Karim Goudiaby, EasyRoommate CEO, on why we need a more liberal housing market for the future
The country is experiencing the turmoil of high rent and low salaries and have voted to leave this at the hands of the Conservative party.
Prior to the election, the Labour and Conservative parties had many heated debates over rent control and its potential to help struggling citizens keep their homes. ThisIsMoney reported that rent in England has risen above inflation at about 4.2% in the past five years and while rent control is widely supported by tenants who want a quick-fix solution, the practice has proven time and time again to be counterproductive to the long-term health of the housing market.
The root of the issue in the UK is a low housing supply and placing a cap on rents will only slow down growth by discouraging investments. This refers not only to investment of new property but also in the upkeep of current property. By suppressing landlords’ means, we will inherently affect their financial ability to routinely refurbish their property and this will lead to poor living conditions – particularly among the poor.
Rent control began in London during the First World War and continued until the Housing Act of 1988 which deregulated the rental market for all leases after January 15, 1989. Like London, New York City used rent control in order to protect citizens returning home after World War II and continued through the 1970s.
According to CityLimits.org, there are only 27,000 rent-controlled apartments in New York City and this number was at 38,000 just three years ago. Also like London, New York has extremely restrictive laws that slow the process of new construction.
Ryan Bourne, head of public policy at the Institute of Economic Affairs, explained to Londonist.com: “The UK’s extremely tight planning laws, including green belt restrictions which prevent the expansion of cities where people want to live (like London!), height restrictions on buildings and the extremely long development process … have raised rental and housing costs by as much as 35-40% above what they would be in a more liberal regime.”
The British government should focus on controlling high rents in ways that will truly benefit the economy. Rather than focusing on rent caps, parliament should look to increase the shortage by encouraging investment.
It’s not going to be easy to piece back the broken housing market, but rent control policies would be a short-term solution with long term consequences. Instead of looking to enforce failed policies of the past, let’s push for a more liberal housing market for the future.
Karim Goudiaby is the CEO of flat-sharing website EasyRoommate