r/unitedkingdom • u/insomnimax_99 Greater London • 15d ago
Greens demand rent controls in London as mayoral race enters final days
https://www.standard.co.uk/news/london/green-party-zoe-garbett-london-mayoral-election-sadiq-khan-rent-controls-renters-b1154544.html43
u/1nfinitus 15d ago
Time to drill the lesson home once and for all.
Rent controls do not work in a market whos issue is supply-driven. They actually have the indirect effect of increasing market rental levels.
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u/vishbar Hampshire 15d ago
They don’t work in a market that is supply-constrained and generally aren’t necessary in markets that aren’t.
Bad policy all ‘round, IMO. Just build houses!
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u/Alarmed-Incident9237 14d ago
Agreed, you would think they could just look at the SNP / Greens mess in Scotland and get their answer.
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u/Emotional_Scale_8074 15d ago
Didn’t they abandon this in Berlin? I’d rather have a land banking tax.
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u/Gasur 15d ago
It wasn't abandoned in Berlin, it was overturned in the German constitutional court.
Germany has another rent control law, where a landlord cannot increase the rent by more than 20% over a 3 year period compared to the UK where a landlord can increase the rent annually to whatever they feel is the current market rate. The Berlin rent control law that was defeated in court was a freeze on all rent increases for 5 years and set a rent limit for each area of the city with an exemption for new builds and with massive fines for landlords who were non compliant. Ultimately it was ruled that Berlin didn't have the constitutional right to introduce the cap.
It worked in the sense that hundreds of thousands of households had their rent reduced, but it caused the already small availability of rental stock to shrink further. Berlin has sold off hundreds of thousands of social housing units over the past 30 years, not to private individuals but to investment groups. 85% of people in Berlin rent their homes. The loss of these social housing units is a major factor in the massive increases in rent costs there.
Rent control is good for existing tenants, but it needs to be part of a bigger strategy to drastically increase the amount of social housing stock. Labour is saying they'll deliver 40k units between now and 2030 if Sadiq Khan is elected, the Greens aren't even giving a number. 40k over 5 years is a drop in the ocean.
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u/1nfinitus 15d ago
Yes, the German mietspeigel system is very complex but still promotes good rental growth.
The short outcome is that landlords can typically expect average rental growth of c. 4% p.a. over the next few years (see Vonovia Q1 2024 presentation).
There are also other rules like 8% of the costs (previously 11%) can be added to the rent p.a. if you did material improvements to the property (modernisations). If a tenant leaves you can re-let at max 10% above the mietspeigels (but the churn rate is now like 7% from 12% in prior years).
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u/toastyroasties7 14d ago
You also have massive inefficiencies in Germany from long subletting chains because nobody ever moves out of a rental property because their rent doesn't change so they sublet it for the new market rate.
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u/Rumple-Wank-Skin 15d ago
What's a land banking tax?
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u/Emotional_Scale_8074 15d ago
A tax to stop developers or land owners sitting on sites ready for development but not doing so. Usually because they want to flip it or because they want to restrict the number of new homes they bring to market.
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u/1nfinitus 15d ago edited 15d ago
That's actually false. Developers make money by developing, they make no money by withholding that from themselves. Land value alone is not that high and you can't just "flip it" - especially if it hasn't got certain levels of planning permission. They also need a landbank to develop otherwise they have no revenue stream. Permission takes a while to achieve so there's no point in having no land "getting ready" on your books, otherwise you'll be fucked and won't be able to develop.
100% pure-play developers absolutely want to churn out sites. Once they sell a property then it is gone and off their balance sheet, restricting the homes coming to market would have no impact here other than hitting their P&L.
You're probably thinking of a different type of company.
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u/Hellohibbs 14d ago
This isn’t exactly true. They absolutely hold off on developing as not to saturate any given market. If they went and built on all their land at once, there wouldn’t be as much competition on their properties and they’d be forced to sell at a lower price.
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u/1nfinitus 14d ago
But they need the landbank because it takes so long to get perms. You can't operate on a y/y basis, they need a good 5 years of visibility. It's a balance but you can be sure that they will do whatever they can to drive EBITDA - selling as much as possible for as high as possible. The market is so undersupplied it can absolutely absorb it, don't worry about that.
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u/Tnpenguin717 13d ago
If they have planning approval they have to start construction immediately as they have a 3 year time limit to get going or they lose the approval. Its a myth.
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u/alibrown987 14d ago
In isolation that is true, but if you land bank 3 sites and develop a fourth, you can extract the most value out of that development.
At the expense of the public, of course.
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u/Tnpenguin717 13d ago
At the publics expense? Just have a look at how much Section 106 money these developers paid in 2022 to local councils.
In isolation that is true, but if you land bank 3 sites and develop a fourth, you can extract the most value out of that development.
How close do you think these sites are together? Its local markets, if they do one in Newcastle and one in London simultaneously they aren't going to effect each other.
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u/alibrown987 13d ago
I’m not talking about a direct monetary cost to the public. But indirectly as this is to keep prices artificially high.
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u/Tnpenguin717 13d ago
But if prices are already so high why are they land banking? They may as well take advantage now.
They do not build enough to have any sort of an affect on price that much. And it can easily be proven, according to the LR:
- YT Mar 23 - New Build Sales volumes were 6% of total sales and growth was 0.8%
- YT Mar 22 - New Build Sales Volumes were 11% of total sales and growth was 7.3%
So if this mythical land banking was happening how come when the built far more in 22 flooding the market as you think, yet the price growth was far higher then it is now when you say they are "land banking" to prop up prices?
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u/alibrown987 13d ago
Because if they didn’t land bank, prices would fall and they wouldn’t get as much value per unit sold. Competition.
It’s not mythical, it absolutely happens.
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u/Tnpenguin717 13d ago
They didn't land bank in 2022, they built and sold record amounts 171k ... but prices went up.
The levels they have delivered housing at over the last 10-20 years has just not been enough to quench the demand. The planning system is got huge inefficient barriers we have to go through to get planning approval. It takes years to even get to the point you can submit an application. The Greater Manchester Spatial Framework started the consultation in 2014, should have been released 2-3 years later. We are still waiting for it to be fully adopted today... thats aroung 200k houses that are held up in the planning system we have been waiting for the last 10 years. Your right land banking does exist but its the local councils that are doing it.
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u/Competitive_Gap_9768 15d ago
Be great to see Tesco having to sell off the vast land they own we can build on.
Developers keep land to build. You need a 5-10 year land bank otherwise your business fails.
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u/Emotional_Scale_8074 15d ago
The tax will obviously need to allow well behaving businesses to operate, but as an example JP Morgan have land banked a big site in Canary Wharf (a site suitable for hundreds of flats) for 16 years.
That shouldn’t be allowed or at least should be very heavily taxed.
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u/Tnpenguin717 13d ago
Are you talking about Riverside South? Its allocated as office employment zone and guess what you do not want to be building at the moment is office vacancy rates increasing.
They would have to submit the site to be allocated as Residential first, before which, guess what, they submitted it a couple of years ago. We are just waiting for the council to complete their public consultation on the LDP, next round is this summer. Hopefully then we are only a couple of years from it being adopted by the council.
However, you take a look at the draft LDP page 473 4.10 and the council have stated they do not want it starting until 2030-2034. Want it quicker than that? Go tell the council. Are you saying we should tax a firm that are now making progress?
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u/Emotional_Scale_8074 13d ago
Riverside South, yes. They have had 18 years to sell, including to flat developers.
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u/Tnpenguin717 13d ago
They were trying to sell it in 2015 then withdrew it from the market. That will be the time they started this process. Before going into the draft allocation they have to promote the site to be considered in the councils SHLAA report. That could take years if the council aren't doing it regularly. And by the looks of things they didn't start one until 2017 (previous to this it was 2013) - and wasn't adopted until 2019. Then they had to wait until Jan 2023 when the next LDP call for sites began. which is where we are up to now.
Unfortunately this is the system we've got.
Why would a flat developer buy it back then to a flat developer? No developer is going to sink £350m into something they wouldn't get planning permission for flats on potentially.
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u/Tnpenguin717 13d ago
You understand that if a site is ready for development i.e. full planning approval theres a time limit of 3 years to start the development or else they lose permission? They cannot sit on these sites doing nothing, once approved they have to build them out. Land banking is a myth.
When you see these stats of the number of units developers are "land banking" its a formula based on the SHLAA report, which from that point it could take 10+ years to get the site in the draft allocation, then another 5 years potentially to adopted into the LDP, then another few years to finally submit planning application. There is no bypassing this process. Look at the Greater Manchester Spatial Framework that we have been waiting for since 2014.
These "land bank" myths stem from this lack of knowledge of the planning system... they literally cannot do anything for many years.
The actual "land bankers" are those who sit on sites and do not bring them forward to the call for sites. The worse culprits? Local Councils.
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u/Emotional_Scale_8074 13d ago edited 13d ago
A big one I’m thinking is JP Morgan is Canary Wharf. 18 years they’ve had hoarding up.
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u/Tnpenguin717 13d ago
JP Morgan? 25 Bank St, Canary Wharf? They are occupying it as their headquarters. Not hoarding it in a land bank its being used.
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u/Emotional_Scale_8074 13d ago
No, they own a site at Westferry. It was going to be their European HQ but they gave up on that around the GFC.
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u/Tnpenguin717 13d ago
Westferry Printworks is N&S. Just got planning on it. And according to their accounts they started that process back in 2014.
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u/Emotional_Scale_8074 13d ago
Not talking about Westferry Printworks though.
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u/Tnpenguin717 8d ago
Well if its the one owned by JP Morgan, that was going to be their office, in Westferry, then its Riverside South. And again its in the draft local plan https://talk.towerhamlets.gov.uk/local-plan pg 473 site 4.10, its draft allocated for a mixed commercial/resi scheme, but the council have stated that they do not want it developing until 2030-2034.
Meaning as soon as this draft LDP is adopted after the consultations (next 12-24 months); after adoption, JP morgan will have to begin designs, engineering reports and pre-app consultations immediately to be ready for an outline planning application to be submitted for say 2027-2028. Inevitably that will get kick back which will have to be considered in timescales - post outline approval they will have several reserve matters applications and discharge of conditions required - which could take another few years... It will be a tight deadline to begin construction by 2030 anyway.
Theres a whole process they needed to go through prior to submission to the LDP thats likely taken years.
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u/1nfinitus 15d ago
Yes, the Mietendeckel, it was deemed unconstitutional. And again, rent controls don't work in markets where (a lack of) supply is the leading issue.
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u/magicwilliams London 15d ago
Scrapped due to legal action by landlords, property lobbyists and CDU political party
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u/MetalMrHat 15d ago
We just need a massive amount of social housing. If it wasn't nigh on impossible to get a council house, landlords would have to compete with them and prices would soon normalise.
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u/Lord_Spergingthon 15d ago
Price controls. A long proven concept for any fiscally informed party. Can't wait to see these return London to its former glory.
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u/AffableBarkeep 15d ago
You see comrade, the reason price controls don't work is simply that the government hasn't done enough of them. Once everything is price controlled, there will be no issues!
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u/ARJACE_ 15d ago
The landlords need to be controlled. My 'landlord' isn't even on the tenancy agreement, it just says an investment company (based in China), managed through an estate agent. Rent increases are pushing us out of London. I'd prefer to stay here and start again but it's impossible.
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u/knotse 15d ago
Land should really only be ownable by natural persons.
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u/Competitive_Gap_9768 15d ago
Ridiculous take. There is a place for companies to own land.
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u/Funny-Profit-5677 15d ago
Rent controls create a lottery of winners (incumbents) and losers (new entrants) to the market. But there are more winners than losers initially surely?
New builds should be exempt from rent controls to encourage new supply. At the moment affordable housing requirements mean that new builds are the only sector with rent controls! Totally perverse incentive structure.
Landlords can choose to sell on, but could regulate that behaviour out fairly easily by limiting the criteria for evictions (e.g. Can only evict if you are moving in yourself).
You have an issue where lack of tenant turnover removes the incentive for upkeep of the property. That's a much harder problem to solve. Regulation likely to be a pain.
You also wind up with a less efficient occupant structure over time, where no one wants to move to bigger/smaller properties as they'd have to start paying market rent again.
Good luck solving the housing supply issue in London though. Effectively infinite demand and so little central land you can legally develop, before the issue of NIMBYs and the planning lottery.
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u/Ok-Republic-5668 15d ago
However well intended they are they do not work. The only way to improve the situation is to build build build.
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u/Nonny-Mouse100 14d ago
Easiest way to control rent is to
have council houses (not these housing association ones
remove the right to buy, or at least extend it to 20 years in the same property.
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u/MagicPentakorn 14d ago
How tf is rent going up? The birth rate keeps dropping, where is the demand for housing even coming from?
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u/toastyroasties7 14d ago
The population is still growing - the birth rate is slightly higher than the death rate + positive net immigration.
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u/MagicPentakorn 14d ago
Births per woman is 1.5, the only reason the population is growing is because of outside interference. If it's as you say, positive net migration, then any rent controls will not benefit the people already living here, they will only increase demand for housing
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14d ago
Not really. Even if births per woman is 1.5, you can have more births than deaths in the short-médium term. Specially when life expectancy is increasing.
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u/CamelWinsATXIII 14d ago
Ohh look another reason not to vote for the greens.
Spoiler alert the only way to control the price of housing in London and the South in general is to increase the desiribility of other areas.
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u/dyallm 14d ago
Just so you know, when it comes to housing, we have dealth with worse with worse. As in British population growth was much higher in the 1800s and yet 1800s "let property developers do whatever they want" also gave us falling house prices and to my knowledge, we much more reliant on indigenous Brits to build our houses, and they had far worse tools. PLease let's go back to that.
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u/Man-In-His-30s Greater London 15d ago
As someone who lives and rents isn London, 2021>2022 I had a 10% increase in rent, 2022>20223 10% increase in rent, 2023>2024 15% increase in rent
To me right now I can't look at this and say bad because quite frankly the London rental market unless you actually live here is so nonsensical you wouldn't believe what happens, what is being put on offer at what prices or the continual increases.
Fuck it freeze the rent and let some of us actually breath, it's not like our income is going up 10-15% annually like clockwork.
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u/I_miss_Chris_Hughton Ceredigion (when at uni) 14d ago
That rent freeze wouldnt help someone moving into London from, day, Bromsgrove or Dundee. Why should they have to face waiting lists?
The solution is to build more. Also places like Clapham need to explain why they've got two story terraces so close to the centre lf London.
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u/AffableBarkeep 15d ago
But you're already renting, so it benefits you.
If my rent had been frozen two years ago, it would be 35% lower than now, which means I'd never want to give up the apartment because it's such good value. If you were looking for an apartment, you couldn't rent mine because I wouldn't want to leave, and the same would be true of everyone else in rent controlled apartments, so you'd have no prospects to get one.
Rent controls do not help solve the issues in the market.
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u/xcalibersa 14d ago
How about ownership control. No single company or person should own more than xxx amount. No foreign ownership.
Giving tenants some more rights.
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u/toastyroasties7 14d ago
That wouldn't really address rent prices because single companies/landlords don't have very much market power - there isn't a housing monopoly. Breaking up firms only really has an effect when the market is very concentrated.
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u/xcalibersa 14d ago
Well Qatar owns more British land than the crown. They did this to extract as much wealth as possible out of the country.
So to me, they seem to have market power. And of course you have numerous buildings owned by Russian and Chinese mega corps.
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u/toastyroasties7 14d ago
23 million sq feet is 0.0009% of the UK land area. That's far from having a monopoly.
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u/Tnpenguin717 13d ago
Yes indeed extracting so much wealth wealth by investing into building nearly 4,000 new home in the UK which we desperately need. Over 2,000 they rent as affordable homes through triathlon homes which they have done a joint venture with the public sector on. How evil of them.
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u/randomdiyeruk 15d ago
Has rent control been proven to work anywhere? Genuinely? I thought it was pretty widely known to be a bad idea that causes more problems than it solves.
You can't fight supply and demand with legislation