Rents

Meeting: 
MQT on 2013-05-22
Session date: 
May 22, 2013
Reference: 
2013/1388
Question By: 
Tom Copley
Organisation: 
Labour Group
Asked Of: 
The Mayor

Question

How much more is the average Londoner paying in private sector rent at the beginning of 2013 compared to a year earlier?

Supplementary Questions: 

Answer

Answer for Rents

Answer for Rents

Answered By: 
The Mayor

Boris Johnson (Mayor of London): Thanks, Tom. There is no good news here at all because there is no question that the rents in London are a by-product of the buoyancy of the London market and the shortage of housing and they are going up. Rents rose on average 10% last year and that followed on, as you know, to big increases of 12% in 2006, 12% in 2007. There has been a real increase in the cost of rent in our city. We are working very hard to try to address some of the impact of this, principally by building more homes. That, as I say, is the single best thing you can do.

Tom Copley (AM): Thank you, Mr Mayor, and indeed median rents according to the Valuation Office increased by 9% in 2012 and 12% in 2011. The actual cash figure is quite shocking. The average rent went up £99 a month, we calculate, which is £1,188 a year. That is of course more than your monthly net income if you are on the minimum wage, so essentially you are paying more than a month of your wages extra in rent in a year. So would you say that London rent inflation is out of control?

Boris Johnson (Mayor of London): What I would certainly say is that our housing economy is changing very fast and we need to look at what is happening with real energy and ambition. Owner-occupation has now fallen below 50% for the first time in decades, perhaps for as long as anybody can remember. The shape of the London housing market is people are increasingly using private rent. The question is what we do to control the rise in private rents. Do you impose rent controls of the kind that they have in New York or not? The evidence from New York is really not encouraging.

Tom Copley (AM): You present a false choice, if I may interject, Mr Mayor, because of course there is not just the question of carrying on as we are at the moment or adopting New York-style rent controls. There are many different versions of rent stabilisation, as perhaps we should call it, many different versions around the world. In fact, indeed, in Germany where 60% of Germans live in the private rented sector, they have regulated rent. So it is a serious question because you always talk about supply and I think everyone here agrees that ultimately and certainly in the long term supply is key. Of course it does take a long time to deliver the amount of housing that would be needed to stabilise rents. In the absence of any rent controls, how long would you say it would take before we have enough new housing to reduce rent inflation?

Boris Johnson (Mayor of London): I think you are right to focus on supply. Actually, in Germany, the interesting thing is that they do not have a shortage of supply. They have had a history, as you know, of rented accommodation in that country. They have a very different approach to the market from us. The problem we have in Britain and particularly in London is the cost of new housing caused by all sorts of factors.

To answer your question about how long it will take to address that problem and how long it will take to build the homes Londoners need, I think it will take at least ten years. We have to be realistic about this. It will take a long time before we have built enough homes to alleviate the pressure that our city faces. I want to be optimistic here because we can do it and if the Treasury would give us greater powers over some of the public land that is available in London, if we were able to use that land to build homes for the people of this city and people who need to live here, you would not only drive the London economy but you would start to address that problem.

Tom Copley (AM): There is I think almost a rare consensus over a lot of these issues to do with the supply of housing in London and the powers that London potentially needs to deliver them. I want to bring you back because you say it could take potentially ten years. In the meantime, you being against any form of rent regulation, are we going to have to endure constant rent increases of the likes that we have seen recently every year? Is that what we are going to have to control?

Boris Johnson (Mayor of London): I am not going to sit here and pretend to you that I can wave a magic wand and introduce rent controls in circumstances of very constrained supply already. That is the problem we have. If you introduce rent controls in a rental market where the supply is already so constrained, the risk is that you will simply drive out potential providers and that you will introduce distortions into the sector that are not actually in the interests of those who are facing the problem.

Tom Copley (AM): I think you are presenting a false choice between the status quo and only one very rigid form of rent control that you always refer to.

Boris Johnson (Mayor of London): I think I have tried to say that the German model does not apply to us, either. The German model is irrelevant to our concerns. It is the cost and the scarcity that is the problem. The only way to address that is to build more.

Tom Copley (AM): Could I perhaps approach this from a different perspective? Of course, rents have a real impact on the London economy and for every 1% increase in rent, that takes £130 million out of the pocket of Londoners to spend in our economy. In two thirds of London boroughs, Londoners are spending more than 50% of their income in rent. The CBI says that the cost of housing has now risen to third on the list of barriers to business investing in London. To what extent do you think that the rise in rents is damaging London's economy?

Boris Johnson (Mayor of London): I think that rents and the scarcity of housing generally, as the CBI recently said, are now becoming a major cause of economic inefficiency in our city. I would agree with you about that. Tom, we are doing absolutely everything. We have the London Rental Standard which is being increasingly taken up by landlords. We have 13,000 now subscribing to that standard. That is one way of making sure that landlords behave themselves and do not gouge their tenants. We do not have the statutory powers anyway in the city to impose rent controls of the kind that I think under any model you would want.

The second and more profound objection is that I am not convinced that it would be the right thing for the market. In New York they are moving away from rent controls because of the distortions they introduce. They are now trying to get rid of them. In Germany they have no constraints on supply as it is.

Tom Copley (AM): I would love to go into further detail over the Rental Standard. However, I am out of time, so I will leave it there.

Boris Johnson (Mayor of London): You are always at liberty, Tom, if you have a brilliant proposal for a rent control standard that does not constrain supply, then give it --