Labour Mayor of London Sadiq Khan recently announced that he is to seek new powers to introduce rent controls in London and published research that claimed to show how 68% of tenants supported the idea.
Rent controls would enable the mayor to regulate how often and by how much landlords in the capital can increase a property’s rent.
At the moment landlords can raise the rent after the fixed period has ended (which is usually six months) although most landlords wait until someone moves out and will then increase the rent for the next set of tenants, who in a competitive rental market have little choice but to pay it.
What do you think about rent controls? Take part in our poll.
Sadiq Khan’s up for re-election next year and is acutely aware that tenants in London represent a sizeable chunk of the electorate.
His own research reveals a bleak picture for the majority of tenants, who he says struggle to get on the property ladder because rents are so high.
For example, the capital’s 2.8 million tenants spend 41% of their net income on rent while the cheapest 80% of new-build homes for sale in London are affordable to only the 8% richest tenants.
The the average weekly rent in London is £300 or £1,230 a month official research shows, almost twice that outside Greater London. And on average tenants spend 41% of their net income on rent.Khan clearly thinks introducing rent controls is a vote winner. But are they a good idea?
What does rent control really mean?
There are three types of common rent controls used around the world. These are rent freezes; control of rent increases between tenancies; and control of rent increases within tenancies - often called ‘rent stabilisation’. Sadiq Khan is proposing is the last of these ideas; rent increases within tenancies.
Pros
Tenants will be able to budget how much they will spend on rent in the future.
Landlords will be stopped from jacking up rents unfairly.
In the long-term rents will become more affordable.
What Generation Rent says:
“London’s rents are absurdly high, eating up ever higher proportions of people’s incomes as the last decade has seen wages stagnating while rents rose.”
“Market solutions to make housing affordable in London aren’t working in London. We’ve all been talking about the building more homes for years, but it just isn’t happening at the scale or speed needed to bring down rents. The economic uncertainty as a result of Brexit isn’t helping the housebuilding industry. It’s time to start looking for other answers."
Cons
Landlords may be discouraged from providing or investing in buy-to-let properties.What the Residential Landlords Association says: “All evidence around the world shows that where forms of rent control are in place, decoupling prices from the value of properties hurts both tenants and landlords.“In the end what is needed is a relentless focus on boosting the supply of housing."What do you think about rent controls? Take part in our poll.
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If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.
CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.
Remember the information provided in this article is for information purposes only and should not be considered as advice.
