Back in April a housing association called ‘The Collective’ launched a new concept property which Vice described as “a sort of all-in halls-of-residence-for-grown-ups where they do your laundry and deliver your sheets and pay for your Wi-Fi but you live in a small bleak white room to justify it all”. The tiny rooms, just 10 sq meters, are available for the eye watering price of £1,083 a month – which as the Guardian noted is about half the average Londoner’s take home pay.
Boasting a space invaders themed communal area and using the term ‘Twodio’ to describe rooms so small you can’t even fit a four ring hob in it, would usually signal that those signing up to the new Old Oak development were a group ripe for ridicule – but they’re not.
At the moment most Londoners are paying just under half of their take home pay on their rent, and that’s before bills. The average rent in London increased a further £17 last year to £298 per week, which starts to make The Collective’s shoeboxes look like more of a bargain.
Private renting now accounts for 27% of all residential accommodation in the capital according to the latest English Housing Survey, and it’s a sector that will continue to grow rapidly with more Londoners renting from a private landlord than owning their own home by 2025.
New mayor of London Sadiq Khan, who’ll have the happy task of trying to control the problem, focused heavily on the housing crisis throughout his campaign. But one of the less publicised proposals of Sadiq’s is the idea to give the London Mayor the ability to cap rents, and this is where we start to disagree.
It is obvious that we need to alleviate the pressures on renters in London but it’s important not to get into the habit of sticking regulatory plasters all over what is in fact a huge gapping oozing wound created in the large part by the planning system.
Putting a price ceiling on any product below the market rate causes shortages: demand outstrips supply. Landlords will remove their investments if their returns are capped, consequently shrinking the choice of rental properties, but also flooding the housing market and causing a sudden fall in house prices.
There are further potential repercussions which hurt those they mean to serve, such as limited tenancies. If you’re capping increases in rent during a tenancy, then landlords are likely to have a much higher turnover of renters in their property so as to keep up with market value – not compatible with the three-year standard lease Labour are looking for.
Capping also runs the risk of limiting social mobility as people locked into low rent contracts will find it costlier than they otherwise would to move. This may not sound important, but lowered housing mobility causes higher unemployment as people are less ready to move to find new jobs.
The best way to reduce the cost of housing is to build more, not stifle the supply. And we need to build a lot of new homes if we’re going to make any significant impact. As we’ve argued before, building on just 20,000 acres of the Metropolitan Green Belt (roughly 3.7%) would create room for the 1m new homes needed, estimating 50 houses per acre; nearly all of which could be built within 10 minute’s walk of a station.
If we don’t start building soon, we may just be subjecting ourselves to an eternity of passive aggressive conversation across a communal dining table with our 451 flat mates.