Research for the London Assembly by Cambridge housing academics, reported in the Guardian Newspaper, seems to confirm that arguments about rent stabilisation powers (a form of rent control which has been dubbed “rent control lite”) in London are “finely balanced”.
Questions posed in the study include:
“Should London mayors have the power to regulate the rents set by the capital’s private landlords and, if so, what should those powers be and what effects would their use have?”
The Guardian article acknowledges that these questions provoke fiercely polarised and politicised views:
“On the free market right, the words “rent control” trigger torrents of totalitarian metaphors and surreal red scare comparisons with Venezuela, Cuba, the Soviet Union and so on. On the left, “rent control” is one of those placard policies waved by self-styled radicals who’ve never troubled themselves with reading the nasty small print on the reverse.”
The “difficult details” for the left to deal with in the Cambridge report reveal that interventions by the authorities in London’s private rented sector can have “ill-effects as well as good”, and that these could hurt some of the very people the policy was meant to help – hardly a desirable outcome says The Guardian. It’s an outcome that conservative objectors to rent controls have long argued would be the result.
So, given the imminent mayoral election, and Labour candidate Sadiq Khan’s pledge to bring in the controls, would these powers be allowed to the point of inhibiting the supply of more homes for renting, at a time when demand for renting is growing.
Currently, the London Assembly’s housing committee is conducting an investigation into the possible impact of rent “stabilisation” measures on London’s housing market and its possible effects on the growing renting market. Renting now accounts for 30% of all residential accommodation in the capital, up from just 13% ten years ago. Around two and a half million Londoners now rent privately. (latest English Housing Survey).
Last month, according to The Guardian newspaper article, the Assembly committee’s guest experts examined the possibly counterproductive influence that imposing “rent stabilisation” (seen as a better term for rent control by some) could have on the sector and on those who live in it.
The report for the committee by the Cambridge Centre for Housing and Planning Research attempted to quantify the effects the various types of such regulation that might apply to London.
The conclusions reached are said to be “very tentative”, but the gist is that applying “a range of moderate stabilisation measures” would each result in quite small reductions in the rate rents would rise over 10 years, but also accompanied by quite modest reductions in the rate of growth of the capital’s private rented sector.
As it stands says the report, the PRS in London is set to grow by 49% over the next ten years. The study anticipates that applying all of its conceived rent control scenarios, they would slow growth to 40%, but in the most severe of its control scenarios, Scenario 5, this could reduce this growth to “at least 16% and could even end up shrinking it.
The knock-on effects from such intervention, the researchers envisage, might “impact across the housing market and could cause a sudden fall in house prices, with a resultant impact on new housing supply across all tenures.”
In a world-leading city with a fast-growing population, in very urgent need of more housing of all tenures, this result could be devastating.
There was little enthusiasm for controls of any sort from landlords question in the study surveys, as would be expected, but some were indifferent to the idea of index linking of rents, whereas others reported they would be dis-investing where their income stream to be capped.
A substantial proportion of the landlords questioned said they would immediately sell all or some of their properties or set at plan to reduce the number of properties they owned over the years.
The researchers acknowledged that these results would be expected of landlords questioned about the idea, but would they follow these stated intentions through? However, the researchers defend these results by saying that their findings are “in line with other attempts” to bring a rational academic focus on to a hot political potato.
The upshot is the reports emphasis that “rent control” is not a “magic solution to the problems of many private renters in London” and others in housing need.
It would be a mixed blessing they say: if a programme of rent stabilisation really did cause landlords to desert the ship in large numbers, who else would step up to provide the desperately needed homes? Where would it leave two and a half million tenants?
There’s no getting around it, in 2015 the policy could be a political disaster for any local or central government that tried the experiment. The questions raised in the report, and several other reports before it, simply cannot be ignored by those left wing proponents rent “stabilisation”, which all those who take a common sense view fully understand.
Protecting tenants, particularly the most vulnerable, is clearly desirable. But if rent stabilisation in London would have unwanted consequences as well as benefits, the balance between the two would have to be carefully weighed.
Read the full Cambridge report – “Research on the effect of rent stabilisation measures in London” here
Should London Mayors have Power to Regulate Rents set by the Capital’s Private Landlords? – https://t.co/k5mv7a6BiO
— LandlordZONE (@LandlordZONE) October 29, 2015