So Sadiq Khan has announced that he will develop a model of rent control for London. It’s a bold move for the Mayor of London and just opening up this conversation shows the extent of the affordability crisis affecting 2.4 million private renters in the city.
London’s rents are absurdly high, eating up ever higher proportions of people’s incomes as the last decade has seen wages stagnating while rents rose. The internationally accepted figure of rent affordability is 30% of income, yet there are only two boroughs in London where average rents are (just) less than 50% of a low-income worker’s wage. Even for private renters in middle and some high wage jobs, the dreaded annual rent rise can force you out of your home and your community, or reduce your savings pushing you further away from homeownership. High rents entrench private renters in financial precarity and erode our communities.
Market solutions to make housing affordable in London aren’t working in London. We’ve all been talking about the building more homes for years, but it just isn’t happening at the scale or speed needed to bring down rents. The economic uncertainty as a result of Brexit isn’t helping the housebuilding industry. It’s time to start looking for other answers.
The Mayor of London doesn’t have the housing powers to be able to implement rent control, but what he can do is explore how rent control could work in London if the powers were there. He’s taken a similar approach with the London model of renting, which outlines how private renters could have security in their homes by ending Section 21 and introducing indefinite tenancies, as in Scotland.
There are many different models of rent control. There’s capping rent rises in a tenancy, also known as rent stabilisation, which is really not so controversial – the Conservative government was looking at this last year in the consultation on barriers to longer tenancies. It doesn’t mean your rent will suddenly become affordable, but it does mean that renters know how much their rent will go up each year and prevents landlords from pushing households out economically with a huge rent rise.
A more radical form of rent stabilisation is capping rent rises between tenancies as well as within tenancies, which has more impact on the market by preventing landlords from hiking the rent by huge amounts when a tenant moves out. This has the potential to dampen market rents in London and should be seriously explored by Sadiq’s team.
Then there’s rent control which sets hard caps on the amount of rent that can be charged. This is a true affordability solution for renters, but would be a huge shock to the market and government intervention would be needed to ensure that supply of new homes kept up with demand and that it didn’t create distortions over the long term.
And back in 2014, Generation Rent set out a flexible model of rent control in which a living rent would be set for each property based on their Council Tax band. If landlords wanted to charge more than this cap they’d be free to do so, but this would be subject to a 50% surcharge which would be invested in social house building. Building more social housing - urgently - is of course key to tackling the housing crisis and delivering more affordable housing.
As well as tackling the fundamental shortage of housing, for rent control to work in London it’s imperative that we see restrictions on short-term lets in place beforehand, and we’d also need an end to Section 21 evictions. But since 1915, we’ve always had some form of rent control in Britain, and it still exists to some extent for renters on assured tenancies, so to say that it can’t and won’t work here is simply untrue.
Indeed, polling by the GLA shows that 68% of Londoners support rent control. This chimes polling commissioned by Generation Rent in 2018 which asked people if they agreed that landlords shouldn’t be allowed to raise the rent more than the rate of inflation. We found 63.5% of Londoners agreeing or strongly agreeing with that statement. Across England 70.9% of people agreed or strongly agreed. Fascinatingly, we found strong support even among Conservative voters. 71.6% Tory voters we surveyed in England agreed or strongly agreed with rent rises capped at inflation, while for Labour voters that figure was 76.7%.
It’s certainly welcome news to our ears – and those of many private renters across the capital - that London’s Mayor is opening up this important conversation and exploring how rent controls might work to provide tenants with secure and affordable homes. Generation Rent will be following this closely, as well as looking how different models of rent control across the world work in a future post.