Landlords say rent controls are ‘hurting’ tenants

To see him into a second term as Mayor of London, Sadiq Khan sets out blueprint for rental sector overhaul.

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Rent controls “hurt” tenants by drying up the supply of homes to rent and in some cases increasing rents, according to new research.

As reported by 24housing, as a cornerstone to his 2020 re-election campaign, Khan says he intends to introduce a private-rent commission to the capital – with a board that would include current renters – to enforce measures to reduce rents and keep them at lower levels, something the Mayor of London presently lacks the legal power to do.

Following this, an analysis of existing research by the Residential Landlords Association on the impact of rent controls around the world reveals the harm they can cause.

As outlined, the report references examples including forms of existing rent control in Los Angeles and San Francisco.

A paper for the California Budget and Policy Centre has reported that renters are “substantially more likely to struggle with housing affordability than homeowners”.

According to the American report, more than half of renter households paid over 30% of income toward housing in 2017, and more than a quarter were severely cost-burdened, paying more than half of household income toward housing costs.

A further paper for the National Bureau of Economic Research has found that, in San Francisco, landlords affected by rent control reduced rental housing supply by 15%.

Research for the National Multi Housing Council in the United States warns that rent control and rent stabilisation laws “lead to a reduction in the available supply of rental housing in a community, particularly through the conversion to ownership of controlled buildings.”

Examples also include a rent-control mechanism that was introduced across Germany in 2015. Research evidence showed that, between 2015 and 2017, rents in central Berlin increased by almost 10%. Before the introduction of the control they had been rising by just 1-2% each year.

“Contrary to the expectations of the policy makers, the rental brake has, at best, no impact in the short run,” the report revealed.

“At worst, it even accelerates rent increases both in municipalities subject to the rental brake and in neighbouring areas.”

The latest RLA research comes shortly after a senior academic warned the Greater London Assembly that the Mayor’s proposals for rent controls would have “really dramatic unintended consequences”.

Addressing the Assembly’s Budget and Performance committee, Kath Scanlon, assistant professorial research fellow at the London School of Economics, argued: “Landlords would simply decide they were no longer going to rent their properties.”

There are now 2.4 million renters in the capital, and rents are rising faster than wages, according to research by City Hall.

The mayor cannot currently bring in rent controls and has called on the government to devolve the powers to London.

David Smith, policy director for the RLA, said: “This research shows clearly that rent controls are not a panacea for tenants.

“Far from making renting cheaper, experience around the world shows it can make it more expensive and more difficult for those looking for a home to rent.

“Rather than resorting to simplistic and populist ideas which have shown themselves to fail, the Mayor should instead work with the vast majority of private landlords doing a good job to see what is needed to stimulate the delivery of more homes to rent.

“Increasing supply is by far the most effective way of keeping rents down.”

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