IMPACT OF RENT DECONTROL ON VALUES

Abstract

The implementation of rent control has had controversial consequences. In the aftermath of the Second World War, it has achieved its objective of protecting tenants against unscrupulous landlords who tried to exploit the dire housing shortage then by imposing excessive rentals. All premises which were built on or before September 7, 1947 were affected by the Control of Rent Act 1947. Exceptions to this rule were those premises owned by the Government and its statutory boards. With rent control, the response to free market mechanisms is dampened and thus the values of controlled properties are artificially depressed below market levels. Besides the impact on values, other economic, equity, physical and social effects are felt as well. However, with the successful housing programme of the Government, this legislation has outlived its usefulness. Therefore, it is inevitable that it is being phased out. This would be carried out using two tools, namely, the Control of Rent (Exemption) Notification 1988 and the Controlled Premises (Special Provisions) (Amendment) Act 1989. The aim of this dissertation then, is to examine the impact of the latter legislation on properties in the designated conservation areas. Using the piecewise linear regression method of analysis, the impact on values of decontrolled properties was found to have been felt at the time the decontrol news was released rather than at the point of actual implementation. One likely reason for this is that owners and investors would have recognised the potential values that these properties would command even before the actual implementation of the decontrol measure. The announcement was also found to have some spillover effects on values of non-controlled properties. Values of previously controlled properties are expected, in the short to medium term, to rise but the limit to the increase would be set by the values in the non-controlled sector. Wider implications are also expected from the decontrol.