DEBATE: Should London have rent controls?
Dr Kristian Niemietz, head of political economy at the Institute of Economic Affair says No
Rent controls are a lot like socialism. Both have been tried dozens of times. Both have ended in failure every single time. And both remain insanely popular nonetheless. In both cases, supporters will insist that, far from having failed, the idea has just never “really” been tried.
The latest example is Berlin (Germany’s very own miniature Venezuela), where, after the introduction of a rent cap, the supply of rental properties coming on the market fell by almost half, at a time when it increased in comparable German cities. But, needless to say: the cap remains.
A high price is simply a signal of scarcity. You can override such a signal, just like you can switch off a beeping smoke detector. But the underlying problem, which triggered the signal in the first place, is still there, and it will now simply manifest itself in other ways.
We can only build our way out of this crisis. There are no shortcuts.
Sarah Arnold, senior economist at the New Economist Foundation says Yes
One in four Londoners live in the private rented sector, which has seen huge growth in recent decades. The sector, home to increasing numbers of families and older people, has also seen rents increase rapidly, whilst many young people are shut out entirely.
Before Covid, average private rents in London had risen over three times as fast as average earnings over the last decade, and around a quarter of privately renting households in the capital spent over half of their income on rent.
Private renters are among the worst hit by this pandemic, with 840,000 behind on payments nationally as many tenants saw their incomes fall. The longterm impact of the pandemic on the housing market is far from clear but having affordable rents in London should remain a priority. In many major cities, from Berlin to New York, rent controls are the norm. Carefully designed rent controls could be key to creating a fairer, more affordable private rental sector.