2 minutes reading time (449 words)
Why rent controls won't work – as the energy price cap failure proves
ADAM WILLIAMS- THE TELEGRAPH
Follow 19 JULY 2019
Everybody would like lower energy bills and bargain rents. But given political interference has not led to more resaonable gas and electricity charges, why does London mayor Sadiq Khan think he can deliver cheaper housing costs?
Mr Khan plans to make rent controls a cornerstone of his 2020 election bid. He proposes setting up a commission that will cap the amount tenants can be charged by landlords.
Rents in London are expensive, there is no doubt about that. The average one-bedroom flat in the capital costs more to rent than a three-bed anywhere else in the country.
But as we’ve seen in the energy sector, caps do not address the fundamental issues that lead to high prices.
The energy regulator introduced a price cap on Jan 1 this year. But rather than stimulating competition between providers, energy companies have treated it as a target rather than a limit.
This has ultimately led to consumers across the country paying £148m more than they otherwise would have done – or £9.75 per month per household.
Mr Khan's intervention is the latest crackdown on landlords, who are already having to grapple with tighter tax rules that taper the amount of mortgage interest they can deduct from their taxable income. In some cases this will leave them facing a marginal tax rate of 100pc.
Landlords must also contend with the withdrawal of section 21, which will limit how quickly and easily they can evict unruly tenants from their properties.
Those looking to invest in new properties have also been deterred by the extra three percentage points of stamp duty applied to purchases of additional homes, leading to a slowdown in the buy-to-let mortgage market.
As well as these policy changes, the market itself is under strain. Figures published this week by the Land Registry showed that house prices in London fell by 4.4pc in the year to May. This is the biggest decrease since the financial crisis.
With the value of their asset falling, increased costs and future earning potential being limited, what incentive do good landlords have to invest in their properties? Or to renovate new homes and bring them onto the market?
Policies such as rent controls just dance around the main issue facing many areas of the country: a chronic shortage of housing. Politicians of all stripes have failed to address this fundamental issue for decades, leaving us in today's dire situation.
This is felt more strongly in London than anywhere else. But rather than meddling at the margins, Mr Khan simply needs to build more houses.
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