Danger Ahead: Rent Control

There are currently 1,114,477 households on local authority waiting lists for housing. 232,409 in London (Source: ONS).

By contrast the number of new homes provided by local authorities in the last 12 months? Just 2550 (Source: MHCLG - 10th July 2019).

That's quite a gap.

And where does the slack get taken up? Well, some of it but by no means all, gets provided by housing associations that were set up some years ago to build affordable homes - subsidised rent; shared ownership; affordable rent and ownership etc. And their contribution to this huge thirst for homes? 27,870 properties completed in 2018/9.

So you see the system, so to speak, is knackered in that barely 30,000 dwellings are being built each year to service a need that is thirty seven times bigger than that.

But wait, all is not lost. In recent years we have seen the advent of the 'buy-to-let' landlord, a breed that invests in property and rents them for a 'yield'. Typically that yield is about 5% of the purchase price of the home - for example a ￡100,000 purchase would expect to return ￡5,000 each year (about ￡416 per month). All well and good.

Until recently, around 19% of property purchases were for buy-to-let - that's about 200,000 each year. Many of these are rented to people that are on council waiting lists and whom receive housing benefit and thank goodness private enterprise is filling a need that the 'state' is failing at or else we would surely have even more people on the streets.

But since 2016 the government has, quite inexplicably for a Conservative administration attacking property ownership and aspiration, begun to squeeze the sector with one penalty after another including:

• A 3% stamp duty levy on second homes including buy-to-let purchases
• The removal of tax-relief at the higher rate on the mortgage interest on such homes
• Repealing of Section 21 from tenancy agreements to prohibit the lawful eviction of tenants that refuse to leave the property after their tenancy has expired. In effect, granting lifetime tenancies with no rent review in some circumstances.

These moves have resulted in buy-to-let sales dropping from 19% of all UK property transactions to just 11% (Source: FT). That's a drop in inventory of over 80,000 each year.

Today, Shaun Bailey the Conservative candidate for London Mayor tweeted that he hears Sadiq Khan is due to announce a further blow to landlords inthe capital. Arguably the biggest dent to their existence of all in a Marx'esque 'all property is theft' move... this week Sadiq Khan will announce his plans to set state controlled rents across all private rental properties.

Now, quite apart from the interventionist politics at play here and a distinctly Venezuelan flavour to such a policy (a country that is bankrupt despite its huge oil resources) - this crack-pot populism would have a DEVASTATING effect on the supply of rental property in London. Simply put, a hard-pressed landlord fraternity is likely to see this as the last straw and will result in many exiting the sector and at best, putting further purchase plans on hold.

Lower rents equal lower yields and which means a less attractive investment. Less attractive means to look elsewhere for better, more predictable returns and therefore fewer buy-to-let homes purchased. Fewer homes equals less choice and, consequently, a widening gap that sees no prospect of being filled by government or indeed Sadiq Khan's GLA - actually, ESPECIALLY Sadiq Khan's GLA in that he is currently delivering just 18% of the affordable homes that he pledged he would in his election campaign of 2016. His output, despite the rhetoric, is about half that of his predecessor Boris Johnson (Boris built more affordable homes in 2014 than Sadiq has in the last three years - Source: GLA statistics April 2019).

Rent controls are nuts. It's pure pandering to an audience that is desperate for housing because politicians such as the current Mayor of London have failed to deliver on previous promises. In order to cater for demand and to regulate rents through a free-market, we need MORE homes in the private rental sector. Not bloody less! Oh the irony...

Thankfully, Sadiq Khan's announcement later this week is set to disappear as the PR stunt that it really is, given that the Mayor of London does not have the power to introduce rent controls and must receive a mandate from central Government to do so and which, I most sincerely hope will not be granted to him.

Despite that reprieve it's clear that, once again, politicians, particularly those about to begin their quest to defend their fragile tenure, are happy to play fast and loose with housing as a topic that can be tossed around like someone else's rag-doll. No thought. No accountability. No responsibility. No clue.

Boy, do we need reform and new bold, radical housing policies that can actually be delivered for the better. Not more ill-thought PR stunts that only amount to populist, temporary headlines and if enacted would hurt the very elements of society that they pretend to favour.