Dave Hill: Would Labour give Sadiq Khan more powers to help London’s private renters?

Dave Hill: Would Labour give Sadiq Khan more powers to help London’s private renters?

Private sector housing “rent control” – the quote marks are there for a reason – excites political passions like few other issues. Its polarising powers bear comparison with those of Brexit. In London, only road-user charging stirs comparably strong views, and in its case only Conservatives are so maddened by it they become strangers to reason – hence the totemic prominence they gave the Ultra-Low Emission Zone expansion in the mayoral election campaign.

By contrast, “rent control” makes Left and Right alike lose their minds, at least at their outer fringes. Mere mention of the term has certain types of Tory howling totalitarian comparisons with Cuba or Zimbabwe, while in the monochrome moral mindset of the hard Left the case for the state curtailing the profits of “greedy landlords” is unanswerable.

There are problems with both types of response: the Left sticks it fingers in its ears when told that “rent control” in practice has had an array of unintended consequences, including making it harder for people on low incomes to find somewhere to live; the Right averts its gaze from the damaging rise in rents in the capital of late, because to act against it would be to threaten “freedom” – meaning the freedom of some of them and ideological allies to exploit.

Against that backdrop London’s private rented housing sector has become a growing, major component of its intensifying housing emergency. Too many families are stuck in it, often in inadequate conditions. Sky-high rents are causing homelessness, fraying the city’s social fabric. Such rents are also making it harder for London to attract and retain the workforce it needs, simply because workers, from cleaners to schoolteachers, can’t afford to live in the city. The capital’s economy, so vital to the whole nation, is being damaged.

The argument for action seems overwhelming. But what type of action? The urgency of the question has been intensified of late by shadow chancellor Rachel Reeves triggering a flurry of headlines after saying in a radio interview that restraints on rent rises might be acceptable in some specific geographical areas, and by the publication of a Labour-commissioned independent report on the sector in the UK as a whole.

The commission’s report is principally authored by Stephen Cowan, leader of Hammersmith & Fulham Council, along with legal expert William Hunter, former Shelter policy manager Rose Grayston and Jacky Peacock, head of policy at Advice for Renters. It is informed by an impressive range of experts, including housing ombudsman Richard Blakeway, senior figures from Grainger PLC and Christine Whitehead of the LSE.

It looks at not only “rent control” but also the regulation of other aspects of the sector, including tenants’ security and property standards, along with, crucially, the need for change to form part of “a holistic approach to fixing all parts of the housing market”. And it recommends a “comprehensive, annually updated National Landlords Register” as “the essential mechanism for managing and enforcing standards”, with landlords required to prove their properties comply with the Decent Home Standard, a complete, long overdue, end to “no fault evictions”, measures to prevent landlords moving into the short-term lets market instead and, yes, “rent control” – but of a particular kind.

The report fully recognises “the overwhelming consensus among economists” that what are defined as “first generation rent controls”, especially compulsory freezes or cuts “do not work and are harmful”. It congratulates Labour on its “good decision” to rule out such measures. It documents the “unhappy history” of rent freezes in recent times, notably in Berlin where the policy produced the outcome its critics feared: a decline in the number of properties available, probably a permanent one.

The report is ultimately sceptical, too, about so-called “second generation controls” which “seek to govern rent increases both within and between tenancies”. It arrives at a preference for “third generation” controls which would operate within tenancies only and entail rises being linked to either local wage growth or consumer price index inflation, whichever is the lower. Rises could happen only once a year and a four-month notice period would have to be given. The term “rent stabilisation” is preferred.

Cowan and colleagues show their working in some detail, summarising the thinking of economists of Left and Right, including the late Richard Arnott who in 1995 called for a more nuanced assessment of rent regulation methods in view of newer, “soft” types functioning in North America which differed from the “hard” forms brought in after World War II in New York and many European countries. It was Arnott who came up with the three generations distinction.

The report politely distances itself from those who’ve looked for measures to cut rents rather than moderate increases, including campaigners Generation Rent, the National Renter Manifesto and Sadiq Khan’s blueprint for reforming private renting, published in 2019. Yet it also has important things in common with some of them.

Both Generation Rent, which had input into the report, and the Mayor’s proposals acknowledge potential negative impacts, which have long been known about – a calculation of these was produced for the London Assembly by Cambridge University academics nearly ten years ago. Generation Rent applauded the report’s endorsement of a rent stabilisation mechanism. The Mayor’s blueprint said controls on rents in London “should be implemented gradually over time” to “avoid unintended consequences”.

The new report is alive to the full variety of problems in London, where 30 per cent of dwellings are privately rented (around twice the proportion at the start of the century), rents routinely devour 40 per cent of incomes, and the bottom end of the market is rife with criminality, overcrowding, poverty and vulnerable tenants.

Reeves’s comments about restraints on rents perhaps being acceptable in specific areas raises the intriguing question of whether a near-future Labour government might give London’s Labour Mayor the opportunity to pilot a rent stabilisation scheme of the type the Labour-commissioned report favours.

Only last month it was reported that Khan had had no luck persuading his party’s leadership to move in that direction. But Keir Starmer’s post-mayoral election summit with all of England’s Labour Mayors seemed to point to possible closer collaborations, perhaps embracing cities serving as test beds for policy innovation. In London, many renters’ fingers are crossed.

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Categories: Analysis

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