Rent controls 'not necessarily the answer' for London

Out-Law News | 19 Jul 2019 | 3:36 pm | 2 min. read

Powers sought by London's mayor to introduce rent controls will not solve the housing crisis in the capital, an expert has warned.

A new report, published by the mayor's office, has called for a "fundamental overhaul" of London's private rented sector, including new statutory powers for the mayor. Sadiq Khan said that the case for giving the London mayor the power to cap rents "has become overwhelming", citing figures showing that the average rent for a one-bedroom home in London is now more than the average for a three-bedroom home in every other English region.

However, housing expert Kevin Boa of Pinsent Masons, the law firm behind Out-Law, said that although it was "understandable" that the mayor was troubled by unaffordable private rents in London, rent control "is not necessarily the answer".

"The problem is London's chronic undersupply of homes," he said. "The solution lies in building more homes of varying tenures: private sales, affordable housing and build to rent developed via collaboration between public and private sector with new development spearheaded by the GLA [Greater London Authority] and London boroughs."

Boa Kevin

Kevin Boa

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It’s understandable that the Mayor is troubled by unaffordable private rents in the capital but rent control is not necessarily the answer. The problem is London’s chronic under supply of homes.

"Based on the good and bad experiences of rent stabilisation around the world, many would argue controls on rent pegged to inflation could be palatable for investors. However, if the mayor seeks to impose a 1970s-style 'fair rent' regulatory framework, this will stifle build to rent investment and reduce the numbers of new rental properties in London," he said.

The report proposes setting up a new London Private Rent Commission, with renters on its board, which would be responsible for implementing and enforcing measures to reduce private rents and keep them at lower levels both during a particular tenancy, and on the grant of a new tenancy. The commission would establish and maintain a universal register of private landlords and the rents that they charge to inform this work.

Existing rents would be gradually reduced to a timetable developed by the commission, which would also be tasked with recommending incentives to encourage investment in new and existing housing supply. The mayor is also seeking interim powers from the government to limit rent increases during and between tenancies while the commission is established and a full system of rent control implemented.

The report makes a number of additional recommendations for reform of the law on tenancies, which Khan said he hoped would be "embraced" by the government ahead of an anticipated tenancy reform consultation. These include the introduction of open-ended tenancies, banning 'break' clauses from tenancy agreements, ending 'no fault' evictions and increasing the minimum notice a landlord must provide a tenant before bringing the tenancy to an end to four months. The report also recommends better support and dispute resolution services for landlords and tenants.

"We need the government to play their part by making tenancy laws fit for purpose and by enabling us to bring in the rent control Londoners so urgently need," Khan said.

Various forms of private sector rent control or stabilisation currently exist in major cities in Europe and North America including New York, Paris and Berlin. Berlin recently announced plans for a five-year rent freeze on top of the caps already operating to restrict rent increases during and between tenancies, while the NYC Rent Guidelines Board caps rents in some New York apartments and can 'stabilise' or 'reset' rent between tenancies.