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News: Rent control: it can work but can also backfire on tenants, says BBC

Wed, 06 Feb 19

The BBC’s Reality Check service, respected for giving a more realistic assessment of many politicians’ promises, has looked at London mayor Sadiq Khan’s claim that the arguments for rent controls in the capital are “overwhelming.”

While the Reality Check service said this was not the case, it did claim that in certain circumstances rent controls could work for some - but by no means all - tenants.

Its verdict is that rent control “has been helpful for existing tenants in areas with particularly fast-rising rent, but it can be at the expense of new renters. In some places, it has also led to a shortage of supply. While the arguments for rent control are not overwhelming, it is possible that a well-designed policy combined with significant new homebuilding could be effective.”

The BBC looks at the experiences of rent controls in Germany and in San Francisco.

In the former, the Reality Check team found landlords in 313 of 11,000 towns and cities (with a total of 25 per cent of the country’s population including Berlin and Munich) could not set rent for new tenants more than 10 per cent above the local long-term average.

However, there are exemptions for newly-refurbished properties and those being rented out for the first time, allowing for potential rises for landlords who invest.

In San Francisco, where rent controls have existed for 40 years, it discovered previous research showing that people who were living in rent-controlled properties had benefited from lower rents by about $2.9 billion over a 16 year period. 

However, renters who came to the city later paid an extra $2.9bn in higher rent over a similar period, largely because of a shortage of available housing. So things balanced out.

With specific regard to London, the BBC discovered research dating back to 2015, conducted for the London Assembly, suggesting that rent controls could really only work if accompanied by a surge in supply: without that, even a three-year cap on rent rises would make little difference to affordability overall, the research concludes.

[Editor] Rent controls AND a surge in supply? Unlikely! Supply is falling at an alarming rate in the capital.

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