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| How to improve London's private rented housing sector - and how not to | How to improve London's private rented housing sector - and how not to |
| (about 20 hours later) | |
| London renters’ list of woes is distressing and familiar: high and rising rents, insecure tenancies, dodgy landlords and poor conditions. Meanwhile, any hope of becoming a home owner in the capital is becoming a receding fantasy. The London Assembly housing committee is trying to work out how to help. On Tuesday, a panel of experts shared its wisdom about the pros and cons of regulating rents and much, much more. Here are some of the illuminating points made. | London renters’ list of woes is distressing and familiar: high and rising rents, insecure tenancies, dodgy landlords and poor conditions. Meanwhile, any hope of becoming a home owner in the capital is becoming a receding fantasy. The London Assembly housing committee is trying to work out how to help. On Tuesday, a panel of experts shared its wisdom about the pros and cons of regulating rents and much, much more. Here are some of the illuminating points made. |
| There’s more sharing and less dying | There’s more sharing and less dying |
| “The core issue for London is that we are now housing four generations rather than three,” said Christine Whitehead, housing economics professor of the London School of Economics. This meant that “people trying to get into the market are being excluded by people like me, who live too long”. A related factor is that the historic outflow of population from London (largely to the Home Counties) has slowed because of the financial crisis. Result? “We have a lot more families in London than we would have predicted,” Whitehead said. “They won’t move until the kids are of a particular age, even if they can.” | “The core issue for London is that we are now housing four generations rather than three,” said Christine Whitehead, housing economics professor of the London School of Economics. This meant that “people trying to get into the market are being excluded by people like me, who live too long”. A related factor is that the historic outflow of population from London (largely to the Home Counties) has slowed because of the financial crisis. Result? “We have a lot more families in London than we would have predicted,” Whitehead said. “They won’t move until the kids are of a particular age, even if they can.” |
| All of this has contributed to the enlargement of the private rented sector in the capital in recent years and to the growing demand for it. Newcomers to the London housing market have always had to put up with accommodation that is less than ideal, Whitehead stressed, but what used to last for four or five years can now go on for 20 or 30. It’s partly a consequence of London’s pulling power and growth. “London needs people and if it’s successful it will get people,” Whitehead said. “The ones who want to be here are going to be prepared to put up with worse housing. That means by definition that sharers will outbid non-sharers. The sharing issue is enormous.” | All of this has contributed to the enlargement of the private rented sector in the capital in recent years and to the growing demand for it. Newcomers to the London housing market have always had to put up with accommodation that is less than ideal, Whitehead stressed, but what used to last for four or five years can now go on for 20 or 30. It’s partly a consequence of London’s pulling power and growth. “London needs people and if it’s successful it will get people,” Whitehead said. “The ones who want to be here are going to be prepared to put up with worse housing. That means by definition that sharers will outbid non-sharers. The sharing issue is enormous.” |
| Different kinds of renters want different things | Different kinds of renters want different things |
| Property analyst Kate Faulkner told the committee it was a mistake to see London as a single, uniform renting market. Even individual boroughs can contain several different renting markets, she explained, catering to different needs. She stressed the range of people who rent privately and their differing reasons for doing so: there’s the student market; those who would be in social housing were there enough of it; those who’d like to buy but can’t afford it; and those who rent simply “because it suits them down to the ground.” | Property analyst Kate Faulkner told the committee it was a mistake to see London as a single, uniform renting market. Even individual boroughs can contain several different renting markets, she explained, catering to different needs. She stressed the range of people who rent privately and their differing reasons for doing so: there’s the student market; those who would be in social housing were there enough of it; those who’d like to buy but can’t afford it; and those who rent simply “because it suits them down to the ground.” |
| Faulkner acknowledged that in an ideal world many renters would like to be able to buy, but that in reality even some who can afford to choose not to. “Quite a lot of people living in London don’t want the hassle of doing up an old house these days,” she said. And while rents are clearly rising, they aren’t outstripping lower-paid Londoners’ stagnating wages at anything like the same rate as house prices are: “A lot more people are renting simply because it’s cheaper.” Faulkner also cited research showing that house sharing among the young can be popular. “Companies like Spare Room have shown that people like living together. They leave university and don’t want a one-bed flat to themselves. They want to continue with that lifestyle.” Goodbye Rising Damp, hello Friends. | Faulkner acknowledged that in an ideal world many renters would like to be able to buy, but that in reality even some who can afford to choose not to. “Quite a lot of people living in London don’t want the hassle of doing up an old house these days,” she said. And while rents are clearly rising, they aren’t outstripping lower-paid Londoners’ stagnating wages at anything like the same rate as house prices are: “A lot more people are renting simply because it’s cheaper.” Faulkner also cited research showing that house sharing among the young can be popular. “Companies like Spare Room have shown that people like living together. They leave university and don’t want a one-bed flat to themselves. They want to continue with that lifestyle.” Goodbye Rising Damp, hello Friends. |
| Also on the panel was Anne Baxendale from Shelter, who said the charity’s most recent survey of tenants found that 13% of private renters were in the sector from choice. She drew attention to the growing number of families renting privately in London and their greater need for long-term certainty about where they are going live, notably because it isn’t good for children to have to keep changing schools. To that end, Shelter has been campaigning for the introduction of five-year minimum tenures. However, both Alan Collett, a consultant with property investors M&G Real Estate, and Simon Chattfield, research and operations director with be:here, said they’d found little demand for five-year tenures so far. Many young professionals don’t want to stay put for more than a single year. So the private renting picture is a complicated one within the context of a London housing culture that is changing in a variety of ways. | Also on the panel was Anne Baxendale from Shelter, who said the charity’s most recent survey of tenants found that 13% of private renters were in the sector from choice. She drew attention to the growing number of families renting privately in London and their greater need for long-term certainty about where they are going live, notably because it isn’t good for children to have to keep changing schools. To that end, Shelter has been campaigning for the introduction of five-year minimum tenures. However, both Alan Collett, a consultant with property investors M&G Real Estate, and Simon Chattfield, research and operations director with be:here, said they’d found little demand for five-year tenures so far. Many young professionals don’t want to stay put for more than a single year. So the private renting picture is a complicated one within the context of a London housing culture that is changing in a variety of ways. |
| Most London private landlords are pretty good | Most London private landlords are pretty good |
| Kate Faulkner said that standards in the capital’s private rented sector had improved greatly in the last ten years. Christine Whitehead said it was important to separate out “good landlords and good tenants, which are the majority” from the minority. There was also some interesting debate about rent rises. Anne Baxendale reminded everyone that rents can take enormous bites out of Londoners’ take home pay: an average of 60%, she said, when Shelter would consider 30% to be a properly affordable proportion. Yet despite recent data showing that the average monthly rent for a London house or flat has risen to £1,500 a month, the committee heard that many landlords don’t increase their rents at all. | Kate Faulkner said that standards in the capital’s private rented sector had improved greatly in the last ten years. Christine Whitehead said it was important to separate out “good landlords and good tenants, which are the majority” from the minority. There was also some interesting debate about rent rises. Anne Baxendale reminded everyone that rents can take enormous bites out of Londoners’ take home pay: an average of 60%, she said, when Shelter would consider 30% to be a properly affordable proportion. Yet despite recent data showing that the average monthly rent for a London house or flat has risen to £1,500 a month, the committee heard that many landlords don’t increase their rents at all. |
| What’s going on? Well, landlords often have an interest in keeping good tenants in their properties. They don’t give them any grief and if they move it can mean time, trouble and possibly a spell while the property stands empty until someone new moves in. It can be cheaper and less hassle to leave rents as they are or only hike them by a little. Rises tend to happen when new tenants move in, and landlords put their prices back up to local market levels or whatever they judge competitive. Also, different trackers of rent levels tend to measure different things in different ways. So, yes, rents overall are rising but at different rates for different people at different times. The general upward trend is about growing demand failing to be met by supply, even though more rooms are being let and more people are occupying individual properties. Also, higher standards don’t come free. Higher rents aren’t necessarily about greed. They can also help fund higher quality. | What’s going on? Well, landlords often have an interest in keeping good tenants in their properties. They don’t give them any grief and if they move it can mean time, trouble and possibly a spell while the property stands empty until someone new moves in. It can be cheaper and less hassle to leave rents as they are or only hike them by a little. Rises tend to happen when new tenants move in, and landlords put their prices back up to local market levels or whatever they judge competitive. Also, different trackers of rent levels tend to measure different things in different ways. So, yes, rents overall are rising but at different rates for different people at different times. The general upward trend is about growing demand failing to be met by supply, even though more rooms are being let and more people are occupying individual properties. Also, higher standards don’t come free. Higher rents aren’t necessarily about greed. They can also help fund higher quality. |
| There is a small number of very big crooks | There is a small number of very big crooks |
| “There is horrendous criminality, particularly in London, landlords that are absolutely exploiting people,” Faulkner said. “The number of landlords like that is small, but they have a lot of properties and they affect an awful lot of people, because they are shoving in as many as they can. That is an enforcement issue.” She praised Newham’s pioneering licensing scheme, which requires every private landlord in the borough to register. The Guardian’s Hilary Osborne pointed out that elsewhere “complete dross” was being marketed “in plain sight” for £800 a month or more, and wondered why letting agents weren’t questioning it. This was the kind of stuff vulnerable people on insecure incomes were ending up living in. Baxendale pointed out that families often end up in overcrowded and otherwise unsuitable homes. She’d like to see if Boris Johnson’s London Rental Standard could be beefed up to help deal with this. | “There is horrendous criminality, particularly in London, landlords that are absolutely exploiting people,” Faulkner said. “The number of landlords like that is small, but they have a lot of properties and they affect an awful lot of people, because they are shoving in as many as they can. That is an enforcement issue.” She praised Newham’s pioneering licensing scheme, which requires every private landlord in the borough to register. The Guardian’s Hilary Osborne pointed out that elsewhere “complete dross” was being marketed “in plain sight” for £800 a month or more, and wondered why letting agents weren’t questioning it. This was the kind of stuff vulnerable people on insecure incomes were ending up living in. Baxendale pointed out that families often end up in overcrowded and otherwise unsuitable homes. She’d like to see if Boris Johnson’s London Rental Standard could be beefed up to help deal with this. |
| Forget “rent control” as a miracle cure | Forget “rent control” as a miracle cure |
| For a lot of people concerned about high rent levels - including, it seems, a lot of Guardian readers - it is beyond obvious that legally enforceable regulations or controls would fix the problem. If only London did things the way they do them in Berlin or New York! If only it were that simple. You don’t have to be the sort who screams “Venezuela” at the merest mention of statutory intervention to recognise that such moves can have adverse effects for some as well as benefits for others. | For a lot of people concerned about high rent levels - including, it seems, a lot of Guardian readers - it is beyond obvious that legally enforceable regulations or controls would fix the problem. If only London did things the way they do them in Berlin or New York! If only it were that simple. You don’t have to be the sort who screams “Venezuela” at the merest mention of statutory intervention to recognise that such moves can have adverse effects for some as well as benefits for others. |
| In Berlin (and elsewhere in Germany), where the entire housing scenario has long been quite different from London including in private renting, new, stronger rent controls are welcomed by current tenants living in increasingly desirable areas but are also raising concerns that they are deterring investors in new homes for rent in such areas at a time when more are needed. | In Berlin (and elsewhere in Germany), where the entire housing scenario has long been quite different from London including in private renting, new, stronger rent controls are welcomed by current tenants living in increasingly desirable areas but are also raising concerns that they are deterring investors in new homes for rent in such areas at a time when more are needed. |
| Whitehead said that rents in several German cities, while much lower to begin with, have actually increased more quickly than in London as a result of stabilisation measures, perverse as that may seem. She explained that in a high inflation environment rules limiting the extent to which rents can be increased appeared to have encouraged landlords to impose such increases as are permitted instead of engaging in negotiations with their tenants, which might have resulted in smaller increases or none at all. | Whitehead said that rents in several German cities, while much lower to begin with, have actually increased more quickly than in London as a result of stabilisation measures, perverse as that may seem. She explained that in a high inflation environment rules limiting the extent to which rents can be increased appeared to have encouraged landlords to impose such increases as are permitted instead of engaging in negotiations with their tenants, which might have resulted in smaller increases or none at all. |
| In New York, Whitehead said, “The people who are benefiting are all over the age of 50 and professionals.” She added: “The general evidence says that if you have extreme types of control, basically those who are there benefit and those who want to get in [to such properties], don’t get in.” Anne Baxendale said that research for Shelter found that if rents were reduced by a third, many landlords would simply sell up - hardly ideal for tenants. Alan Collett told the committee that in Amsterdam, another city often held up as a rent control example London should follow, new properties for private rent are to be free of rent regulation measures in order to get more of them built. There is a useful lesson here: complaining about high rents is easy; making them lower without hurting the very people you want to help is trickier. | |
| Conclusion? | Conclusion? |
| London needs a bigger, better and cheaper private rented sector, but politicians seeking to get all three at the same time will have to engage in a complex and subtle balancing act that the mayor and the boroughs lack the powers to even try to execute all on their own. Happy days. The above gives just a flavour of the discussion at the 1st September housing committee meeting. You can watch a webcast of the whole thing via here. | London needs a bigger, better and cheaper private rented sector, but politicians seeking to get all three at the same time will have to engage in a complex and subtle balancing act that the mayor and the boroughs lack the powers to even try to execute all on their own. Happy days. The above gives just a flavour of the discussion at the 1st September housing committee meeting. You can watch a webcast of the whole thing via here. |
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