Deputy Moakes said that many local people are currently in a position where they cannot find properties to rent - not only because of price but also because of a lack of supply of housing. He was also worried that introducing legal controls on rents could make the rental market unattractive for landlords at a bad time to reduce the supply of rental stock.

He said that would "exacerbate the problem - and then you’ve got developers and investors who might stop developing new properties or renting them out, which again puts you into a downward spiral".

“I can see how this might appeal to people, but I think the unintended consequences are huge."

Deputy Moakes said that it would be better for the States to focus on building more houses to address shortfalls in supply and increasing costs.

Pictured: Deputy John Dyke believes that scrapping planning policy GP11 and allowing developers to build new homes without having to worry about including social or affordable housing on their developments would be an effective way of increasing the supply of housing relatively swiftly. 

Another member of the Guernsey Party, Deputy John Dyke, agreed that rent controls were not necessary and could be counter-productive.  

“As a matter of principle, [they] are a bad idea because they cut the supply of rental housing in the long term," said Deputy Dyke.

"In the short term, it might be a temporary fix, but long term it's not a good idea.

“What the fix is now is to get rid of [planning policy] GP11 and let the market produce some houses. That’s the solution and we have to do that quickly. Rent control is a side issue."

GP11 is part of the Island Development Plan and requires medium-sized and larger new housing developments to set aside some land for social housing or what is known as affordable housing.

Pictured: Deputy Charles Parkinson cautioned against ineffective or counter-productive intervention in the housing market.

 Deputy Charles Parkinson said he would not support the reintroduction of rent controls.

"Prices in any market are determined by supply and demand. If you try and regulate prices artificially through legislation, it just doesn’t work," said Deputy Parkinson.

Several other deputies told Express off the record that they were similarly opposed to the reintroduction of rent controls.

Express approached Steve Williams, Chief Executive of the Guernsey Housing Association, the island's second-largest landlord of rented property after the States, but he declined to comment.

The States' committee with responsibility for general housing policy is the Committee for the Environment & Infrastructure. Its President, Deputy Lindsay De Sausmarez, was only the deputy spoken to by Express - apart from Deputy Ferbrache - who did not rule out supporting rent controls in some form.

“I’ve got no view on it yet," said Deputy De Sausmarez.

"I’m one of the people on the Housing Action Group. We're looking at a range of different issues, including potential policy interventions, and this is one of the things that will be looked at.

“We haven’t had an opportunity yet to look at the issue in any detail. I remain open-minded but not currently in a position to have an informed view.”

 

Pictured: Deputy Lindsay De Sausmarez said that Deputy Peter Ferbrache's suggestion to look at reintroducing rent controls required further research and discussion before coming to a definitive view.

What are rent controls?

Rent controls are usually laws which seek to ensure that tenancies within the rental market remain affordable. They are a way of setting prices and legally enforcing those prices in a way which proponents of rent controls argue is fair for the tenant and the landlord. Opponents of rent controls say they are ineffective and counter-productive.  

In Guernsey, close to 100% of homes were under some form of rent control in the period after the Second World War. The number of rent controlled properties steadily declined and by the 1990s there were almost none left.

In many cases, rent controls which existed on properties in theory were not applied in practice because tenants did not exercise the right of a rent review.

It is believed that one reason for this was tenants not wishing to create tension with their landlord, who ultimately retained the right of eviction.

The maximum value of properties which can be rent controlled has not been increased for many years - meaning that fewer and fewer properties fell within the terms of rent control until there were none left.

Although laws remain which could allow rent controls to be reintroduced, it is believed that the legislation is no longer fit for purpose, and therefore substantial legislative changes would be necessary if the States decided to back rent controls as a policy.