Getting Rents Under Control: How to Make London Rents Affordable

The resource "Getting Rents Under Control: How to Make London Rents Affordable" is published by the New Economics Foundation, focusing on the pressing issue of housing affordability in London. The report is authored by Hanna Wheatley, Sarah Arnold, and Joe Beswick, and aims to inform the development of a potential rent control model tailored for the capital's unique rental landscape.

The private rented sector (PRS) in London has grown significantly over recent decades, now representing the second largest housing tenure after home ownership. By 2025, the Mayor’s office forecasts that private renting will equal home ownership in prevalence. However, this growth has led to a sharp increase in rental costs, which have risen more than three times faster than average earnings since 2010. Consequently, 25% of privately renting households in London spend over half their income on rent, indicating a severe affordability crisis.

A growing movement among Londoners advocates for rent controls as a solution to this affordability crisis. Polls indicate that 68% of London residents support such measures, including the Mayor, Sadiq Khan, who aims to implement rent controls alongside broader reforms for private renters. The report identifies six crucial building blocks for introducing rent control in London, emphasizing the need for policies that promote economic and social justice while addressing the inherent risks associated with rent control.

The report highlights alarming statistics about housing affordability in London. The median rent for a two-bedroom flat consumes 50% of the median income, far exceeding the standard affordability benchmark of one-third of income. The situation is particularly dire for families, with 55% of children living in private rented housing facing poverty. Furthermore, nearly half of London teachers leave the profession within five years, citing high housing costs as a significant factor.

To effectively manage rents, the report suggests establishing a comprehensive database of landlords and properties to ensure transparency. Additionally, it advocates for property-linked rent control, which would regulate rents between tenancies, rather than just within them. A Desired Rent Level should be set, allowing for gradual rent reductions to improve affordability over time. Once this level is achieved, a Private Rent Index would govern future rent increases based on local wage growth and other economic indicators.

The report does acknowledge potential risks associated with implementing rent controls, including the possibility of reduced housing supply if landlords exit the market due to decreased profits. Therefore, it emphasizes the need for a careful and gradual introduction of these controls alongside other housing policies, such as increased social housing construction, to mitigate risks.

The New Economics Foundation aims to collaborate with the Mayor of London and other stakeholders to refine and implement these recommendations. The report calls for devolution of rent policy to enable tailored responses to local conditions, as well as extensive engagement with renters' groups and landlords to ensure a balanced approach to reform.