Khan’s rent controls could “wreck the private market”

Industry experts have lambasted Sadiq Khan’s renewed call for rent controls as a political ploy that could “wreck the private market”. Khan said the London mayoral election on 7 May will be “a referendum on rent controls”. If re-elected, he said prime minister Boris Johnson will be forced to give him the powers to enable controls. He said: “The Tories and big landlord lobbyists might not like it, but Londoners need rent controls now.” Tamara Hooper, UK residential policy manager at the RICS, said: “Rent controls could wreck the private rented market in London, having the effect of restricting the number of homes for Londoners and placing pressure on local authorities to build more.” She said while rental demand surges, supply has been on declining, and increased pressure on landlords will further shrink this. “It will likely cause them to exit the market.” Investors facing high land values, fierce competition and significant viability hurdles in the capital, will simply go elsewhere, said Scott Hammond, chief executive of Eutopia Homes. Hammond said: “Developers, investors and institutions can simply invest in alternative locations outside of London or different sectors – all of which would remove a much-needed housing supply from the London market.” Khan’s rent control mandate has created a London versus the regions issue, says Tracey Hartley, residential director for the Howard de Walden Estate, one of London’s largest landlords. She adds that such a mandate would set “a dangerous precedent” that would not benefit renters. “Economic analysis after economic analysis has demonstrated that rent controls are really damaging,” said Hartley. “It’s like a pass the parcel, if you are lucky enough to be holding it when the music stops you get a capped rent, but for everybody else the market gets worse.” In the parts of the US where rent controls have been enabled it has resulted in more harm than good, says David Woodward, chief executive at Global Apartment Advisors and former global head of multifamily at Brookfield. “Not only does it reduce supply, but the quality of the stock starts to deteriorate over time,” said Woodward. “There is also the intended consequence of the grey/black market of people taking payments to get preferential treatment on rent control units.” He added it can leads to unregulated pseudo-landlords trading poor-quality homes. “Rent control is a short-term, short-sighted often politically motivated tool, without consideration for the long-term unintended consequences,” he said. “Often those politicians are not around to see the full impact of the longer term repercussions.” “It is that age old theme of political gainsmanship instead of evidence-based policy,” added Hartley. Instead, the mayor should focus on delivering social housing and examining current restrictive policy demanding set levels of affordable housing that ultimately lead to fewer homes and fewer genuinely affordable homes, she said. “They only have to look at themselves, instead of trying to mess around with a private market. They need to think about what they are going to do for proper public delivery and stimulate the building of proper rented council homes.” To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette