London Mayor’s rent control plans criticised by rental industry

London Mayor’s rent control plans criticised .jpg

With reports suggesting that Sadiq Khan is considering rent controls in the capital, it’s time to take a closer look at his proposals and the negative feedback they’ve generated from landlords. 

In December, The Guardian reported that London mayor Sadiq Khan was pushing for the introduction of rent controls in the capital to protect private tenants. The newspaper said it had seen a letter sent by Khan to Labour MP Karen Buck – the frontwoman for the recently passed Homes (Fitness for Human Habitation) Bill – stating that London needed a ‘strategic approach to rent stabilisation and control’.

Outlining his long-term backing for rent controls, the letter said: “I have long advocated such reforms; in 2013, I suggested reforms could give renters the right to longer-term tenancies and predictable rents. The housing crisis is now having such an effect on a generation of Londoners that the arguments in favour of rent stabilisation and control are becoming overwhelming.”

According to the same newspaper, Khan is set to make rent controls the key tenet of his 2020 re-election campaign. Ahead of the 2020 vote, where his main challenger will be Conservative candidate Shaun Bailey, Khan is planning to work out a blueprint for the overhaul of current laws to enable new limits on rent to be set – powers he doesn’t currently have. He is set to ask the government to make reining in rising rents in the capital part of the London Mayor’s remit.

“London is in the middle of a desperate housing crisis that has been generations in the making,” he said.

“I am doing everything in my power to tackle it – including building record numbers of new social homes – but I have long been frustrated by my lack of powers to help private renters.”

Research recently commissioned by City Hall, and carried out by YouGov, suggests that rent controls have the backing of the majority of London’s renter population. It found that two-thirds of the 2.4 million tenants in the capital strongly back some form of pricing control. 

A strong backlash from the industry

Other key stakeholders in the industry, however, are much less supportive of Khan’s plans. John Stewart, policy manager for the Residential Landlords Association (RLA), said it was bizarre that the Mayor is considering introducing rent controls ‘at a time when rents in London are falling in real terms according to official data’.

“The Labour Party in Wales has previously rejected rent controls arguing that they reduce incentives to invest in new property when we need more and lead to a reduction in the quality of housing,” he added.

“All evidence around the world shows that where forms of rent control are in place, decoupling prices from the value of properties hurts both tenants and landlords. In the end what is needed is a relentless focus on boosting the supply of housing.”

Chris Norris, director of policy and practice at the National Landlords Association (NLA), was equally unimpressed by the proposals, arguing that ‘artificially suppressing rents sounds like an easy solution’ but would in reality be counterproductive and fail to address the root causes of a shortage of affordable housing. He added that history shows rent controls stifle the supply of housing and reduce the money available to landlords to maintain their properties.   

Alexandra Morris, managing director of online letting agent MakeUrMove, also argued that rent controls made little sense and would simply ‘represent another burden for landlords who are already facing interest rate rises, tax relief changes and increasing regulation’.

Elsewhere, a blog by Matthew Lesh – head of research at the Adam Smith Institute – insisted that Khan was mistaken about rent control. The opinion piece, which appeared on the website of The Spectator magazine, said that ‘rent controls would worsen London’s housing crisis while hurting the poor, immigrants, and minorities’. 

He argued that rent controls would lead to less house building (and lower quality housing), while also pointing to how restrictions on rent had proved disastrous in other cities – from Stockholm and Berlin to New York and San Francisco. 

Will rent controls be imposed in London?

Despite Khan’s commitment to introducing rent controls, and the surveys suggesting that many people renting in London back them, the proposals are highly unlikely to win the support of the Conservative-led government.

Housing Secretary James Brokenshire is firmly in the anti-rent control camp, arguing that curbs on rent would lead to poorer housing standards as a result of landlords being unable to afford maintenance on their properties. He also says controls could have a significant impact on housing supply, with landlords preferring to sell up and exit the market rather than seeing their rental income reduced. 

Currently, the only way rent controls will be introduced is a change in government to one more sympathetic to Khan’s wishes.

Tracey Hanbury

Read more in issue 43 of Li Magazine