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Sadiq Khan is wrong: rent controls would damage London

Rent controls will make things worse for tenants and potential tenants. Sadiq Khan should focus on more practical solutions, writes David Smith

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Sadiq Khan is wrong: rent controls would damage London, says the RLA #ukhousing

Instead of putting forward simplistic and superficially attractive policies, the mayor’s office should be working with landlords on solutions that increase supply, says the RLA #ukhousing

"Although superficially attractive, rent controls have always proved to make life more difficult for tenants and potential tenants" writes David Smith of @RLA_News #ukhousing

Rent controls would diminish the supply of homes to rent, making life harder for those finding a place to live.

London cannot return to a policy which has been shown fail the sector as a whole.

In his recent article for Inside Housing making the case for the return of rent controls, James Murray, Sadiq Khan’s deputy mayor for housing cites a number of countries and cities for London to follow. Delve deeper however, and all is not as it seems.

In Ireland, its Residential Tenancies Board reported that in 2018 private sector rents increased by an average of 7.8 per cent. This stands in marked contrast to London where, over the same period and without rent controls, average private rents increased by 0.2 per cent according to the Office for National Statistics.

What is more, according to Savills, rents in Dublin between the third quarter of 2018 and the second quarter of 2021 are predicted to increase by just over 17 per cent, far more than the increase Savills predicts for London over a longer period of 2019 to 2023.

The Irish Government has also enabled landlords to once again reclaim 100% of their mortgage interest as a result of the rental supply crisis facing the country.


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In Berlin, a city seen by many as the model to follow in respect of private renting, the global estate provider, CBRE, has noted that asking rents for apartments increased by 5.6 per cent per square metre per month during 2018 whilst asking prices for condominiums rose by 12 per cent over the same period, far more than increases in London.

The German system is also underpinned by a much more generous tax regime for private landlords, a fact which many tend to overlook but is a key plank of rental market.

Rent controls in Paris were struck down by the courts in 2017 and only in the last few days has the French Government issued a decree paving the way for their re-introduction.

Like Germany, there is a more favourable tax regime for private landlords supporting the market.

Closer to home, in Scotland rent increases are not ‘controlled’ in the sense that there is a fixed formula that they can only increase by a certain amount.

Rather rents can be increased within indefinite tenancies once every 12 months with the right of tenants to challenge what they believe to be unfair increases.

 

Crucially, this was all part of a package of tenancy reforms which included changes to the ways that landlords could repossess properties which the Scottish Association of Landlords has told the RLA has seen landlord rights strengthened in a number of areas, especially in circumstances where tenants are building rent arrears.

Although superficially attractive, rent controls have always proved to make life more difficult for tenants and potential tenants.

The power to designate a Rent Pressure Zone in Scotland subject to rent control has yet to be used.

Although superficially attractive, rent controls have always proved to make life more difficult for tenants and potential tenants. In 2013, the cross-party Communities and Local Government Select Committee rejected the idea of rent controls concluding that “the most effective way to make rents more affordable would be to increase supply, particularly in those areas where demand is highest.” One undeniable impact of rent controls is to reduce investment in the sector so reducing supply.

The committee was right then and it is a statement that holds true today.

Instead of increasing taxation on the private rented sector which is already leading to a reduction in supply the government should support the development of new rented housing.

For example, the RLA has proposed that that the Stamp Duty Levy on the purchase of homes to rent should be removed where landlords are investing in properties adding to the net supply of homes.

This could take the form of bringing long term empty homes back into use, developing new build properties, or converting large properties into smaller, more affordable units of accommodation. It is absurd to have a tax on new homes.

Instead of putting forward simplistic and superficially attractive policies without thinking through the consequences, the mayor’s office should be working with landlords on solutions that increase supply and tenants’ choice

The private rented sector has a vital role to play in meeting the housing needs of those living and working in London.

Instead of putting forward simplistic and superficially attractive policies without thinking through the consequences, the mayor’s office should be working with landlords on solutions that increase supply and tenants’ choice, raise standards and keep rents affordable. It is in that spirit that we will work with the mayor’s team.

David Smith, policy director, Residential Landlords Association

At a glance: the different types of rent in London

At a glance: the different types of rent in London

Picture: Getty

Social rent: The amount of social rent a person pays depends on the location and size of the property, and is set according to a complex formula, but it is typically set at between 50% and 60% of market rent.

Affordable rent: Introduced by the coalition government in 2011, ‘affordable’ rent can be up to 80% of market rent, although many associations have been charging lower than this.

London Affordable Rent: A tenure introduced by Sadiq Khan that is lower than national affordable rent and based on target rent levels towards which social rents are gradually being raised. This makes it higher than average social rents in the capital, but in line with the rent that would likely be charged if a new social rent unit was built and set according to the same formula.

London Living Rent: A rental product aimed at middle-income Londoners introduced by Sadiq Khan, with rents set at one-third of average local earnings.

Target rent: A social rent level calculated by the government, which council and housing associations should use to move their social rents to over time.

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