Rent control has once again come to light as the Mayor of London proposes to cap the money going into the landlord's pockets. London needs houses with its increasing population and demand for space as private renting has once again become a much more mainstream sector in the UK. 1 in 5 of all households live in private rental accommodation with over 1 million landlords.
Berlin, among other European cities, has decided to freeze rents, and I cannot help but be reminded of the Soviet East. 'Affordable rents' is repeated in Labour conference speeches every year, in an attempt to persuade people that the sovietisation of property will increase access and affordability for the many. At a glance, this sounds like the cure to all our problems. But let's have a look at who benefits and who loses out.
Rent control is one of those policies that has more lives than Doctor Who: three regenerations in, and some people still think it's a good idea. This regulation wants rents below market levels to preserve existing tenure. In the long run, this causes a reduction in supply; there will be pressure to avoid or evade the regulation as we will simply not have enough homes.
A perfect example of this is New York City, a place where tenants can rent a property for generations at low prices such as $500 a month. Their policy dates back to 1943. Families can pass these homes to another member and preserve the rent-control status, transforming houses in an inheritance privilege. It's strictly linked with social mobility and an intergenerational issue as not everyone has their parents to pay their way into the London housing market.
I'm horrified to think that we could end up in Stockholm's shoes with a 50-year wait for rent-controlled flats. And why would your landlord renovate your home? Or paint the walls of your flat if you'll stay there for years? What is their gain? This model has been tried, and there is a consensus by 94% economists from left, right and centre, that a ceiling on rents reduces the quantity and quality of housing.
Constructors and developments are going to think twice about building and will move to commercial skyscrapers or luxurious homes. Instead of encouraging landlords to up their game, we are prioritising gentrification and forgetting about the core issue at stake. Only competition can solve the case of ill-maintained properties.
With 2.4m private renters in London spending 42% of household income on rent, I would not like to be on that waiting list. It would be hard enough for a local to get hold of a property but think about all our immigrants and thousands of young hopefuls. Are we going to bang the door in their face? Instead of broadening the spectrum of opportunities to the disadvantaged, rent control creates a social clique of privileged lists and a black market, where waiting lists take years and years.
How can we solve this mess? As Sir Mark Boleat, former Chairman of the Housing and Finance institute argued, we have a broken planning system, and it will be impossible to build more houses unless we address the green belt.
This week the Institute of Economic Affairs with Jacob Rees-Mogg MP published a detailed report on how we need to demystify the 'green belt'. This is not a radical call to deregulate and get rid of the green belt. The green belt is supported by 64% of the public, and it's a vital part of our city, but this is about acknowledging the land that it encompasses.
The London green belt is enormous, and they are vast areas of broken land near train stations that are already developed. If we built on just 3.9% of these forgotten spaces, we could build a million houses. It's not all parks and pure hectares of perfect land, it's about zoning the regions that are already in use and building homes to supply the increasing demand. We could learn from cities like Amsterdam, where self-building is allowed by extending development and planning rights to residents, giving them the power to take control of their local housing development.
Left-leaning economist, Assar Lindbeck asserted, "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing." At least bombing would enable more supply.
Rent control is a romantic first date that ends in sorrow...
Helen Paton is a research intern at the Adam Smith Institute.