04/04/2022

No Sadiq Rent Controls Are Not The Answer

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Housing, and therefore housing policy, affects us all. We’ve witnessed another spring statement that has done nothing to address the housing crisis gripping London and the rest of the UK.
I may own a central London estate agency now, but my roots are firmly in the social housing sector, having been born and raised on a council estate. So unlike those in power and many commentators discussing housing, I understand both sides, the aspirational homeowner, the private buy to let investor and those struggling to find a home to rent with crippling rents and undersupply.Over half of the rental stock in the UK is owned by private buy to let landlords. They are a hugely vital component of the UK’s housing solution. A few bad eggs maybe, but the overall majority provide safe, quality housing, yet, they are often both derided by social housing campaigners and targeted by central Government and local authorities alike.We need these private landlords. The private Build to Rent sector and the social housing sector have spectacularly failed to deliver the volume of safe, affordable homes we need, despite soundbite after soundbite from central Government.

Londoners are feeling the pain

Rents are rocketing sky high, and house prices are at their highest level since records began. Normal Londoners are feeling the pain.The government embarked on a campaign to attack private buy to let landlords as far back as 2014. Subsequent tax changes and legislative changes have made it a very unattractive proposition for many who have the means to be a private landlord. The very people we need to attract into the buy to let market.
Government policy was supposed to curtail buy to let so that property prices freeze or fall, therefore making housing affordable for everyone. That’s what we were told, or those of us who listened were.
Here we are a few years later. The former has certainly come true. We rarely see buy to let investors entering the market now, yet housing is also more expensive. The lack of rental homes caused by this lack of flow into the buy to let market is contributing to a 15% increase in rents in London and a shortness of supply I never thought would be possible.Of course, we needed to curb property speculation. It’s a curse on our society. So-called ‘investors’ often from overseas buying and flipping property for a huge profit with little or no effort. That’s not right, not when it means Londoners cannot afford a place to live. But in the government’s rush to make popular headlines, they have excluded from the market the very people whose existence would curb these ludicrous rent rises and supply issues – the buy to let landlord.
Watch out in the coming weeks for announcements from Sadiq Khan and City Hall to bring in rent controls. Now he is also using the energy price increases to justify a rental cap. Why penalise private landlords when the energy companies make such obscene profits?

Rent controls are not the answer

We’ve seen in Berlin the negative effect of rental controls, with a 30% reduction in available rental stock and over 200 people chasing every available apartment. Berlin’s attempt failed, yet this does not seem to deter City Hall. A further 30% reduction in London rental stock would be devastating.
Yes, we have a huge problem, but no, rent controls won’t help – it will make the matter immeasurably worse as even more buy to let landlords leave the market.
And there is no one there to take their place.
Let’s not look to the private sector either. Developers continue to get what they want with new housing developments that rarely support the local communities, the ones they demolish to build “a better life”.
Let’s stop deriding private landlords and create an environment that attracts long term law-abiding investors – those in it for the long haul and not the quick buck.
Let’s give landlords escalating CGT tax breaks for being a law-abiding landlord, say every ten years. Longevity is the key here. Encourage landlords to enter and stay in the market.
And to local authorities who keep adding more and more ludicrous selective licensing, let’s say to them, stop, you are only hurting law-abiding landlords. Landlords who rent out illegally need to be stopped, but they are the very people who do not register with your licencing schemes. Turn your attention to enforcing the myriad of current legislation you already have at your disposal to bring those rogue landlords to account.
So there we have it – the housing crisis can be eased by helping landlords be landlords. Will it solve all of our housing problems? No, but we will all have a decent and affordable place to live.

If you would like to comment on any of the issues I have raised here, you can reach me at steven.herd@mylondonhome.com

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This post was written by:

Steven Herd

Steven's extensive 30 years of estate agency experience in London culminated in launching MyLondonHome, which has enabled him to bring together a hand-picked team to provide the high level of quality advice, market strength and service he is renowned for.

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