Rent controls will not solve the housing crisis – Goodall

by: John Goodall, CEO of Landbay
  • 28/03/2019
  • 0
Rent controls will not solve the housing crisis – Goodall
With knife crime in London at an eight-year high and Brexit uncertainty forcing at least 250 companies to relocate their central operations to the Netherlands alone, one would have thought Sadiq Khan’s re-election bid might prioritise these significant and pressing issues.


However instead, the Mayor of London has decided to make rent control the key plank of his re-election bid.

Khan has called on the government to give him powers which enable limiting the amount landlords can charge their tenants.

The mayor claims this will help solve the capital’s housing issues, yet his approach fails to consider the potential consequences this could have on investment in the rental sector, which could punish renters rather than help them.

He defends his policy as a response to the rising costs of housing, but the truth is that rent prices have stagnated in London.

In fact, contrasting the reality across other regions, rental growth in London has not risen since the Brexit vote, according to the Landbay Rental Index.


London rents stagnant

Even when we ignore the obvious effect of inflation, London’s property market saw an annual rental growth drop from 1.26 per cent in June 2016 to a low of -0.31 per cent in June 2017.

It then began a sluggish recovery up to 0.67 per cent in January 2019.

To put this into perspective, between 2016 and 2018 average London rents have hovered around £1,880 per month.

It must also be pointed out that historically, rent controls have been introduced by advocates who want to cut rents and encourage landlords to sell up.

Not only would this hit renters in the capital, it would also punish those who are desperately trying to get their foot on to the property ladder.


Attract investment into rental sector

Instead of making rent control his flagship policy, the mayor should be considering new ways to attract investment into the rental sector, which would provide better quality rental housing.

Landlords have been penalised enough by the government’s decision to cut tax relief as well as changes to stamp duty.

The mayor could instead help the sector by loosening regulation on buy-to-let properties and encourage more housing to be built specifically for renting.

He is, of course, a politician and understandably feels the need to play to an audience.

He has certainly opted for a politically palatable move, but the unintended consequences will not lead to a positive outcome for London renters in the long run.

Landlords will move their investments from the property market to elsewhere, further driving the shortage of rental properties.

The housing crisis can only be solved by building more homes-to-rent, not by rent controls.


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