Homeys and Faux Libs talking crap, as per usual.

From City AM:

To combat the problem of housing affordability, the mayor will advocate creating a private rental commission to implement and oversee rent controls and to establish a register of landlords to "name and shame rogue landlords".

However, free market think tanks and London's house builders have thoroughly rubbished the idea, with many arguing that increasing housing supply is the only way to deal with unaffordable rents.

Rico Wojtulewicz, head of housing at the National Federation of Builders's House Building Association, said a cap on rents could hurt the construction industry.

Clearly nonsense.

Let's say Khan caps London rents at half current levels, so rents in London are now the same as in and around (say) Leeds. Is there new construction happening in and around Leeds?

Yes. There is still a profit to be made at Leeds rent levels, and land with planning in
Leeds still has value. So there will still be profits to made by building in London.

Rent caps would only reduce new construction if the cap was so low as to make construction unprofitable, even if land with planning were free.

"[House builders] with projects in the pipeline could suffer, as rent caps may push down land prices, leaving many who have already purchased land, with unviable projects," he said.

Tough, what they paid for land, or what it was worth before the cap is irrelevant to future decision making, it is a sunk cost. They would only slam on the brakes if they had a reasonable expectation that the caps would be scrapped (and in the UK, that is a reasonable expectation).

And as he says himself, land prices would fall, which would encourage construction.

Dr Kristian Niemietz, head of political economy at the Institute of Economic Affairs, labelled Khan's stance "Trump-style knee-jerk populism".

"Rent controls have never worked anywhere," he said, "If Sadiq Khan had any interest in solving London's housing crisis, he would focus on the supply side."

He's a floppy haired Faux Lib who is too stupid to accept that agglomeration benefits will cancel out added supply. In the absence of a total ban on people moving to London, we'll have X more homes and X more households and they cancel out. London just gets a bit bigger (and more expensive), as it has been doing for centuries.

And rent controls clearly do work - see below.

Chris Norris, director of policy at the National Landlords Association, said implementing rent controls would crimp investment within the housing sector.

"Rent controls cap the price a landlord can charge, but not the costs they will incur meaning that as the cost of providing homes increases so will the losses landlords are expected to make," he said, "Landlords will have no choice but to take their investment elsewhere, making it harder still for households to access the housing they need."

Clearly nonsense.

The only significant cost that landlords have is mortgage interest, and that's only some of them. They did leveraged speculation and lost the gamble. That's life. All other landlords will still be earning money, just less than before - or else there would be no landlords in Leeds.

Whether or not Khan realises this, the effect of rent controls (in the UK at least) is that landlords sell up to first time buyers-cum-former tenants, or people buying new homes to live in, not to rent out. That makes it *easier* for households to access the housing they need, i.e. homes to own.

Rent caps are a crude form of land redistribution, but clearly it worked in the UK for most of the 20th century when such controls were in place. The result was a huge rise in owner-occupation levels and we were all happier for it.

I'll be pleasantly surprised if this gets past the City AM moderators.

Kristian Nimitz wheeled out his Faux Lib nonsense for the umpteenth time.

Shooting the messenger: Rent controls have always and everywhere ended in failure

Quite clearly, in the real world they haven't, sometimes yes, usually no, depends on other factors.

My actual comment:

Badly wrong on at least two counts.

The UK had rent controls for most of the 20th century, but that did not mean that housing supply disappeared. All that happened was that landlords left the market - meaning there were more homes for owner-occupiers to buy, who also acquired all new supply.

(In European countries, rent controls coupled with yet another "government interference" i.e. minimum building standards have also led to favourable outcomes.)

This is a large part of the reason why owner-occupation rates doubled in the decades after 1945 and the number of private tenants halved.

Another major reason was that mortgage loans were capped at low income multiples, which set a natural cap on house prices.

His other glaring error is that granting even more planning permission will make no difference, it is pushing a piece of string. Land bankers/home builder have a profit maximising level of output of about 150,000 a year. If more permissions are granted, these are simply banked, which is why the largest home builders are sitting on land banks with planning sufficient for ten years' supply.

If Mr Nimitz left his ivory tower for a few minutes and took the trouble to read the accounts of Barrats, Persimmon et al, this would be obvious to him.

I imagine that the third mechanism adopted by UK governments to put a natural cap on rents and hence house prices will be completely unpalatable to Mr Nimitz. That was the easy availability of low rent social housing, which enabled millions to opt out of the land price Ponzi scheme altogether.
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UPDATE, re Anti's comment.

The more complete list of policies which the UK had in one form or another for most of the 20th century until the Home-Owner-Ist era is as follows:

- rent controls (came in hard after each war, were then gradually whittled away)
- tenants were protected from eviction, as long as up to date with rent (until 1996 or so)
- as a result, neither banks nor building societies would lend to buy-to-let landlords (until 1997 or so)
- higher taxes on landlords' rental income
- private landlords not subsidised by Housing Benefit (until 1990).
- Domestic Rates (until 1990)/Schedule A tax (until 1964), which together were more like LVT than like Council Tax.
- little or no bank lending on land/mortgages.
- building societies had stricter criteria on minimum deposits and maximum loans-to-income multiples. If you can't borrow more than twice your joint income, that caps house prices at just above twice your joint income.
- there was the opt out from the whole Ponzi scheme i.e. social housing (peaked at 30% of all households in the 1970s).
- lower house prices meant that builders increased profits by increasing volume/quality; not by restricting supply to prop up prices, so little or no land banking.
- general political assumption that owner-occupation is the best form of tenure
- general cultural assumption that landlords were a bit sleazy, barely a step up from brothel owners or benefit claimants.

The inevitable result was low rents, low house prices, small and resilient banks and building societies…

… and rapidly increasing owner-occupation levels, which is where this Georgism-lite contained the seeds of its own demise and tipped over into Home-Owner-Ism again. The country is run by politicians who want to buy votes as cheaply as possible, so from the 1960s onwards, there was a political advantage in allowing house prices to increase year on year - a notional profit for a majority of voters and an invisible cost for future generations, all requiring zero tax increases.

Fast forward to last year, the scales were tipping the other way, more people were losing out from Home-Owner-Ism than were gaining, so the then Conservative chancellor started withdrawing tax breaks from buy-to-let landlords, ostensibly to shift the balance from landlords back to would-be owner-occupiers. If the shift from Home-Owner-Ism back to Georgism-lite takes as long as the other way, we will have Georgism-lite again by the middle of this century.

Rent = privately collected income tax.

Mombers left a new comment on the post We own land! Give us money!":

Out of interest, I wonder how the means testing of rent controls works?

"Apartments can be deregulated under rent stabilisation if they are vacated at a monthly rent of $2,500 (£1,600) or if they reach that rate and the occupant's income reaches $200,000."

So does your landlord get access to your private financial data?

One would assume so - a bit like the tax office.

And do they really get to keep a portion of your income above $200k for doing precisely nothing...

Clearly yes. It's not clear from the article how much, but broadly speaking a percentage of it - a bit like income tax.

... or does that money somehow end up going to the public purse?

The landlord in turn will pay some income tax on that 'income tax' he has collected from you.

Oxford University's Department of Economics concurs.

Emailed in by TBH, from page 29 of this:

If one is interested in the spread of owner-occupation per se, it is necessary to consider not only the two million plus houses built in the interwar period for owner-occupation, but also the large number of houses – estimated to be in excess of one million – transferred out of the privately-rented sector by sale to owner-occupiers.

In a large proportion of these cases, landlords sold their properties in response to the low returns imposed on them by the rent restriction legislation. (Conversely, they were concentrated in the 1920s.) In many cases they could only realise low prices for their properties, and they often sold to the sitting tenants.

Although there is little information on these sales – Merrett refers to them as the ‘hidden history’ of the interwar period – it is likely that many of them involved working-class households. In other words, many more working-class households became owner-occupiers in the interwar period than Swenarton and Taylor allow, not only because they bought many of the new houses built during the 1930s, but also because they also bought a significant number of pre-war houses, particularly during the 1920s.

Reader's Letter Of The Day

From The Evening Standard, page 57:

The arguments against rent caps ignore all the hard evidence.

For most of the twentieth century, the UK had quite strict rent controls and better tenant protection. Yes, the result was that rented accommodation was of lower quality - but landlords were no longer outbidding owner-occupiers, keeping a lid on house price inflation.

[This para was edited out: As a result, the number of households renting from private landlords fell from 90 per cent to 10 per cent between 1900 and 1990; and the number of owner-occupier households went up from 10 per cent to 70 per cent. Social housing took up the slack.]

The most worrying statistic is that among the under-35's, owner-occupation levels have fallen from two-thirds to one-third over the past ten years. So reintroducing strict rent caps is a core part of YPP's housing and economic policies.

It is not just about protecting tenants - to borrow some Tory slogans, it is about putting money back into people's pockets and having a property owning democracy.

Mark Wadsworth, Young People's Party PPC for Epping Forest.
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In response to the comments, replacing taxes on income with taxes on land is a much better way of doing everything and would sort out most so-called economic problems, but on the narrow issue of high rents/house prices and wealth inequality, a combination of mortgage restrictions and rent caps are a reasonably good second-best way of doing things - they largely solve these narrow issues (but not much else).

The missing homes conundrum; outright lies

Labour's timid ideas about modest rent controls/tenant protection have provoked the usual Homey backlash.

Top of the list of counter-arguments is the missing homes conundrum:

Labour was accused on Wednesday night of attempting to introduce rent controls like those blamed for damaging the property sector during the 1960s and 1970s.

The Conservatives said the policy had been tried unsuccessfully by Socialist governments in Venezuela and Vietnam, and would result in low quality accommodation and fewer homes being rented out.

What damage to the 'property sector'? We were building a lot more houses than now and a lot of people were buying them for affordable amounts. Rent controls simply made housing more attractive to owner-occupiers than to landlords, which is why the number of households renting privately fell from 90% to 10% between 1900 and 1990.

Unlike the author of The Telegraph article above, the Tory housing minister couldn't even be bothered to look up rent controls on Wikipedia comes out with this:

Conservative housing minister Brandon Lewis dismissed the plans, claiming only building more homes would lead to affordable rents. 'Rent controls never work - they force up rents and destroy investment in housing leading to fewer homes to rent and poorer quality accommodation,' he said.

For sure, the quality of rented accommodation might go down, but so what?

People are happy to put up with a few years of slumming it when they leave home, get their first job, go to Uni etc. What's really important here is reversing the decline in owner-occupation rates. Among the 24-35 age group, owner-occupation rates have collapsed from a two-thirds fifteen years ago to only one-third today.

To round this off, more bollocks from the end of the first article:

Grant Shapps, the Tory Party chairman, said: “Evidence from Britain and around the world conclusively demonstrates that rent controls lead to poorer quality accommodation, fewer homes being rented and ultimately higher rents – hurting those most in need.”

He is just making this up as he goes along. There is no real life evidence for any of this. We could present counter-evidence from Germany, which does have implicit and explicit rent controls and much better quality housing.

Sam Bowman of the Adam Smith Institute said: "Rent control is a stunningly bad idea that could devastate Britain’s cities and clobber renters. To paraphrase the socialist economist Assar Lindbeck: the only thing worse for cities than rent control is bombing them."

Rent controls do not 'clobber renters', they turn them into owner-occupiers, which I thought we all agreed was A Good Thing? Further, cities recover surprisingly quickly after being bombed or struck by an earthquake, provided the economic conditions are right. Even by his own admission, rent controls have a lot less impact than that.

Simon Walker, Director General of the Institute of Directors, said: "Basic economics tells us that if you artificially hold down the price of something, you get less of it in the market. This is as true for housing as it is for anything else. At a time when we appreciate there is a housing shortage, this policy is particularly short-sighted."

"Basic economics" tells us that there will indeed be less to rent, but the amount of housing is fixed, and there is no shortage in an absolute sense, so when landlords try to sell up, prices will fall to a level which former tenants can afford. Sorted.

(Obviously, shifting to LVT would sort this out much better, but that's not under discussion here).