Sadiq Khan, the newly elected Mayor of London, has found senior industry figures who back his campaign for rents tied to inflation.
A report in the FT quotes JLL’s Head of Residential Research Adam Challis saying: “This is being described as rent control but is more properly described as rent indexing, and set at the right level it is completely palatable to investors.
He added, “[the policy] offers a sense of relative certainty over what future rental growth is going to be.”
This view is further supported by local south-west London based lettings agent Holmes, whose managing director Rafiq Omar (disclaimer: my Dad) says: “If there isn’t a check on rents, we’re just going to experience the pain of a crash.
“It’s beyond imaginable that a two bedroom in Streatham would successfully let for £2,000 pcm, but it’s happening.”
Detractors to any policy intervention in residential rental pricing say that it could place an artificial cap on development activity in the build-to-rent secctor.
Lucian Cook, Challis’s opposite number at Savills, suggests that to mitigate the risk of throttling development activity the new Mayor could set a “London living rent”.
He suggests the policy could be involved capping rents at one-third of the local average income, which Challis suggests would be easy to implement with new build supply.
He said: “To implement this on new properties would be relatively easy – it’s already what we do in various forms within the affordable housing spectrum.”
This policy comes as part of a raft of property proposals from Khan.
They touch upon building more homes for Londoners, taking action against rogue landlords and lettings agents and introducing a non-profit lettings agency.
With home ownership increasingly out of reach for many, comments in the FT attacked the Government’s flagship Help to Buy scheme by describing it as “Help to cry” and “one of the most perversely named government policies ever”.
Guardian columnist Danny Dorling stated: “London urgently needs rent regulation of its private sector.
“This might be outside the new Mayor’s powers, but there is nothing to stop him campaigning on a similar scheme for the UK to Berlin’s rent cap.”
The topic of rent caps receive heated conversations across the globe, with noted US venture capitalist Marc Andreesen vehemently opposed: Employment protection causes higher unployment. Rent control causes higher rents.”
He goes on to quote an article by Paul Krugman in the New York Times which suggests: “A ceiling on rents reduces the quality and quantity of housing.”
Property market expert Henry Pryor effectively laid down the law by saying: “As far as I know the Mayor doesn’t have powers to introduce rent caps or rent controls, and unless he’s going to acquire those powers it’s unlikely to be an issue, and even if he did I wouldn’t be a fan of rent controls.”
Comments (3)
Not such a bad idea – we already do rent increases in line with RPI and often where we have a good tenant – no rent increase.
Here we go again… They’re playing the same tape as last year during the general elections campaign.
Would the market freely set rent levels? No. So it would be rent control whatever the rhetorics and spin.
In London rents are what they are because demand exceeds supply. Rent control does not solve this. On the contrary it makes it worse. It would not make it easier for people to find a place to rent, and it would give an incentive to tenants not to move.
Using an analogy I used before: If the price of bread skyrockets because there are only 10 loaves available for 100 people, capping the price will still leave 90 people without bread. And it will remove the incentive to bake more bread.
Rent control has been tried in the 1970’s and proved to be a disaster. These people who think they know best (politicians) are the very people who caused the housing crisis by selling off council housing and allowing unfettered migration without providing the infrastructure to support it. Rent indexing is RENT CONTROL. It will be manipulated as are other indexed linked schemes. Just look at the way the Government choose and manipulate the indices by including or excluding what they do or do not want included to arrive at the figures they want. This is all Bull Poo! Khan does not have the power to bring this in and I am not sure that even the current suspect conservative government will be keen to roll over to Khan’s demands. Fix it by building council housing to replace the council property previously sold and increase the supply to meet the demand required by the migration figures. Whist at it provide an adequate health service where you do not have to wait 2 years for an operation and a service where you can see a GP when you need one and not the current phone lottery for a GP appointment.