Developing proposals for London rent control

Developing proposals for London rent control

The Mayor of London’s review of rent control has concluded with a call for new powers to cut rents in the capital.

In this post we explain why we support new powers to give tenants predictable rents, and how we hope to work with the Mayor to get rent control right for those struggling at the bottom of the housing market.

The Greater London Assembly (GLA) is also announcing details of its London Model proposal for how to implement the end of Section 21. You can read a separate post on this here.

London’s affordability emergency

There’s no question that London’s private rented sector is deep in an affordability emergency.

In 2017, our research found that 16% of tenants in the capital found it a constant struggle to pay their rent or were falling into arrears[1]. And with the continuing freeze on Local Housing Allowance rates for low income tenants, the fundamentals have deteriorated further since.

Analysis by the BBC recently found that the difference between Local Housing Allowance rates and the lowest 30% of rents across the capital runs into hundreds of pounds a month. This includes areas that until a couple of years ago were relatively affordable, like outer east London. In central London, the gap is almost incomprehensible at £881 a month.

The consequences of this have been as deplorable as they’ve been predictable. With the option of moving into social housing practically closed off by the shortage, more Londoners are becoming homeless and staying homeless for longer.

The mayor’s announcement

Today’s announcement is a call for devolution of powers over rent control in London to help tackle this emergency. It’s sure to provoke debate but could provide a valuable tool in the battle against London’s housing emergency.

The mayor hasn’t set out a detailed specification of the rent control system he would like to bring in, but he’s outlined some principles he wants it to be based on:

  • use good data by establishing a universal register of landlords and rents
  • be developed and implemented by an independent London Private Rent Commission
  • reduce rents and keep them more affordable
  • incentivise continued investment in the private rented sector
  • include consideration of the interim measures that could alleviate pressure on Londoners while the main system is developed

Of these, the call for powers to proactively reduce rents is the most eye-catching and – we think – would be an international first.

We don’t know of another example of a rent control regime that’s set out to bridge the affordability gap by proactively bringing down rents rather than slowing or freezing increases (but please do get in touch with us on Twitter if you do).

Most systems that appear to do this today actually started out as a freeze. In other words, most rent control has been the equivalent of moderating how quickly you open a fizzy drink. This would be pushing the gas back into the bottle.

Targeting those most in need

As it’s such a big idea, the announcement will help keep focus on the dire state of renting affordability in London. Rent control systems around the world have clearly had some success in preventing escalating rents. But we need to see more to know what such a system would look like in practise in London.

Given both the absence of solid details and the fact that this would be a first, it’s impossible to estimate exactly what the impact of such a system could be. What we can predict are the challenges that it will need to overcome to be successful.

Serious consideration would need to be given to enforcement. Research on the Rental Price Brake, introduced in Berlin in 2015, has seen the difficulties of getting tenants and landlords to stick to the caps. A good system on paper can struggle if it is routinely ignored or breached.

Finding a way to target these rent controls at those really struggling to pay would also be necessary, particularly the 16% we found are struggling the most. Flat cuts would be very large if they were to bridge the gap left by shrinking housing benefit, and they would hand the biggest cash terms cuts to high income tenants choosing to pay higher rents.

Finally, the report itself raises the question of how to mitigate and manage unintended consequences. Pushing down rents could mean the gap between the number of people who want to rent in London and the number of available rented properties grows even larger. Consideration would need to be given not only to ensuring continued investment in the sector, but also to managing a potential increase in effective demand.

An opportunity, but no magic cure

The growing support and interest in rent control is a huge opportunity to improve the lives of millions of private renters. And we’ll be looking to work with the mayor to develop a model of rent control in London that is enforceable, prioritises those struggling most, and avoids unintended consequences.

However, as the GLA itself says, no form of rent control can solve London’s – or the country’s – affordability emergency alone. It’s not a magic cure.

The opportunity is for a scheme that sits alongside long-term investment in building many more social homes and lifting Local Housing Allowance rates to make renting less expensive. Together, this could guarantee an affordable, stable home for many more current and future Londoners.

[1] YouGov survey of 3,978 private renters in England, online, weighted, 18+, July – August 2017. Unweighted sample size for London was 902.