Without being political, the Mayor of London has been active when it comes to housing, having pushed through more funding for new homes and introducing a public database to ‘name and shame’ rogue landlords and letting agents.
But he may have gone too far. While his latest plans to reform the lettings sector in the capital have been largely welcomed it is apparent determination to introduce rent controls that have been heavily criticised by the private rented sector.
Sadiq Khan want new powers to bring rents down. He has set out his proposal to create a new London Private Rent Commission, with renters on its board, to implement, monitor and enforce measures to reduce rents and keep them at lower levels.
It would also set out how existing rents should be gradually reduced and their subsequent levels limited within and between tenancies and recommend incentives to encourage investment in new and existing rental housing supply. The Mayor is also calling for interim powers to limit rent increases within and between tenancies whilst the full system of rent control is being implemented.
It should be pointed out that a poll carried out by City Hall and YouGov last year revealed strong support for rent controls in the capital, with over two-thirds of Londoners surveyed in favour of the Government capping the amount that landlords can charge people renting their property.
But such a move has been criticised by the lettings sector with equally good arguments. David Smith, policy director of the Residential Landlords Association (RLA), said that rent controls are meaningless if Londoners can’t find a home to live in and warned that such a move would lead to a drop in investment and increasing supply should be the Mayor’s priority.
He pointed out that research from the Centre for Cities has found that rent controls divide renters into the privileged and outsides, with those already renting when the controls are introduced doing well but those hoping to move into the city or for more space losing out, damaging social mobility.
The British Property Federation (BPF) said that it fundamentally opposes rent controls and it would make no sense to have a different tenancy models in London compared to the rest of England. It says that rent controls will exacerbate the London housing market’s supply-demand imbalance and affordability crisis, by reducing investment into building new rental homes as a time when demand is increasing, hitting the Build to Rent sector.
It points out that a recent analysis of rent controls’ impact on supply by Stanford University which looked at rent controls in San Francisco between 1995 to 2012, highlighted that it reduced rental housing supply by 15%, causing a 5.1% city wide rent increase.
There is also wider unease about plans by the Government to change the way landlords in the private rented sector can repossess properties and scrapping the Section 21 possession route. Research from the RLA says, for example, it would result in landlords and agents being more selective about tenant selection. It’s poll, one of the largest ever non-government surveys of landlords and agents, found 84% believe that plans to scrap Section 21, ‘no explanation’ repossessions would make them more likely to reject tenants they think are a risk or those with pets.
Landlords would be concerned that if problems emerged they would not be able to swiftly regain possession, according to the RLA. ‘If Section 21 were to go I would only rent to professionals because I don’t want to be left in a situation where a tenant is in my property who cannot afford to pay the rent,’ one landlord told the survey. The research also refutes the argument that many Section 21 notices are used for no reason.
Of those landlords who had used this route to repossess properties 84% had used it because of tenant rent arrears, 56% had used it because of damage to a property and 51% had used it because of anti-social behaviour.
But landlords, including those in London, are seeing rents and demand rising. The latest Rightmove rental tracker index shows that nationally, excluding London, asking rents are at a record high of £817 per month, up 2.7% on a year ago while in Greater London rents increased by 3% to £2,059.
The average cost of a new let in Britain increased by 3.1% to £986 per calendar month in June, driven by rising rents in the South of England, according to the latest lettings index from Hamptons International. Excluding London average rents increased by 1.7% to £787 while in Greater London they were up by 4.3% to £1,737. Overall rents are at their highest level since April 2016.
So rents are creeping up while regulation looks to continue for the private rented sector. The demand is not going to go away. It is clear that it is a time of change which started several years ago and that is not yet coming to an end.
Ray Clancy, Editor Property Wire
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