Sadiq Khan has made clear that he is going to make the issue of private sector rent controls a key plank of his 2020 re-election bid, even though the Mayor of London has absolutely no statutory power to cap rents. The sad reality is that these pronouncements amount to nothing more than a populist distraction from his failure to get crime down, build more houses and improve our transport network.
Nevertheless, it is up to us Conservatives to explain to Londoners why such a move would be deeply flawed and extremely damaging were the Mayor ever to secure the powers he seeks from national government. Make no mistake, the rollout of rent controls could actually push up the cost of rent as well as limiting the supply of new places to rent and drive down the quality of homes.
It really is no surprise that experts and commentators from across the political spectrum have repeatedly pointed out that rent controls simply do not work. When he chaired the London Assembly’s housing committee, the rent control- obsessed Labour AM Tom Copley instigated an investigation into the effect thy would have on the capital’s housing market. Virtually all the experts agreed that far from reducing rents, this policy can in fact lead to costs going up.
When rent controls were introduced in central Paris, prices started to increase across the city’s suburbs where no cap was in place. If Mayor Khan applied rent controls across Inner London, where prices are highest, it is likely that it would be private renters in Outer London boroughs such as Bromley, Havering and Hillingdon who would be hit in the pocket. Even if the Mayor was to freeze rent prices across the whole of Greater London, the already high rents across the wider south east of England would most likely rocket as a result.
In Berlin, the introduction of rent controls saw rents shoot up for new tenants as landlords compensated for having next to no flexibility over rent charges for existing ones. Rents in that city had been rising by just one to two per cent each year before the rent brake was introduced in 2015, but new renters were hit by a 10 per cent jump in prices in the three years after its introduction. Such discrimination against new renters in London would have a devastating impact on the city, with high rents already putting people off moving here.
And while some rents may go up, it is likely that the number of rental properties available would go down. The evidence from San Francisco shows that landlords unable to vary their rents are forced to resort to more lucrative ways of using their properties. In that city, the rental housing stock went down by 15 per cent as landlords increasingly sold their houses and flats to owner-occupants or redeveloped the buildings.
Those landlords who don’t pump up rents for new tenants or redevelop are likely to have less money available to invest in their properties, as academics at Stanford University have found. Any Londoner who has rented a property in our city knows that the quality of the homes in London needs to improve, not deteriorate. In those few cases where Mayor Khan’s plans for the rental market would bring rents down, this would come at the expense of good property maintenance.
Across the world and across the decades, rent controls have failed time after time, which is why a whole host of experts have again denounced this policy approach. Left wing commentator Stephen Bush has said that rent control “incentivises landlords to remove their properties from the private rental market” and “creates steeper barriers to entry for new tenants”. In a similar vein, the Institute for Directors have warned that they would lead to landlords leaving the rental market, which would hit the poorest the hardest.
As has been the case for years, we need to get London building and increase the housing stock rather than playing around with rent controls. It is becoming clearer by the day that the Mayor is failing to build enough homes. Only a few weeks ago the Evening Standard revealed how he is at risk of missing his target of 14,000 affordable homes for the financial year to April. This is extraordinary given Mayor Khan’s habit of double counting affordable housing starts in order to boost his statistics.
Sadiq Khan owes it to Londoners to stop pumping out populist policies which he knows will do nothing to improve housing conditions in our city. His focus needs to be on using the billions of pounds he has at his disposal to finally get more homes built – that’s the only effective way to address affordability in London.
Andrew Boff is a Conservative Londonwide London Assembly Member and a member of the Assembly’s housing committee. Sadiq Khan has asked his deputy mayor for housing James Murray and Westminster North MP Karen Buck to “develop a new blueprint for stabilising or controlling private rents in the capital”.