Landlord groups have claimed London mayor Sadiq Khan’s re-election bid to introduce rent controls in the capital would be “a disaster” for tenants.
Khan kicked off his campaign at the start of this month by calling the mayoral vote on 7 May a “referendum” on his controversial rental policy. Speaking at the launch in Hackney, Khan said “the case for rent controls is now undeniable”.
Rents have increased by 27 per cent over the past 10 years and many Londoners pay almost half their wages to their landlord, he said, but Tory ministers have so far blocked his attempts to introduce controls. Khan argued that if he is re-elected as mayor and Boris Johnson still refuses to grant powers to implement the policy, the prime minister will be “denying the express democratic will of millions of Londoners”.
But conservative mayoral candidate Shaun Bailey insisted that controls have failed in other countries. He accused Khan of trying to distract the public from his record on affordable housing, saying he had only built a tiny fraction of the new homes promised – despite being given £5bn from government.
The soon-to-merge Residential Landlords Association and National Landlords Association said in a joint statement from policy leads John Stewart and Chris Norris: “Rent controls might appear attractive to those already renting but they would be a disaster for anyone looking for somewhere to rent. All they would achieve, as history and experience elsewhere tells us, is to drive landlords out of the market, exacerbating an already serious shortage of homes available.”
They urged Khan to use existing powers to boost the supply of available homes in order to improve affordability in the capital.
Khan has said that he would first seek to reduce rents before introducing controls. It is not yet clear what type of model Khan would favour as he plans to set up an arms-length commission to examine different options.
He would need to decide whether to control rents only within a tenancy period or whether to limit increases between tenancies as well. He would also need to decide what type of limits to impose, whether that be linked to market rents, property values, wages or another measure.
The landlord groups cite several other sources that warn rent controls would not have the desired impact. Centre for Cities analyst Anthony Breach wrote last year that “rent control hurts renters”. He points to research on the San Francisco model, which revealed that renters who lived in the city when strict controls were introduced in 1994 saved $2.9bn over the next sixteen years, but those who moved to the city after the measures came in actually paid an extra $2.9bn over the same period.
Breach wrote: “Tenants who are lucky enough to already live in housing that suits their needs benefit greatly from rent control. But those who will want to move for more space, young people who want their own place in the city, and migrants moving to London for the first time all lose out, as landlords look to recoup their losses through new tenants, as they did in San Francisco.”
Last year, London School of Economics distinguished policy fellow Kath Scanlon told the London Assembly’s Budget and Performance Committee that the mayor’s proposal not just to limit rent increases but to reduce rents from current levels was a policy she had not seen in any of her studies of different international models.
“That would be a level of regulation unseen in any developed country, I think, and would have really dramatic unintended consequences,” she said.
Meanwhile, the Resolution Foundation has said that “while a rent-smoothing mechanism that limits dramatic rent spikes over, say, a three-year period would be a sensible way to protect tenants from arbitrary increases, holding down the true market price of private housing via enduring rent controls, rather than increasing housing supply and reducing demand, is unlikely to succeed”.
Arla Propertymark and the Royal Institution of Chartered Surveyors also voiced strong opposition to Khan’s plans. Rics UK residential policy manager Tamara Hooper says: “Rent controls could wreck the private rented market in London, having the effect of restricting the numbers of homes for Londoners and placing pressure on local authorities to build more themselves.”
But Generation Rent policy manager Caitlin Wilkinson says: “Rent controls would give tenants immediate protection from unaffordable rent increases, but should be implemented alongside investment in new social and affordable homes. The next mayor needs an ambitious plan to bring down rents to an affordable level – you shouldn’t have to pay more than a third of your income on rent.”