London’s newly elected mayor, Sadiq Khan, has already committed to making the London housing crisis a priority.
He has announced a raft of policies aimed at helping the capital’s two million private renters, and one is attracting particular scrutiny and controversy – the introduction of a London rent cap.
Few people doubt rents in London are so high that they are now a serious issue for renters living and working there, but with a severe shortage of homes compared to the number of residents, critics claim such a move could reduce the supply of homes available to rent.
In an economic climate which is becoming less and less favourable for landlords, is there not a very real risk that implementing rent controls might be one policy change too far for landlords?
Well, I don’t believe any such risk is likely. I also think that rent capping may not only benefit tenants, but could be a good thing for landlords into the bargain.
This isn’t just wishful thinking. There’s good evidence to support this and we don’t need to look too far away to see how rent controls might work in practice.
The Tory MP, Shaun Bailey has described rent capping as “Soviet”, but he might want to revise that geographical reference as other big global cities already have rent controls in place and they have nothing to do with totalitarian governments of the last century.
New York and Berlin both have rent stabilisation rules, without an apparent detrimental impact on the cities and their landlords. In New York, about one million apartments have limits placed on the amount by which rent can rise each year. In Berlin, landlords are prohibited from raising rents more than 10 per cent above local average.
I’m not going to suggest that landlords in these cities are huge fans of such controls. But equally, they’re not exiting the market in droves – in fact there is no evidence to suggest that they are exiting the market at all.
For landlords, it’s worth noting that rent controls tend to usher in longer tenancies and more settled tenants. Given the costs of finding new ones, this can only be a good thing.
In New York, tenants in rent controlled apartments tend to stay in the same place for an average of 12 years (compared to six years in places without any).
But there’s another issue at work here. Landlords want, need and deserve tenants who will look after their properties and co-operate with them to improve them when needed.
One of the major gripes I hear from landlords is that tenants do not treat their property as if it were their own. The reasons for this are not simple. Nor do you need to be a genius to figure out that when a tenant is shelling out around 62 per cent of his or her income (for this is now the reality of renting in London) that doesn't leave a great deal of extra cash to keep your home clean, bright and as well-maintained as it should be.
Huge, unchecked rent hikes also create an adversarial relationship between landlord and tenant from the very outset. Tenants feel that landlords are charging them extortionate rents with impunity and landlords feel they’re cast in the role of the nation’s favourite whipping boy – responsible for every ill in the UK housing market.
The London rental market is rapidly spiralling out of control and swift, decisive action is required rather than mild tinkering. Stabilising rents is one practical solution which could help bring an end to the misery of renting in London. Let’s do it.