Every so often the thorny issue of rent control raises its head. Rent control was in the Labour Party’s 2017 election manifesto and it has the backing of London Mayor Sadiq Khan. The Mayor has now said he intends to outline a plan for stabilising and controlling rents for the 2.4 million renters now living in the capital. The London Mayor’s powers don’t extend to bringing in rent control across the city but he has said he will campaign for it and lobby the Government for his proposals to be accepted.
Rents in London are extremely high as a percentage of earnings compared to other parts of the country and private rents rose on average by a whopping 38% between 2005 and 2016. According to Mr Khan the arguments for rent control are “overwhelming” and it is vital the Government acts to improve the quality of millions of lives. Londoners seem to agree with him. A recent survey confirmed that 68% of Londoners were in favour of capping the amount private landlords could charge tenants. But is rent control really the answer to renters’ problems?
The argument against capping rental levels has always been that it will impact supply as landlords, unable to make a profit, take their properties off the market. As the majority of private landlords only own one property this is a distinct possibility, especially as higher taxes are already eating away at profitibility in the buy-to-rent market. This would certainly add to the problems tenants already have in finding a suitable home to rent. Build to rent developers may also take a step back from the London market if they can’t make the figures add up on new developments. However, the rental market’s loss could be the housebuyer’s gain if there is a sudden flood of former rental housing onto the market.
In other major cities such as New York and Berlin, rent control has been in place for decades. The lesson to learn from the experience in these markets is that in tandem with bringing in rent control, it is important to provide a supply of social housing to mop up the shortfall in private rentals when some landlords, inevitably, decide to quit the market.
Mr Khan has invited Karen Buck, the MP behind the Homes (Fitness for Habitation) Bill, to work with James Murray, the deputy mayor for housing and residential development, to work up proposals for future rent control laws. This is clearly not as straightforward as it may at first appear and the additional social housing that Sadiq Khan has also pledged to provide for London must be brought into the mix, otherwise rent control could be completely self-defeating and simply hurt the people it is intended to support.
So will London follow the lead of other major cities around the world and become the first place in the UK to enforce a rental cap? Watch this space – the next few years could be interesting.