A general view of housing in Brixton on January 30, 2013. Photograph: Getty Images.
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We need rent controls to solve London's housing crisis

Too many essential workers are being priced out of the capital. Rent controls could address the uncertainty and unaffordability they face.

In an unusual break from the disagreement, dissent and bickering that pervades politics, consensus has broken out amongst policy makers in the capital: London is in the midst of a housing crisis.

The facts are stark. Private rents in London have risen nine per cent since December 2011. Property price growth has returned to pre-2008 levels and is on the brink of exceeding it.Higher rents make it difficult to save a deposit, and rapid house price growth pushes the size of that deposit further and further out of reach. Indeed, those two factors combined mean that the projected average age by which a young person will be able to buy their first home in London is now 52. Sixty six per cent of first home buyers are supported by the bank of Mum and Dad in order to afford a deposit.

London has reached the point where the cost of housing is affecting productivity growth. We are on the cusp of having to bus in cleaners, retails workers and hospitality staff from the Shires because those on low incomes cannot afford London rents. Londoners on average already spend more than half of their income on paying their rent or mortgage. Not only does that disincentivise the best and brightest teachers and nurses from living in London, it also significantly reduces the disposable income of those with the highest propensity to spend, threatening the future of the retail sector in particular and the economic recovery in general.

London clearly needs to build more homes. A report by London Councils found we have 283,000 too few homes in London now, and we will need a further 526,000 by 2021 to cope with a growing population. But building hundreds of thousands of homes will not happen in the very short- term; meanwhile, Londoners are struggling to pay their rent.  With the monthly rent for a one-bedroom flat in Wandsworth sitting well above £1,100, it has become patently obvious that London needs some form of rent control.

But let me be clear about what I mean when I talk about rent control. I don’t mean the old-school "first generation" rent control that was introduced in the UK during the Great War, which prevents any increase in rents, diminishes investment returns in real-terms over time, and discourages people from becoming landlords. I don’t mean the type of rent control that keeps rents so low that they are not enough to pay for the proper maintenance of a home in a liveable condition. I mean rent controls that nod to the market but allow for the realities of what it is to have a home to live in; the type that are espoused by those who could hardly be called left-wing ideologues, including Angela Merkel and Michael Bloomberg.

Currently in London, a family can move into a home at an expensive but affordable rent. The landlord cannot evict them (except for non-payment of rent) for six months. But after a year that landlord can raise the rent as high as he or she would like to; the rent could be doubled without any notice to the tenant family, putting it completely out of the range of affordability. The family is obliged, then, to move house, move their childrens’ school, probably move to a different part of London, and pay another round of letting fees, bonds and two-months-rent-in-advance. The other option is to seek the landlord’s permission to sublet one of their bedrooms to another family, adding one more to the 207,000 London households already living in overcrowded conditions.

There is an alternative. Take, for example, the German system of rent controls. Renters have indefinite tenancies; a tenant can only be evicted for non payment of rent (over a number of months), damage to the property, unauthorised subletting, or to allow the landlord or a member of his or her family to live in the home or to sell the home. It is in the interests of a landlord to retain their current tenant because the costs of letting agents are borne by the landlord.  The initial rent is set by the market, but cannot be more than 20 per cent higher than similar properties in the area. Rents can be raised according to inflation or due to an increase in the landlord’s costs, but by no more than 20 per cent in any three-year period.  Further, proper maintenance of the property by the landlord is incentivised; a tenant only pays 100 per cent of the rent if the home is in 100 per cent good condition. Perhaps a system like Germany’s is exactly what London needs to address the uncertainty and unaffordability faced by tenants in our private rented sector.

A common criticism of rent controls is that they discourage investment in the private rented sector. But British history since the deregulation of the rental market in the late 80s has shown that argument to be flawed; 89 per cent of landlords are individuals or couples, not builders or developers. In general, they buy pre-existing properties as an investment or nest egg.  They aren’t the part of the housing market that builds new homes in London, though they do compete against first homebuyers for existing properties. The fact that more rental accommodation has not been built in London, with its high rent prices, shows the inelasticity of housing supply in London which has more to do with cautious developers, the planning process, and a scarcity of developable land than it does with rent prices.  

To encourage investment in new homes (rather than locking up investment equity in pre-existing houses), there could be concessions to rent controls on new developments. Maybe rent controls should not apply to any new property built after 1 January 2014. Or maybe they should not apply to the first tenant of any new development; that will have the added benefit of encouraging longer term leases by property developers.

We need to start getting serious about how to address the housing crisis in London, because it’s not just those on minimum wage or housing benefit that are struggling to afford to live here. Teachers, civil servants, retailers and service workers essential to the running of our city are all threatened by the crisis. Though not a silver bullet that will singlehandedly solve the crisis, we should think about how rent controls – done sensibly – can be part of a comprehensive plan to ensure that all Londoners can afford a home in our city.

David Lammy is Labour MP for Tottenham

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How should Labour's disgruntled moderates behave?

The price for loyalty looks like being long-term opposition. Sometimes exiting can be brave.

When Albert O. Hirschman was writing Exit, Voice, Loyalty: Responses to decline in Firms, Organizations, and States he wasn’t thinking of the British Labour Party.  That doesn’t mean, though, that one of the world’s seminal applications of economics to politics can’t help us clarify the options open to the 80 to 90 per cent of Labour MPs who, after another week of utter chaos, are in total despair at what’s happening under Jeremy Corbyn.

According to Hirschman, people in their situation have essentially three choices – all of which stand some chance, although there are no guarantees, of turning things around sooner or later.

The first option is simply to get the hell out: exit, after all, can send a pretty powerful, market-style signal to those at the top that things are going wrong and that something has to change.

The second option is to speak up and shout out: if the leadership’s not listening then complaining loudly might mean they get the message.

The third option is to sit tight and shut up, believing that if the boat isn’t rocked it will somehow eventually make it safely to port.

Most Labour MPs have so far plumped for the third course of action.  They’ve battened down the hatches and are waiting for the storm to pass.  In some ways, that makes sense.  For one thing, Labour’s rules and Corbyn’s famous ‘mandate’ make him difficult to dislodge, and anyone seen to move against him risks deselection by angry activists.

For another, there will be a reckoning – a general election defeat so bad that it will be difficult even for diehards to deny there’s a problem: maybe Labour has to do ‘déjà vu all over again’ and lose like it did in 1983 in order to come to its senses. The problem, however, is that this scenario could still see it stuck in opposition for at least a decade. And that’s presuming that the left hasn’t so effectively consolidated its grip on the party that it can’t get out from under.

That’s presumably why a handful of Labour MPs have gone for option two – voice.  Michael Dugher, John Woodcock, Kevan Jones, Wes Streeting and, of course, John Mann have made it pretty clear they think the whole thing’s a mess and that something – ideally Jeremy Corbyn and those around him – has to give.  They’re joined by others – most recently Stephen Kinnock, who’s talked about the party having to take ‘remedial action’ if its performance in local elections turns out to be as woeful as some are suggesting.  And then of course there are potential leadership challengers making none-too-coded keynote speeches and public appearances (both virtual and real), as well as a whole host of back and frontbenchers prepared to criticise Corbyn and those around him, but only off the record.

So far, however, we’ve seen no-one prepared to take the exit option – or at least to go the whole hog. Admittedly, some, like Emma Reynolds, Chuka Umunna, Dan Jarvis, Yvette Cooper, and Rachel Reeves, have gone halfway by pointedly refusing to serve in Corbyn’s Shadow Cabinet.  But nobody has so far declared their intention to leave politics altogether or to quit the party, either to become an independent or to try to set up something else.

The latter is easily dismissed as a pipe-dream, especially in the light of what happened when Labour moderates tried to do it with the SDP in the eighties.  But maybe it’s time to think again.  After all, in order to refuse even to contemplate it you have to believe that the pendulum will naturally swing back to Labour at a time when, all over Europe, the centre-left looks like being left behind by the march of time and when, in the UK, there seems precious little chance of a now shrunken, predominantly public-sector union movement urging the party back to the centre ground in the same way that its more powerful predecessors did back in the fifties and the late-eighties and nineties. 

Maybe it’s also worth wondering whether those Labour MPs who left for the SDP could and should have done things differently.  Instead of simply jumping ship in relatively small numbers and then staying in parliament, something much bolder and much more dramatic is needed.  What if over one hundred current Labour MPs simultaneously declared they were setting up ‘Real Labour’?  What if they simultaneously resigned from the Commons and then simultaneously fought scores of by-elections under that banner?

To many, even to ask the question is to answer it. The obstacles – political, procedural, and financial – are formidable and forbidding.  The risks are huge and the pay-off massively uncertain.  Indeed, the whole idea can be swiftly written off as a thought-experiment explicitly designed to demonstrate that nothing like it will ever come to pass.

On the other hand, Labour MPs, whether we use Hirschman’s three-way schema or not, are fast running out of options.  The price for loyalty looks like being long-term opposition.  Voice can only do so much when those you’re complaining about seem – in both senses of the word – immovable.  Exit, of course, can easily be made to seem like the coward’s way out. Sometimes, however, it really is the bravest and the best thing to do.

Tim Bale is professor of politics at QMUL. His latest book, Five Year Mission, chronicles Ed Miliband's leadership of the Labour party.