Should London follow Berlin and introduce rent freezing?
Gina Miller, founding partner at SCM Direct, says YES.
I appreciate that many economists say rent control forces rent down, which can lead to landlords reducing the stock of rental property. But as the economics professor Richard Arnott has stated: “real-world rent control, at least in its modern form, is generally not very damaging in its impact on the housing market”.
As we face a crisis in our capital, we need brave policy in the face of serious market pressures.
Rent freezing is not a cure for all affordable housing ills across our capital, but it can be an antidote.
Berlin took this decision because monthly rents had more than doubled in the last 10 years alone. This is still markedly less than in London, where rents hit an all-time high in the last quarter of 2018, with Rightmove predicting further increases for 2019.
With London’s population expected to grow to 10.2m by 2039 (compared to 8.6m in 2015), lack of affordable accommodation will lead to employers looking outside the capital to ensure the supply of talent they require.
A period of rent freezing is just one solution, but it’s something that cross-party politicians should be urgently exploring.
Matt Kilcoyne, head of communications at the Adam Smith Institute, says NO.
For London to introduce rent caps would be for the world’s capital to close the door. New tenants – and our city’s future talent – would be locked out of a system designed to help those already here.
Rent controls also do the very opposite of what they’re designed for. A lower fixed price increases the demand for rental housing and at the same time reduces the quantity of it offered for rent.
Landlords are incentivised to convert properties to other, higher-return uses. New developers don’t build rentable homes as they are now less profitable to build. We are therefore left with fewer homes, which was what drove rents higher in the first place.
It’s worth remembering too that the London mayor has no powers to introduce a rent freeze. Supporters merely want to use the issue to bash central government, while deflecting from Sadiq Khan’s own poor record when it comes to building the housing that London needs.