Rent controls for London 'would be a disaster' - Shapps

Published by Jon Land for 24dash.com in Housing and also in Communities, Local Government

Housing minister Grant Shapps has said plans to introduce rent controls in London's private rented sector would be a "disaster".

He was responding to plans announced today by London Mayoral candiate Ken Livingstone who said no-one should pay more than a third of their wage on rent and a 'London Living Rent' would be a fairer system.

This would mimic the London Living Wage - which is higher than the minimum wage - to reflect the increased costs of living in the capital.

Some 24% (700,000) households in London are in the private rented sector compared to 16% nationally; with average rents at around £1,000. The average first-time buyer property in the capital is now over £257,000.

Mr Livingstone said: "Too many Londoners pay more than one third of their income in rent. That benchmark should be the indicator that drives us in our work to improve the living standards of Londoners from all walks of life.

"In more than half of London boroughs Londoners are paying on average over 50 per cent of their incomes. We should be doing everything we can to get that number down. Many people in reasonably well-paid jobs are seeing their incomes absorbed into their housing costs. Learning from the success of the London Living Wage in arguing, cajoling, intervening and collaborating, the Living Rent Campaign will be a new way of making City Hall work for ordinary Londoners."

Mr Shapps said on Twitter that when rent controls were in place the private rented sector contracted by 8%. He said it would lead to "fewer homes to rent, and shabbier accommodation for tenants". 

A spokesperson for the current Mayor Boris Johnson told the BBC: "Whatever the ideological appeal, the Mayor does not have the power to introduce them and even if he did, they would be devastating for the construction industry.

"It would result in fewer homes being built and lead landlords to invest less in their stock."

Mr Livingstone also announced plans to establish the first London-wide non-profit lettings agency - which would put "good tenants in touch with good landlords" so that both can benefit from security of tenure and reduce the costs of letting.

He said: "We must actually intervene into the private rented sector. What London needs is a London-wide non-profit lettings agency. So I can announce today that I will work with other stakeholders to establish one that can start to make a change in the private rented sector for the better. It will put good tenants in touch with good landlords across the spectrum of private renting so that both can benefit from security of tenure and reduce the costs of letting.

"It will work with boroughs, landlords’ representatives and tenants’ representatives, to develop a London-wide strategy for tackling rogue landlords and driving up standards. It will tackle a series of issues on accreditation, inspection and enforcement, licensing and energy efficiency, as well as tenants’ deposits protection.

"I want to end the churn-and-burn approach of some of the private letting agents, so I will be tackling abuses in this area. Through this work we will challenge the scandal of rip-off agency fees, horrific standards and the daily experience of disputes over deposits in the private rented sector, seeking to widen best practice such as that in Newham a borough that has made the campaign for a fairer rented sector a key part of their work.

"In the coming weeks I will set out more detail of how this new arm of the Mayor’s role will work. This fairer approach to housing in London applies the principles of our Fare Deal campaign to the issue of housing: Righting wrongs, restoring fairness, speaking up for the majority."

Commenting on the proposals, Residential Landlords Association (RLA) Chairman, Alan Ward said: “Ken Livingstone's call for rent controls is an old idea which never worked in the past - until 1988 rent controls resulted in a shortage of supply and poorer conditions for tenants. Hardly a remedy for 2012. There is no doubt that rents in the capital remain far higher than anywhere else in the country but the answer lies in improved supply.

“With many, particularly young, people relying on the sector to provide housing to meet their needs, the RLA is calling on both Boris Johnson and Ken Livingstone to support efforts to reform the taxation system to stimulate growth in the sector.

“Standards in the sector are best upheld when tenants have genuine choices about their housing options. Until we see a boost in supply, those choices simply do not exist.”