Controlling rents: A response to the private renting affordability crisis

Today Generation Rent has published a proposal for a flexible rent control policy, aimed first at London but applicable to anywhere where the rent is too high. Diane Abbott MP has kindly written the foreword.

As politicians look towards the London Mayoral race in 2016, they know that the cost of housing will be an absolutely central issue on which Londoners will decide who runs the city. At the moment, no one has said much about how to actually tackle the capital’s spiralling rents. This document begins the discussion.

Over twenty-five years since mainstream, PRS rent controls were abolished in the UK, we have allowed ourselves to reach a situation where the rent is plainly too high, but very few are advocating for rent controls, despite the clear problem they solve and the fact that they would be hugely popular with much of the population.

There are two reasons for this. Ideology is the first, and the current state of the housing market is the second. Looking at the first reason, we are in a position where much of the political establishment, as well as news commentators, accept as gospel the premise that rent control stymied supply in the private rented sector in the twentieth century.

It is true that the PRS fell dramatically as a percentage of housing from the 1930s-1980s. However, evidence about the cause of this fall suggests it was much more related to the new and increasing availability of council housing for millions of people, on the one hand, and new opportunities for homeownership, which had never been the case before for a large portion of the population.

There is certainly no widely available evidence pointing to a causal link between rent controls and lack of supply. Indeed, rent control is compatible with a healthy PRS in other parts of the world. Rather, this argument comes entirely from an ideological point of view that flinches at any limitation on profit from housing, even if this is causing huge problems for today’s private tenants.

The second argument is perhaps more persuasive. It suggests that the housing market is just too different now, established as it has been in the last twenty years with a large and growing private rented sector, much of which is made up of buy-to-let mortgages with strict terms around types of tenancy, rent charged and which tenants landlords can rent to.

This argument amounts to saying that the market is far too reliant on a certain rental model to be adaptable to limitations on rent. Our proposal starts to question this by advocating a flexible kind of rent control.

In such a model, the metric of council tax bands would be used to decide on the value of a home – and the maximum general monthly rent would be half of the annual council tax band for a home. The report gives the example of a band A property in Croydon, at £780 annual council tax – for which a controlled rent would be £390 per month (half that figure).

This measure is important because it is simple to calculate, therefore not causing undue bureaucracy, but also established on accepted property values. As council tax is set by local authorities, people would also be able to hold their local representatives accountable for the rent cap where they live.

Accompanying this basic control, though, would be the flexibility for landlords to charge above the maximum controlled rent. However, any amount above the maximum would be subject to a 50% surcharge, the proceeds of which would go into a ring-fenced housing fund for social house building. Therefore higher rents would actually go towards solving the housing crisis.

Generation Rent believes that this is a flexible and pragmatic system of rent control and that powers should be granted to the London Mayor as well as other regions suffering high rents to implement these controls as necessary.

Click here to write to your MP asking them to sign EDM 621 which calls for the Government to give powers to local authorities and the Mayor of London to implement rent controls where this is the best solution for the area.

You can also write to your local prospective parliamentary candidate here to see if they will back this system.

Click here to go to our campaign page to sign our petition calling for rent control – we will be using the numbers gathered to show Parliament how popular rent control is and how it needs to be part of the debate around housing affordability.

 

 

Coverage

Evening Standard, 9 December

City Metric, 9 December

The Londonist, 10 December

Inside Housing, 10 December

Showing 4 reactions

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  • commented 2015-05-07 21:50:00 +0100
    I let 2 flats in Cardiff Bay. These are council tax band D which is £1,222 pa. The maximum rent I should charge under this proposal is £611 pm. I charge £595 pm, inclusive of water rates, and I have not increased this for 2 1/2 years. The service charge I pay is £1,800 pa, so there is 3 months rent gone straight away. These are premium flats, only 8 years old, well maintained, in a gated development with allocated parking and 24 hr concierge.

    My tenants get first class accommodation, with good service and reasonable rent. So what’s all this about evil landlords robbing generation rent?
  • commented 2015-05-03 12:38:34 +0100
    Another word that has caused a lot of confusion and frustration is “poverty”. Social scientists, commentators and others have come up with definitions of poverty.

    Could “Generation Rent” please provide your definitions of “poverty”, “affordable”, “low incomes” that would be applicable for the whole of the UK?
  • commented 2015-04-17 17:30:05 +0100
    A good post and its nice to see that people read my blog! However, I would prefer to see a landlords register and proper records kept for a few years before big changes come on.

    The big problem for landlords about longer tenancies is that they cannot use section 21 to evict tenants. Not all landlords are using it to evict tenants who dare to complain!

    Often they are used for other reasons, such as getting the property back to sell, evicting tenants who are anti social or who are not respecting the property, or to evict tenants who have a poor payment record.

    Section 21 and the buy to let mortgage are the two big reasons why the private rented sector developed after the 1990’s (prior to which the PRS was moribund). We need to think very carefully indeed before removing section 21 therefore. Or the PRS could change as dramatically again.
  • commented 2015-02-13 14:15:19 +0000
    Average House Price Croydon £302 000 – Buy To Let Mortgage Available £74.480 on rental of £390.00 pcm
    Landlord invests £227 520. How likely is this?