Mayor Khan: The Good, The Bad And The Ugly For London Property….
Last week, Sadiq Khan was re-elected as London Mayor. The race was closer than many expected with Khan of the Labour Party receiving 55.2% of the vote and Bailey of the Conservatives getting a respectable 44.8%.
Khan, writing in The Independent, rightly pointed out that the results of the local and mayoral elections demonstrate a widening political gap in the country, stating: “[t]he commentary over the next few days will no doubt be dominated by what the results mean for the prospects of the main political parties and leaders. But one of the biggest concerns is how the results – both in London and across the UK – show how we are becoming increasingly divided.”
Recently I have been critical of Khan, particularly around the issue of rent control. However, not everything in his housing platform is negative, and I have decided to take a balanced look at his policies and their potential effects on the London property market. Perhaps there is an opportunity to help heal the divide by working together on the things we agree on and openly debating the things we don’t.
During his time as London Mayor, Khan has done a number of positive things regarding housing in London including: loans for developers to build affordable homes; funding for rough sleepers; and establishing a database of ‘rogue landlords’ that fail to comply with regulations.
Khan has also proposed some positive ideas as part of his campaign for re-election. These include a target for 10,000 new council homes, campaigning for “sprinklers and other fire suppression systems in all blocks of flats, and a ban on combustible materials on all buildings” to prevent another Grenfell Tower-style tragedy and piloting a commonhold scheme to combat many of the issues faced by leaseholders including short leases, excessive ground rent and service charges.
Regarding ground rents and building safety, Khan will get his wish as a ban on ground rents for new houses and a Building Safety Bill was announced in the Queen’s Speech on Tuesday.
These are sensible policies and I feel it is our job as members of the public to support him to implement them and to hold him to account if he fails to do so.
In his 2021 Manifesto Khan promised to ‘stand up for renters’, and while this sounds good, you have to dig a little deeper to see what this actually means. In July 2019, Khan published a document called ‘Reforming Private Renting: The Mayor of London’s Blueprint’ and an accompanying technical paper called ‘The London Model’. These documents contain proposals which would alarm many landlords and consequently make it more difficult for tenants to rent.
The proposals call for an end to AST (Assured Shorthold Tenancy) agreements in favour of open ended tenancies. Landlords would need to give 4 months’ notice to remove the tenant. The document even acknowledges that landlords “might have to wait longer than four months to get their property back once the time taken to secure a court hearing date and/or bailiff warrant are factored in” and that “it could add delays and complications into the house buying and selling process”.
The London Model also calls for an end to Section 21 (‘no fault’) evictions and sets out specific grounds that the landlord must prove to evict. Some of these new grounds would still be ‘no tenant fault’, such as for the sale of a property.
After waiting for 4 months (plus the time it takes to secure a court date) to remove a tenant, the landlord would be required to pay a moving fee to the tenant of the equivalent of 1 month’s rent in the case of ‘no tenant fault’ evictions.
As a renter these conditions might sound like a good thing, but the reality is the effects will hit tenants harder than they will landlords.
Let’s start with specific reasons for evictions and open ended tenancies. Adding complexity to the options landlords have to remove tenants will mean that renters with lower incomes; less than perfect references; and young people without a history of renting will be refused a place. Evictions are not always as simple as establishing rent arrears; there can be many complex reasons as to why a tenant/landlord relationship may not work out. Both the tenant and the landlord should have the ability to end that relationship, with appropriate and agreed notice, for any reason. If you tie one party into that relationship, that party is going to be extremely choosy about who they allow in.
With regard to the 4 months’ notice to tenants and the payments for moving, this will reduce the housing stock. Many properties in London are bought by investors who leave the properties empty. This will increase if it is difficult to quickly regain possession for the purpose of sale or refurbishment. More investors will simply sit on their property stock to wait for the right time to sell with vacant possession rather than renting the property out. This reduction in supply will hurt tenants the most.
Finally, rent control. If you have been watching my content recently I am sure you already know my feeling on this topic! Rent control is a failed policy that hurts the poor and vulnerable the most wherever it is tried. Higher priced homes come off the rental market, supply is reduced and competition is increased on the remaining units.
It’s not just my opinion; the experts agree with me! Liberal economist Paul Krugman writing in the New York Times states “[t]he analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ”a ceiling on rents reduces the quality and quantity of housing.””
I intend to go much deeper on this topic in the near future, so watch this space! For now though, let’s look at what Khan is asking for. Khan currently doesn’t have the power to implement rent control so he is asking for this power to be granted to him by the government. Khan must know the disastrous history of rent control, so this may simply be a political bluff where he is hoping that the government will not grant him such powers. However, the Conservative government could be tempted to call his bluff and grant him those powers knowing that should he implement them and destroy the London housing market, they would be guaranteed to win the next mayoral election. I pray they put the interests of Londoners above party political gains!
I believe we should support those in power rather than hope they will fail. Hoping a politician will fail is like hoping your pilot will fail, counterproductive – you will go down with him!
Like I said in my debate with Hakeem Duckworth-Porter, Vice-Chair of the Streatham Constituency Labour Party, I will engage with the process and put my ideas forward to try and influence decision-makers in the right direction.
I want Mayor Khan to make the right decisions for London and to succeed because his success will mean success for all Londoners. I want all politicians in power to succeed in making the country better, because that is better for all of us. To that end, I will be engaging with our elected representatives to help persuade them to make positive decisions, particularly with regard to preventing rent control.