A new report from the Cambridge Centre for Housing and Planning Research indicates that a rent freeze would far from benefit families seeking tenancies in London. Conducted on behalf of the London Assembly Housing Committee, the study comprises data from almost 200 people, including both private and commercial landlords and property investors. The main takeaway? Rent control would lead to a mass exodus of landlords from the private rental sector.
“Much has been said from all sides about rent controls but the debate has been sorely lacking in facts, so it’s incredibly useful to have these set out in this report,” says Tom Copley, chair of the London Assembly Housing Committee. “The choice is not simply between regulating rents and not regulating rents. There is no one size fits all system of rent control, with many cities around the world adopting different models. Each system has upsides and downsides.”
According to the survey’s findings, a whopping 60 per cent of London landlords would reduce the size of their property portfolio if rent controls were enforced. In the event of rent growth continuing in line with inflation, 40 per cent stated that they would downsize their portfolios. The survey also indicates a general reluctance to offer long-term tenancies; however, over half of the landlords interviewed say that they might be more open to the idea with tax incentives.
The research encompasses a number of various scenarios, but there is very real evidence to suggest that enforced rent freeze would place a stranglehold on the private rental sector in London. When faced with a ceiling on rent revenue, landlords will be keen to mitigate risk and limit their financial reliance on property, leading to a shrinking housing supply in a time of dire demand.
“This report reminds us of the dangers of rent controls which would in fact reduce supply, thereby increasing rents,” says David Smith, Policy Director at the Residential Landlords Association. “Rent controls would also severely reduce standards in rented housing as investment dries up… It would take us back to the bad old days of Rachman landlords which we must prevent for the good of tenants.”
It is important to have these facts and figures to hand, to support discussion of what is often a highly emotionally charged subject, says the Guardian’s Dave Hill — not to mention finding a solution. “Their findings are in line with other attempts to bring cool, academic focus to bear on this hot political topic in that they underline that rent control is no magic solution to the problems of many private renters in London and others in housing need,” he says. “Rather, it would be a mixed blessing. If rent stabilisation did cause landlords to bale out in large numbers, why would anyone step up to take their places? Where would such a flight from the sector leave its two and a half million tenants?”
It is easy to see where Generation Rent campaigners are coming from with their calls for fair, affordable housing, especially when there is already such a shortage, but mandatory rent stabilisation is not the answer. All it would achieve is create an even smaller pool of available tenancies and a higher risk of poor living conditions, leaving tenants worse off than they already are.
George Spencer is CEO at Rentify.