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| New report finds that London 'rent control' would have mixed blessings | New report finds that London 'rent control' would have mixed blessings |
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| Should London mayors have the power to regulate the rents set by the capital’s private landlords and, if so, what should those powers be and what effects would their use have? Such questions tend to provoke fiercely polarised replies. On the free market right, the words “rent control” trigger torrents of totalitarian metaphors and surreal red scare comparisons with Venezuela, Cuba, the Soviet Union and so on. On the left, “rent control” is one of those placard policies brandished by self-styled radicals who’ve never troubled themselves with reading the nasty small print on the reverse. | |
| Those difficult details reveal that state interventions of that kind in London’s private renting sector might have ill-effects as well as good, and that these could hurt some of the very people the policy is meant to help - hardly a desirable outcome. These could include inhibiting the supply of more homes for rent at a time when demand for them is growing fast. So if future London mayors were given powers to control, regulate or stabilise private rents in the capital - and any such turn events looks a long way off - those powers would need to be carefully designed and deployed if the drawbacks were not to outweigh the gains. | Those difficult details reveal that state interventions of that kind in London’s private renting sector might have ill-effects as well as good, and that these could hurt some of the very people the policy is meant to help - hardly a desirable outcome. These could include inhibiting the supply of more homes for rent at a time when demand for them is growing fast. So if future London mayors were given powers to control, regulate or stabilise private rents in the capital - and any such turn events looks a long way off - those powers would need to be carefully designed and deployed if the drawbacks were not to outweigh the gains. |
| The London Assembly’s housing committee is running an investigation into the possible impacts of rent stabilisation measures on London’s housing market, in which private renting has been a growing feature throughout this century. It now accounts for 30% of all residential accommodation in the capital according to the latest English Housing Survey, up from just 13% ten years ago. About two and a half million Londoners now rent privately. | The London Assembly’s housing committee is running an investigation into the possible impacts of rent stabilisation measures on London’s housing market, in which private renting has been a growing feature throughout this century. It now accounts for 30% of all residential accommodation in the capital according to the latest English Housing Survey, up from just 13% ten years ago. About two and a half million Londoners now rent privately. |
| Last month, the committee’s guest experts described London’s varied renting landscape and, to the disappointment of some members and satisfaction of others, examined the possibly counter productive influence that imposing rent stabilisation - a better word for what’s being proposed these days than “control” - might have on the sector and on those who live in it or will in future. Now, a report for the committee by the Cambridge Centre for Housing and Planning Research has tried to quantify the effects various types of such regulation might have in the capital were they introduced. | Last month, the committee’s guest experts described London’s varied renting landscape and, to the disappointment of some members and satisfaction of others, examined the possibly counter productive influence that imposing rent stabilisation - a better word for what’s being proposed these days than “control” - might have on the sector and on those who live in it or will in future. Now, a report for the committee by the Cambridge Centre for Housing and Planning Research has tried to quantify the effects various types of such regulation might have in the capital were they introduced. |
| The conclusions are, to use the researchers’ own words, “very tentative”, but they broadly find that a range of moderate stabilisation measures would each result in small reductions in the rate at which rents would rise in London over the next ten years - an average of between nothing and 15% - together with modest reductions in the rate at which the capital’s private rented sector would grow. | The conclusions are, to use the researchers’ own words, “very tentative”, but they broadly find that a range of moderate stabilisation measures would each result in small reductions in the rate at which rents would rise in London over the next ten years - an average of between nothing and 15% - together with modest reductions in the rate at which the capital’s private rented sector would grow. |
| The researchers modeled six different stabilisation scenarios, three of which would regulate rent rises within a tenancy, two of which would hold rents at or close to current levels, and one of which would force reductions of existing rents. For example, under Scenario 1, where rent increases would be limited to increases in the consumer price index (CPI) and tenancies would be a minimum of five years in length, tenants would be at best £6 a week better off by 2020 - paying a projected £352 a week instead of £358 - based on London averages. Scenario 3, which proposes a temporary three year rent freeze, including between tenancies, could make tenants £18 better off by 2017 than they would otherwise have been, before their rents returned to market levels. | The researchers modeled six different stabilisation scenarios, three of which would regulate rent rises within a tenancy, two of which would hold rents at or close to current levels, and one of which would force reductions of existing rents. For example, under Scenario 1, where rent increases would be limited to increases in the consumer price index (CPI) and tenancies would be a minimum of five years in length, tenants would be at best £6 a week better off by 2020 - paying a projected £352 a week instead of £358 - based on London averages. Scenario 3, which proposes a temporary three year rent freeze, including between tenancies, could make tenants £18 better off by 2017 than they would otherwise have been, before their rents returned to market levels. |
| The really bold Scenario 5 proposes that rents are instantly cut to two thirds of their current values and ensuing rises restricted to either CPI or the rate of wage inflation, whichever is the lower. This would slash rents from a projected £352 a week with no stabilisation to £221 per week by 2020 - a massive change. The problem with this, however, would be its likely effect on the number of homes available for private rent and on the wider housing market. | The really bold Scenario 5 proposes that rents are instantly cut to two thirds of their current values and ensuing rises restricted to either CPI or the rate of wage inflation, whichever is the lower. This would slash rents from a projected £352 a week with no stabilisation to £221 per week by 2020 - a massive change. The problem with this, however, would be its likely effect on the number of homes available for private rent and on the wider housing market. |
| At present, the sector is on course to grow by 49% over the next ten years. The study anticipates all of its scenarios slowing this growth to 40% except for Scenario 5, which would reduce the expected growth of the sector to at least 16% and could even end up shrinking it. There would be major knock-on effects as well. These would, the researchers write, “impact across the housing market and could cause a sudden fall in house prices, with a resultant impact on new housing supply across all tenures.” In a city with a fast-growing population in urgent need of more housing of all kinds, not less, that is not a happy thought. | At present, the sector is on course to grow by 49% over the next ten years. The study anticipates all of its scenarios slowing this growth to 40% except for Scenario 5, which would reduce the expected growth of the sector to at least 16% and could even end up shrinking it. There would be major knock-on effects as well. These would, the researchers write, “impact across the housing market and could cause a sudden fall in house prices, with a resultant impact on new housing supply across all tenures.” In a city with a fast-growing population in urgent need of more housing of all kinds, not less, that is not a happy thought. |
| As well as the number crunching, the Cambridge Centre’s report contains material from a survey of 174 London landlords. As might be expected, there was little enthusiasm for stabilisation powers, but some of the detail is interesting. When asked, for example, how they would feel about being restricted to index-linked rises in London alone, some landlords thought it wouldn’t make much difference and others said they would consider investing their money elsewhere: “We would not invest in products where the income steam is capped.” | As well as the number crunching, the Cambridge Centre’s report contains material from a survey of 174 London landlords. As might be expected, there was little enthusiasm for stabilisation powers, but some of the detail is interesting. When asked, for example, how they would feel about being restricted to index-linked rises in London alone, some landlords thought it wouldn’t make much difference and others said they would consider investing their money elsewhere: “We would not invest in products where the income steam is capped.” |
| Substantial percentages, varying according to the scenario proposed, said they would immediately sell all or some of their properties immediately or reduce the number they owned over the years. Yes, they would say that, wouldn’t they, especially if they were the sorts of landlords who feel strongly enough about controls on rents to respond to a survey request. The researchers acknowledge this. | Substantial percentages, varying according to the scenario proposed, said they would immediately sell all or some of their properties immediately or reduce the number they owned over the years. Yes, they would say that, wouldn’t they, especially if they were the sorts of landlords who feel strongly enough about controls on rents to respond to a survey request. The researchers acknowledge this. |
| Even so, their findings are line with other attempts to bring cool, academic focus to bear on this hot political topic in that they underline that “rent control” is no magic solution to the problems of many private renters in London and others in housing need. Rather, it would be a mixed blessing. If rent stabilisation did cause landlords to bale out in large numbers, why would anyone step up to take their places? Where would such a flight from the sector leave its two and a half million tenants? | Even so, their findings are line with other attempts to bring cool, academic focus to bear on this hot political topic in that they underline that “rent control” is no magic solution to the problems of many private renters in London and others in housing need. Rather, it would be a mixed blessing. If rent stabilisation did cause landlords to bale out in large numbers, why would anyone step up to take their places? Where would such a flight from the sector leave its two and a half million tenants? |
| Such questions cannot be ignored by champions of rent stabilisation, as the sensible ones among them understand. Protecting tenants, particularly the more vulnerable and the growing number of families, from huge, sudden hikes in their rents with all the disruption and anxiety this, and the fear of it, entails, is clearly to be desired for the good of those affected and of the city as a whole. But if rent stabilisation in London would have unwanted consequences as well as benefits, the balance between the two would have to be carefully weighed. | |
| Read the Cambridge Centre’s report here. | Read the Cambridge Centre’s report here. |