The scale of the housing affordability crisis in London means a set of policies including rent controls are becoming increasingly necessary to create a capital with a more affordable private rented sector, according to new analysis published by New Economics Foundation (NEF). The work was supported by the Greater London Authority (GLA) to inform the Mayor of London, Sadiq Khan’s work developing a blueprint for reforming London’s private rented sector and introducing rent control. NEF is calling on all of London’s 2020 Mayoral candidates to back a rent control policy in their manifestos.
The report recommends that rents for every home in the private rented sector in London be reduced to a desired rent level and then controlled by a ?‘Private Rent Index’, which would cap annual rent increases. NEF recommends that the index take into account wage growth, house prices, wider consumer inflation and borrowing costs.
The report sets out six key building blocks for establishing a system of rent control in London:
- A landlord and rents database: An open-access record of all landlords, their properties, and associated rents.
- A property-linked rent control: to control rents between and within tenancies;
- Desired Rent Level: to reduce rents for individual privately rented properties over specified time period;
- A Private Rent Index: to govern annual rent changes on privately rented properties, once the Desired Rent Level has been reached;
- An independent administrative PRS body: to design the rent control system, and subsequently administer the system, collect and hold the data required, and set the Desired Rent Level and the Private Rent Index; and
- A system of enforcement mechanisms: to put the onus on landlords and the state to enforce the system, rather than tenants.
The report outlines the case for why greater affordability of rents in the short term is key to solving the housing crisis. London currently has 2.4 million private renters, spending, on average, 43 per cent household income on rent. Since 2010, average private rents in London have risen more than three times as fast as average earnings.
NEF calculations show that reducing rents by 1 per cent per cent a year for four years, for example, could potentially cut rents by 20 per cent in real terms for renters relative to where rents would otherwise be if the market was left unregulated.
The report recommends that, given the wide variety of potential rent control models, the following should be considered when assessing rent control policies: affordability; security of tenure; feasibility; risk of negative effects to the wider economy and housing market; and equity.
Hanna Wheatley, Researcher at the New Economics Foundation, said: “The scale of the housing affordability crisis in London means that carefully designed rent controls are becoming increasingly necessary to create a capital with a fairer, more affordable private rented sector. Rental growth has fast outpaced wage growth in recent decades, leaving private renting as the most unaffordable form of housing, and driving many into poverty.
“With a majority of Londoners now in favour of rent control, a growing private renters’ movement, and a Mayor who supports it introduction, the impetus for the introduction of rent control has reached a critical mass. The question is no longer if, but how, and this report outlines the building blocks needed to implement a rent control that works for London.”
* Read Getting Rents Under Control: how to make London rents more affordable here
* New Economics Foundation https://neweconomics.org/
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