Shaun Bailey: Khan’s Soviet-style rent controls would be a disaster for London
05-11-2016
Shaun Bailey: Khan’s Soviet-style rent controls would be a disaster for London
Shaun Bailey is on the Conservative Party List for the London Assembly elections, and is a former Government Adviser and PPC for Hammersmith.
Housing remains the number one issue for Londoners. A booming population means that the price of an average home in the Capital is now over £500,000, which is over 12 times the median income in the city. This is why closing the gap between the home-owning aspirations of Londoners and the price of buying a home is a key priority for Zac Goldsmith.
Our mayoral candidate has made a commitment to start 50,000 homes every year of his term if he is elected on 5th May. This pledge is based on real economics, which means it can actually be delivered. Such a promise is not simply about mere headline numbers, it is about creating stable and safe communities.
Unlike Khan’s housing plan, which looks like an attempt to only build social housing, which runs the real risk of creating ghettos, as well as not giving Londoners the chance to invest in their future. The housing market works best when people can move on, something which social housing struggles to provide as families often get trapped.
Under Zac’s plans, young Londoners and first-time buyers in particular would benefit from an expansion in housebuilding. As many Londoners who wish to own their home are locked-out of home ownership, a dramatic increase in housebuilding is required. Because of this, Zac has promised to ring-fence public land for Londoners only, so that new homes are reserved for those who live in the city.
However, it is not all about home ownership, as many in London want to rent privately – both young and old. The private rented sector is likely to grow significantly over the next decade from 860,000 privately-rented homes to over 1.4 million.
To boost the private rented sector, Zac has committed to ensuring that more land is released for the build-to-rent market to ensure that the private rented sector can grow and cater to the increasing demand for rented accommodation. In addition to this we need stronger regulation of the landlords to demonstrate to the public that Conservatives understand that the rental market is not just a ‘market’, but it is comprised of homes where people live and raise their children.
His counterpart, on the other hand, has not been productive or practical with his proposals. Sadiq Khan, Labour’s candidate for mayor, has said that he would introduce Soviet-style rent controls on landlords. Under his plans, rents would arbitrarily be capped at a third of average earnings, and not at market or sub-market rates as is the case currently.
While on the surface this may sound appealing, the economics of such a move would be disastrous. While there is recognised need for more social housing, Khan’s proposal will not deliver any new social housing or new privately-rented housing, for which there is an even greater need. This policy is a nod to Labour’s policy of old; “we’ll build them out of London”.
Research by my fellow London Assembly candidate Andrew Boff found that Khan’s rent controls would reduce total rental revenues for landlords by £4.5bn. This would result in 51,000 fewer private rented homes in London by 2025.
By default, reductions in rental revenues limit the incentive for developers to invest in new homes for the private rented sector, any reduction in supply will increase the cost of renting in London, pricing out an ever increasing numbers of people. By imposing Soviet-style rent controls on London, Khan would irresponsibly be reducing the total levels of housing stock in the capital at a time when it needs it desperately.
Last year, the London Assembly Housing Committee hosted a session on this very subject, where experts demolished the idea of rent controls. Dan Wilson of Generation Rent said that landlords would “sell-up” if rent controls were imposed. Alan Collett from M&G Real Estate also said that “investment would dry up” if rents were controlled in such a fashion. Experts in the field agree that imposing statist price controls on rents in the Capital would be disastrous for Londoners.
This is London’s hour of need and Khan’s plans for housing pose a real risk to the prosperity of London. Zac Goldsmith’s bid for City Hall is the Conservatives opportunity to show that we have a real and workable plan to address London’s housing crisis.
Solving the housing crisis is not about political point scoring, but about social cohesion, fairness and giving Londoners the chance of a prosperous future. We have to show the people of London that we don’t only see London as a place of business, but also as home.