In 2023, labour leaders called for the government to implement an immediate rent freeze for all private tenants, following Scotland’s decision in 2022.
While the rent freeze will help reduce property levels and create more affordable housing options for those vulnerable, it will also impact landlords and their ability to increase their profits.
In this post, we will discuss the rent freeze in more detail, examine its potential pros and cons, and explore how it could impact the UK housing market.
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What Is A Rent Freeze?
A rent freeze is another form of rent control in which landlords are prevented from hiking rents or are limited by the amount they can raise their rents. The government will set a cap on rental prices, and in turn, this prevents landlords from raising their rental fees.
The government often does it to protect tenants from market fluctuations and rising living costs like we are seeing now during the cost of living crisis. It can also be done to control inflation, stimulate economic growth and address a housing crisis in a particular region — like Scotland.
The Impact Of Rent Freezes On Landlords And Tenants
While rent freezes can hurt landlords, they can impact tenants quite the opposite.
As landlords cannot increase their rental prices to make up for increased costs during the cost of living crisis, they can find it much more challenging to cover their expenses which could lead to financial losses.
A rent freeze in the UK may also prevent landlords from making further property investments in the UK and, in turn, decline the quality of housing available for tenants.
On the other hand, tenants may benefit from a rent freeze as it offers a base of financial stability and security. This can be especially advantageous for tenants on a fixed income as their rent will not increase.
A rent freeze means tenants can save money on top of their rent, which could help them increase their savings or invest in other areas of their lives. More disposable income in an area may positively influence the surrounding area as tenants use more money in the local economy.
Pros And Cons Of Rent Freezes
Rent freezes have many pros and cons for tenants and landlords alike. The topic is quite complex, and while some landlords may stand for rent freezes, others in different financial circumstances may not. Below is a list of the Pros and Cons of rent freezes:
| Pros Of Rental Freezes | Cons Of Rental Freezes |
Protection of vulnerable households: Rent control ultimately protects low-income tenants who are at risk. Rent freezes help protect the UK’s most vulnerable households by ensuring they can access secure and affordable housing. This, in turn, reduces the risk of homelessness as tenants will not have to worry about rent increases that could put them in financial instability. | Decline in property management: Rent freezes can create a decline in property management because landlords cannot increase their rental rates to cover their costs. Landlords experience financial difficulties as they are unable to cover their expenses. Landlords can also not keep up with repairs and maintenance of their properties, creating an unfavourable environment for tenants. |
Rental costs prediction: A rent freeze allows for rent cost prediction, ensuring tenants can budget effectively and accurately. The tenant knows their rent will not increase, so they can plan financially as they know exactly what their rent prices will be. This can help tenants stay on top of their finances and ensure they do not get into financial difficulties due to an unexpected pay increase. | Financial loss for landlords: Rent freezes can create a financial loss for landlords because they cannot increase their rental rates to cover their costs or reach desirable yield rates on the property. Although some landlords may be racking in high rates and profits, some are on significantly less and need help to hit targets. Which in turn could create a financial loss for landlords. |
Stoppage of overinflated rates: A rent freeze can help stop over-inflated rental prices by giving tenants the security of knowing their rent will not increase. Preventing landlords from taking advantage of tenants by charging excessive rental rates, as tenants will have the assurance that their rent will stay the same. Rent freezes can also ensure that tenants are not evicted for being unable to afford rent increases. | Gap in housing crisis: Rental freezes can create a gap in the housing crisis due to landlords becoming unwilling to rent their properties due to potential financial loss. This leads to a decrease in the availability of rental units and makes it more difficult to find affordable housing. |
Scotland’s Rental Footsteps
Historically, rental freezes in Scotland date back to the early 2000s when the Scottish Parliament introduced the Rent (Scotland) Act 1984, enabling landlords to freeze their rents for up to five years.
Since then, the law has changed several times, including introducing the Private Residential Tenancy Order 2006 and the Tenants’ Rights (Scotland) Act 2016. These laws have provided tenants more protection and ensured landlords could not increase their rents without justification.
Since December, Scotland’s rental market has been under a rental freeze until at least 31st March 2023. This means landlords cannot increase their rent for any private tenant for five years.
This rent freeze is part of the government’s commitment to providing tenants more security and helping tackle the housing crisis. The rental freeze is also expected to help reduce property levels and create more affordable housing options for vulnerable people.
Is A Rent Freeze Possible In the UK?
A rental freeze is possible in the UK for 2023 — but it should be a line walked with caution. The current UK government does not support rent controls or rent freezes but will commit itself to ensuring that rent increases are more predictable.
Labour Party leaders like Sadiq Khan and Andy Burnham have recently called for an immediate private rent freeze.
The labour politicians believe that all landlords are sufficiently wealthy enough to last during the cost of living and housing market crisis.
We spoke to Jonny Christie, Chief Executive Officer of The Property Sourcing Company, about whether he believes a landlord rent freeze is on the horizon for the UK.
He said, “At the moment, I do not believe that a rent freeze is on the cards for England as the conservative government understands the need to protect British landlords. If there would be a general election, however, the likelihood of a rent freeze in England becomes a sincerely more realistic scenario.”
“A rent freeze during our economic downturn is unfair on our landlords as it puts peril on their financial situation, possibly causing repossession if they cannot meet their payments.”
“If we allowed a rent freeze to occur, the free market in which we live could see a freeze on landlords and investors meeting their payments and preferred yields, in turn creating a gap in an entire industry, on which many tenants depend.”
“Although we understand the social aspect of safeguarding our vulnerable, we do insist that we are all facing inflation at many different levels. It would be unfair to segregate the part of England’s property market which is also providing a service and livelihood to many across the country.”
Tom is a Digital Content Writer passionate about sustainable property & property trends. Regardless of the subject, he will always write blogs of the best calibre. Read more about Tom here.
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