Rent controls make no sense with real terms costs falling in London

by Property118.com News Team

9:19 AM, 9th April 2021
About a month ago

Rent controls make no sense with real terms costs falling in London

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Rent controls make no sense with real terms costs falling in London

Rent controls called for by Sadiq Khan would leave tenants across London worse off. Figures show that private rents have fallen every year in real terms throughout his time at City Hall and are now nearly 10% lower than five years ago when compared to the Retail Price Index.

The analysis by the National Residential Landlords Association of figures from the Office for National Statistics show that rents in the capital have fallen by 9.6 per cent between April 2016 (the month before Sadiq Khan came to office) and February 2021. Even compared to the Consumer Price Index, including housing costs, which the Government has said it plans to start using, rents fell by 5.1 per cent over the same period.

The NRLA is warning that any move to control rent rises by linking them to inflation would leave tenants worse off.

In his manifesto for re-election as Mayor, Sadiq Khan calls for the power to introduce rent controls in London. This is despite a report published by The Treasury in 2010 under the last Labour Government, in which the current Mayor was a Minister, that warned of the devastating impact such a policy would have on inner-city housing.

Assessing the impact of rent controls before they were abolished in 1988, the report concluded that they had been a major factor in the “decay of much of the inner city housing stock.”

 Ben Beadle, Chief Executive of the National Residential Landlords Association, said:

“Rent controls would be a disaster for London as the last Labour Government made crystal clear. They would mean tenants actually paying higher rents than leaving them to market forces.

“The story of rent controls wherever they have been introduced is that they exacerbate an already serious shortage of available homes.

“Rather than calling for things he cannot deliver, the Mayor should focus on using the powers he already has to boost the supply of available housing, including for private rent.”

  • The below table provides Office for National Statistics data on the yearly percentage increase in private rents across London during Sadiq Khan’s time as Mayor of London and how it compares to inflation:
Year to % Increase in Rents RPI
February 2017 1.9% 3.2%
February 2018 0.1% 3.6%
February 2019 0.2% 2.5%
February 2020 1.1% 2.5%
February 2021 0.8% 1.4%

RPI continues to be used to calculate interest payments on index-linked bonds and student loans, as well as annual increases on some pensions, rail fares, mobile bills and taxes.

With figures rounded, in April 2016, the month before Sadiq Khan came to office as Mayor, the ONS private rent value was 104.7. In February 2021 (the most recently available figure) it was 108.5. The percentage increase over this period was 3.6%.

The RPI index over the same period increased from 261.4 in April 2016 to 296 in February 2021, an increase of 13.2%.

The above represents a total real term fall in rents in London between April 2016 and February 2021 of 9.6%.

The CPI(H) index increased from 100.6 in April 2016 to 109.4 in February 2021, an increase of 8.7%.

The above would represent a total real term fall in rents in London between April 2016 and February 2021 of 5.1%.

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