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Sadiq Khan is wrong about rent controls

Credit: Chris J Ratcliffe/Getty Images

Credit: Chris J Ratcliffe/Getty Images

January 31, 2019   5 mins

Mould on the walls, overcrowding, vermin, no working heating. In London you can pay as much as £700 or £800 a month for the privilege of renting a room like this. This is Britain’s broken housing system.

I’ve experienced it first hand. In 2016, during research for my book Hired, I lived in a poky bedsit close to London Bridge. The rent seemed cheap by local standards (£80 per week) – until I realised what I was getting. For this sum me and my flatmates were crammed six to a room, with only flimsy cardboard partitions separating each bed from that of its neighbour. Each morning we would wake up amid a chorus of coughing and spluttering, our breath visible in the gloom.Rental properties like this are ubiquitous in the Capital.

It is with this in mind that the Mayor of London Sadiq Khan recently proposed capping rents should he win the next mayoral contest in 2020. “The housing crisis is now having such an effect on a generation of Londoners that the arguments in favour of rent stabilisation and control are becoming overwhelming,” Khan wrote in a letter to Labour MP Karen Buck in December. Labour leader Jeremy Corbyn has also pledged to introduce nationwide rent controls should his party get into government.

The housing crisis can, of course, be blamed on the failure of successive governments to build new homes. Britain has around 560 houses per 1,000 people, while most continental European countries have over 600. In fact, it was reported last year that there are more than 423,000 new homes in Britain that have been granted planning permission but are yet to be built because developers are sitting on land.

As such, the number of people living in the rented sector in Britain has risen precipitously in recent years. By 2021 it is estimated that a quarter of us will be living in privately rented accommodation. This applies particularly to young people: as things stand, up to a third of millennials – those born between 1980 and 1996 – face renting their entire life.

And the sheer proportion of income going on rent puts many at risk of homelessness were they to lose their job. On average, Londoners spend more than 40% of their earnings on rent – in Camden its a whopping 61%.

Against this backdrop, it is not difficult to see the appeal of rent controls. Such a policy could be implemented in a variety of ways, but the aim of any cap is to prevent landlords from increasing rents based on market prices.

Rents could be temporarily frozen, capped at market rates or lower, or the amount landlords are permitted to increase rent by could be restricted. Neither Jeremy Corbyn nor Sadiq Khan have been clear as to which option they would prefer.

Unsurprisingly, rent controls are popular among many of those currently renting in the private sector. According to a 2015 Survation poll, fewer than 10% of people in Britain are against some kind of mandatory legal limit being set on rents, while 59% are somewhat or strongly in favour of rental caps.

When I was writing my book, my flatmates lived in grim and unpleasant conditions because they simply couldn’t afford the market rate for more comfortable dwellings in the parts of town they needed to live in for work (had they lived further out they would likely have spent a similar amount commuting back in). George, a 33-year-old Romanian plasterer and former flatmate of mine who I met up with again last month, summed up the attitude of many in the private rented sector: landlords, he told me, were “filling their pockets while your wages disappear”.

But while rent controls sound like a neat policy solution, do they actually work? Or might they instead have unintended and negative consequences?

One potential paradox of rent controls is that a significant reduction in rents could negatively impact those on low income by encouraging landlords to sell their properties, thereby reducing the amount of rented stock in circulation. In San Francisco, where rent controls are in place, one side-effect has been owners choosing to keep properties vacant because improvement costs outstrip the money they can bring in via rent.

Yet, as the San Francisco-based writer Caroline Dickie has noted, many San Franciscans would “struggle to pay rent without rent control… because so many people want to live here and zoning regulations, condo ordinances and other factors make it extremely difficult for the city to add new buildings”. Some of this will sound familiar to Londoners.

Another American city that has a long-standing policy of rent control is New York: a panel of experts sits down annually to determine how much more landlords are allowed to charge tenants. Yet the flaw in the model was summed up by Anthony Breach in a 2017 article for City Metric: “Those already in rented flats when controls are introduced do well, but the city’s young people and migrants from the rest of the country and abroad are penalised as they need the new homes that are not being built.” In other words, apartments in the centre of town are dominated by New Yorkers with high incomes paying low rents, while low-income residents are very often confined to the city’s outskirts.

These are the potential unintended consequences of introducing rent controls in isolation, as Sadiq Khan appears to be proposing. A two-tier system invariably springs up in which those living in rent-controlled apartments refuse to move while others must compete for (fewer and, therefore, pricier) properties at market rents.

In fact rent controls did exist in Britain until the late 1980s, and one of the reasons they were abolished was because, according to a 2017 parliamentary report, “landlords took opportunities to sell up and invest elsewhere”, depleting rentable housing stock.

An increase in the supply of social housing could help to offset the distortions caused by rent controls, but only partially. London boroughs have never built more than 30,000 council houses a year, and at present London requires around 50,000 new homes annually. Most of the supply is currently built privately; a policy of rent controls could see this figure – around 20,000 annually – actually decrease, worsening our housing supply problem.

The attraction of rent control policies to people like George is obvious: these are people who are stuck in substandard rented accommodation and are paying through the nose for it. Yet the experience of other cities around the world shows that, while an alluring policy tool to deal with the perceived avariciousness of landlords, rent controls would bring a host of problems.

Of course, such a policy fits the prevailing political climate, in which people look increasingly to the state to solve the country’s problems by decree. But arbitrarily capping rents is more likely to end up creating a privileged tier of renters while making the housing market even more precarious and expensive for people like George. State intervention is best focused on ensuring Britain’s housing is fit for purpose, and building more council homes.

We live in an age when easy solutions are all the rage, even when they exacerbate the very problems they purport to solve. Rent controls are not a neat solution to Britain’s ongoing housing crisis – and Khan and Corbyn should know better.

James Bloodworth is a journalist and author of Hired: Six Months Undercover in Low-Wage Britain, which was longlisted for the Orwell Prize 2019.


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