THE BLOG

Rent Control Will Starve London's Housing Future

04/03/2016 15:45 GMT | Updated 05/03/2017 10:12 GMT

The idea of rent control, or "rent stabilisation" as it was recently rebranded, is often banded about as a solution to rising rents and a way of cutting costs for tenants over the long-term.

The problem is over the long-term these strategies have been shown to do the complete opposite.

Rent control in a few words is putting limits on the increases in rents over a tenancy, for example not allowing a landlord to raise rents by more than inflation.

What campaigners of rent control seem to forget is that when something is in high demand people will pay high prices for it. The market decides the price, and London's success is pushing high demand.

Evidence presented to the London Assembly housing committee has shown that rent control would restrict supply over time, as fewer individuals will invest in something with a capped income stream.

The knock-on effect of less supply means more demand and thus higher prices over time.

The most ironic element of rent control is its inability to control rents over time. Rent control gives landlords an immediate incentive to push their rents well above market value to match the increases that would otherwise occur with inflation.

What's worse is the evidence suggesting rent control may also encourage higher increases in rent during tenancies than landlords might otherwise have imposed.

This potentially means landlords will increase rents every year due to the inflexibility afforded to them to raise rent when it's actually required.

In the end landlords have to cover their costs and make a return, and getting in the way of this will scare off investors.

Without investment in housing we won't have enough properties, and the properties that do exist will be old and dilapidated. Rent control will reduce the choice available to tenants.

The Mayor of London is already doing what is needed to lower rents - building more homes.

There were over 22,000 housing starts in London last year, the highest since 2006. There will never be a magic piece of regulation to suddenly lower rent without consequences.

The best way of lowering the cost of renting in London is to increase the supply of homes to the private sector. So instead of trying to hold things back, let's push things forward and get building.