Mayor of London Sadiq Khan has long supported rent controls as a solution to London’s housing challenges. In 2023, he called for a two-year rent freeze and a ban on Section 21 evictions to provide relief for renters facing high costs. However, questions remain about whether rent controls truly benefit the private rental sector.
A report by the Institute of Economic Affairs (IEA) warns that while rent controls aim to protect tenants, they often lead to unintended consequences, such as reducing housing supply and increasing rents in unregulated areas. With London rents at record highs, it’s essential to weigh the potential downsides against the benefits.
What Are Rent Controls?
Introduced in the UK in 1915, rent controls aim to protect tenants from excessive rent increases and prevent unfair evictions. They regulate rent hikes within a set percentage, rather than capping rents outright, to ensure affordability and stability in the rental market.
Why Rent Controls in London?
Sadiq Khan argues that rent controls are key to improving housing affordability in London, where average rents are 43% higher than the national average. By keeping rents in check, tenants could enjoy more stable and affordable housing, potentially reducing tenant turnover for landlords. However, the benefits for tenants might pose challenges for landlords and letting agents.
Impact on the Private Rental Sector
While rent controls can lower rents, the IEA report highlights several negative effects:
- Reduced Supply: Landlords may be discouraged from renting out or investing in properties.
- Decreased Construction: Developers may avoid building new rental properties in controlled areas.
- Lower Quality: Landlords might neglect property maintenance due to limited rent increases.
- Reduced Mobility: Tenants may stay in rent-controlled homes even when their needs change.
- Higher Rents Elsewhere: Controls in one area can push up rents in uncontrolled regions.
These issues suggest that while rent controls can provide immediate relief, they might lead to broader challenges in the rental market.
Future of Rent Controls in London
While Sadiq Khan is keen on rent controls, previous proposals were dismissed by the Conservative Government. The current Labour-led Parliament may be more open to the idea, although no discussions have taken place yet. Prime Minister Keir Starmer has indicated the need to prevent exploitative practices like rental bidding wars, which could open the door to rent regulations in the future.
Labour’s Renters’ Rights Bill, introduced earlier this year, aims to strengthen tenant protections, including measures against rental bidding wars, although it doesn’t explicitly mention rent controls. Letting agents and landlords should stay informed as the bill progresses, as rent control measures could still be introduced.
Rent controls remain a divisive issue in London. While they could offer much-needed relief for tenants, the potential negative impacts on the private rental sector must be carefully considered to avoid making housing less affordable in the long run.
