Beware fine talk of 'rent controls'

http://www.theguardian.com/uk-news/davehillblog/2015/jul/10/beware-fine-talk-of-rent-controls

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Sian Berry, the Camden Councillor who’s hoping to becoming the Green Party’s mayoral candidate next year (as she was in 2008), has challenged the four MPs from other parties who share her designs on City Hall to propose giving London’s mayor the power to control private sector rents.

She says David Lammy, Sadiq Khan, Diane Abbott (all Labour) and Zac Goldsmith (Conservative) should seek to amend the Cities and Government Devolution Bill so that rents in the capital can be capped or even frozen by future mayors. I’m not aware if Berry’s suggestion has yet been taken up. But her initiative is a reminder about how difficult it would be to get such a policy right even if City Hall could introduce one.

The first thing to do is recognise that it won’t happen: Conservatives howl in pain at the mere mention of statutory “rent controls” or even “rent stabilisation” or “regulation”, whatever precisely they think those terms entail. The second thing is to absorb the work of academics who’ve studied how rent levels are controlled, stabilised or regulated in other countries.

When Ed Miliband first announced his (pretty moderate) plans for private renters in May last year, the LSE’s Christine Whitehead described both the then Labour leader’s proposals and the extreme attacks on them as “knee-jerk, partial responses to a problem that can only be addressed by more nuanced, coherent and evidence-based policies.” As Whitehead showed, the problem is complex and that what has worked well in, say, Germany might have perverse ill effects in the very different context of London. For instance:

Unhappily, statutory longer term rent stabilised tenancies, while they may benefit the better off tenant, are likely to worsen the position of poorer households looking to rent privately, harming the very people the suggested approach is trying to help.

Tricky, see? Handily for Sian Berry, Whitehead and her LSE colleague Kathleen Scanlon have also produced a report on rent stabilisation for Camden Council, published last September. In the words of Camden’s leader Sarah Hayward, it was commissioned to stimulate debate about “what can be done in London to influence quality and price in the private rented sector without adversely affecting the supply.”

Hayward pointed out that a third of Camden residents rent privately - higher than the fast-increasing London average of 26% - with a growing number of families joining the young professionals and students traditionally housed that way. Camden administers the voluntary London landlord accreditation scheme, which all the boroughs are signed up to and seeks to help private landlords raise standards. Hayward wanted to find out if the scheme could be improved by adding measures to regulate rent levels. The conclusions of Whitehead and Scanlon’s report include this on the possible effects of imposing caps:

New York provides perhaps the best example of what is likely to occur. Those who live in rent-stabilised properties (where rents are held below market rents) do indeed stay for much longer than those in market rented properties. But they also tend to have higher than average incomes, so the profile of those benefiting from the system is quite different from that which the policy makers wished to achieve.

Given that calls for “rent controls” are indeed often made in the name of preventing exploitation of people on low pay, this is a sobering insight. It’s not the only one in the report, which should be required reading for all aspiring mayoral candidates, not least because its recommendation to Camden (on page 33) says this:

Camden should positively enable longer-term tenancies with index-linked rent increases, voluntarily agreed by landlord and tenant, while at the same time improving transparency and contractual enforcement for both landlords and tenants across the sector...

The word “voluntary” is the key one here. A statutory power to regulate private rents might be useful to future London mayors, but would need to be deployed with great care if it wasn’t to do more harm than good. Meanwhile, it could be that the most effective levers for improving the lot of London’s private renters are already in the hands of its 32 boroughs and that the best thing a future mayor could do would be to throw his or her considerable political weight behind ensuring that those levers are put to the best possible use.