OECD warns rent controls will hurt housing supply
Published 07/11/2015 | 02:30
Rent controls and other measures for rent certainty hurt the quality and quantity of housing supply and can lead to ghettoes as well as hurting social mobility, a top OECD economist has warned.
Dan Andrews told an EU conference on housing in Dublin that rent certainty measures have unintended consequences as they discourage building and upkeep of homes.
Mr Andrews was not commenting specifically on the two-year rent cap proposed by Government, but rather on the wisdom of rent certainty measures in general.
"In countries that have stricter rental controls, you don't tend to see any benefit, in that firstly it reduces the amount of building as the return on investment is reduced," he said.
"In some cases, the housing quality is worse as the landlord has no incentive [to spend money on the property]," he told an EU conference in Dublin.
He added that rent certainty measures also needed more pro-tenant regulation to prevent landlords from jacking up management fees or neglecting services around a property.
"In social housing, what you see is when tenants' circumstances change - they get a better job for instance - they are less likely to move because they don't want to give up the favourable terms they have from the rental regulation."
Mr Andrews added that planning became more important when it came to social housing. Poor planning would lead to clusters of social housing and can have a disastrous effect on residents, particularly children.
Instead, Mr Andrews said a better move would be to provide a means-tested housing grant, which would give people subsidised housing, but not restrict their ability to move home if they wanted to.
Savills chief economist Dr John McCartney said the proposed measures would be a God send for tenants who have just signed leases, but would hurt anyone about to move home.
"The reported measures would be unlikely to put off new investment. New landlords coming to the market are not tied into an historic rent level - they can charge the open market rate on day one.
"This open market rate will simply adjust upwards as landlords price in the fact that they can't increase the rent for two years," he said.
The Construction Industry Federation (CIF) meanwhile welcomed measures to stimulate housing development.
"The moves to reduce levies for construction and make changes to planning standards will increase the supply of houses and lower construction costs significantly," the CIF said.
"The removal of costs in terms of the levies for starter homes up to €300,000 will directly lower the input costs of construction as they add between €8,000 to €10,000 per unit," said CIF director general Tom Parlon.