Here’s why rent control might make the housing crisis worse

New York City, where rent control may have backfired. Image: Getty.

At Labour Conference last month, Jeremy Corbyn made one big announcement on the party’s plans for tackling the housing crisis in our cities – rent controls. However, while Labour argue that this would help to make living in high-demand cities like London and Oxford more affordable, these plans actually run the risk of deepening the housing crisis rather than solving it.

We don’t know yet exactly what form of rent controls Corbyn has in mind, but we can reasonably assume they will go further than Ed Miliband’s proposals in 2014, which capped rent increases to inflation within three-year tenancies but left them uncapped between renewals. In stating that “Rent controls exist in many cities across the world and I want our cities to have those powers too”, Corbyn may be seeking to emulate the recent reform in Berlin, through which all landlords are barred from increasing rents by more than 10 per cent of the local average.

But despite the stated aim of supporting people with lower incomes to live in high-demand, expensive cities, this policy may actually have the opposite effect. The root of the housing crisis in British cities is that we are not building enough homes, particularly in the most successful cities – and rent control could make this problem worse. Paradoxically, it would push some of the costs of housing up.

That’s because rent control would shut off the pipeline of private investment in rented housing. Some 55,000 homes in London have been or are in the process of being built through ‘Build to Rent’ schemes as well as hundreds in cities like Bristol, Reading, and Slough. These new homes would not exist with rent control, as it would make these investments unprofitable.

As a result, not only would the potential residents of such housing lose out from this construction disappearing; so would the rest of the city, as those residents are then forced to live or move into the existing housing stock, therefore crowding out and displacing other city-dwellers.

The location of ‘Build to Rent’ schemes hints at which cities would feel the impact of rent control the most. The UK’s high-productivity, high-housing demand cities such as Oxford, London, York, Brighton and Reading all have average house prices more than nine times the average income, and so also experience very high rents. Cities with weaker economies such as Blackburn and Hull may not feel the effects of rent control as sharply, but only because they have less demand for housing overall.

Undoubtedly, rent control will make some rented housing in these expensive cities cheaper, but with the unintended consequence of introducing new costs – financial and social – into the housing market. For example, for decades New York City has prioritised rent control over house building, with the result that it has failed to keep up with demand for new homes.

As such, rent controlled luxury apartments in elite neighbourhoods in Manhattan have been rented out for decades at less than £100 a month, but average one-bed apartments without rent control in working class parts of Brooklyn cost upwards of £1,300 a month. Rent control in Stockholm sees locals wait decades for new rent-controlled flats. And Berlin’s experience of rent control has not achieved their stated goal of stopping gentrification and has caused some rents to spike as landlords respond to the new incentives.

All the international evidence shows that rent controls divide renters into the privileged and the outsiders. Those already in rented flats when controls are introduced do well, but the city’s young people and migrants from the rest of the country and abroad are penalised as they need the new homes that are not being built. The shortage of housing then makes it harder for cities to attract the workers and firms they need to be successful.

Expensive cities like Cambridge have to manage the costs of growth by building more housing and using the new tax revenues to fund more infrastructure in the key locations that have lots of jobs and opportunities. Rent controls will make this more difficult and worsen the inequality of growth within successful cities.

Labour is also promising a big expansion of social housing, and it could be argued that this would balance out any negative effects of introducing rent control on the private housebuilding industry. This is unlikely. London needs roughly 50,000 homes a year, and is currently building 20,000, mostly privately. Even at the peak of municipal social housing in the 1960s London Boroughs were not building more than 30,000 a year.

The expansion of the social housing programme would have to surpass the historic peak London reached, and would put huge construction and maintenance burdens onto local government at a time when capacity within the sector is at its lowest point for more than a decade, just to keep prices stable. As such, Labour’s plans are not viable.

Ultimately, Labour’s enthusiasm for rent controls is misplaced, and its focus on replacing private rented housing with social housing should be a lower priority than simply building more homes. If Labour wants to make housing more affordable for the many not just the few, Corbyn should promise to commit to green belt reform that could unlock 1.4m homes within 25 minutes’ walk of existing train stations around our ten least affordable cities, all on just 5 per cent of the total green belt.

Fixing our broken planning system should be the priority for cities that want to help renters, not introducing new problems.

Anthony Breach is an economic analyst at the Centre for Cities, on whose blog this post first appeared. 


Was the decline in Liverpool’s historic population really that unusual?

A view of Liverpool from Birkenhead. Image: Getty.

It is often reported that Liverpool’s population halved after the 1930s. But is this true? Or is it a myth?

Often, it’s simply assumed that it’s true. The end. Indeed, proud Londoner Lord Adonis – a leading proponent of the Liverpool-bypassing High Speed 2 railway, current chair of the National Infrastructure Commission, and generally a very influential person – stood on the stairs in Liverpool Town Hall in 2011 and said:

“The population of Liverpool has nearly halved in the last 50 years.”

This raises two questions. Firstly, did the population of the City of Liverpool really nearly halve in the 50 year period to 2011? That’s easy to check using this University of Portsmouth website – so I did just that (even though I knew he was wrong anyway). In 2011, the population of the City of Liverpool was 466,415. Fifty years earlier, in 1961, it was 737,637, which equates to a 37 per cent drop. Oops!

In fact, the City of Liverpool’s peak population was recorded in the 1931 Census as 846,302. Its lowest subsequent figure was recorded in the 2001 Census as 439,428 – which represents a 48 per cent decline from the peak population, over a 70 year period.

Compare this to the population figures for the similarly sized City of Manchester. Its peak population also recorded in the 1931 Census as 748,729, and its lowest subsequent figure was also recorded in the 2001 Census, as 392,830. This also represents a 48 per cent decline from the peak population, over the same 70 year period.

So, as can be seen here, Liverpool is not a special case at all. Which makes me wonder why it is often singled out or portrayed as exceptional in this regard, in the media and, indeed, by some badly briefed politicians. Even London has a similar story to tell, and it is told rather well in this recent article by a Londoner, for the Museum of London. (Editor’s note: It’s one of mine.)

This leads me onto the second question: where have all those people gone: London? The Moon? Mars?

Well, it turns out that the answer is bit boring and obvious actually: after World War 2, lots of people moved to the suburbs. You know: cars, commuter trains, slum clearance, the Blitz, all that stuff. In other words, Liverpool is just like many other places: after the war, this country experienced a depopulation bonanza.

So what form did this movement to the suburbs take, as far as Liverpool was concerned? Well, people moved and were moved to the suburbs of Greater Liverpool, in what are now the outer boroughs of the city region: Halton, Knowsley, St Helens, Sefton, Wirral. Others moved further, to Cheshire West & Chester, West Lancashire, Warrington, even nearby North Wales, as previously discussed here.

In common with many cities, indeed, Liverpool City Council actually built and owned large several ‘New Town’ council estates, to which they moved tens of thousands of people to from Liverpool’s inner districts: Winsford in Cheshire West (where comedian John Bishop grew up), Runcorn in Halton (where comedian John Bishop also grew up), Skelmersdale in West Lancashire, Kirkby in Knowsley. There is nothing unique or sinister here about Liverpool (apart from comedian John Bishop). This was common practice across the country – Indeed, it was central government policy – and resulted in about 160,000 people being ‘removed’ from the Liverpool local authority area.

Many other people also moved to the nearby suburbs of Greater Liverpool to private housing – another trend reflected across the country. It’s worth acknowledging, however, that cities across the world are subject to a level of ‘churn’ in population, whereby many people move out and many people move in, over time, too.

So how did those prominent images of derelict streets in the inner-city part of the City of Liverpool local authority area come about? For that, you have to blame the last Labour government’s over-zealous ‘Housing Market Renewal Initiative’ (HMRI) disaster – and the over enthusiastic participation of the then-Lib Dem controlled city council. On the promise of ‘free’ money from central government, the latter removed hundreds of people from their homes with a view to demolishing the Victorian terraces, and building new replacements. Many of these houses, in truth, were already fully modernised, owner-occupied houses within viable and longstanding communities, as can be seen here in Voelas Street, one of the famous Welsh Streets of Liverpool:

Voelas Street before HMRI implementation. Image:

The same picture after HMRI implementation Image: 

Nonetheless: the council bought the houses and ‘tinned them up’ ready for demolition. Then the coalition Conservative/Lib Dem government, elected in 2010, pulled the plug on the scheme. 

Fast forward to 2017 and many of the condemned houses have been renovated, in a process which is still ongoing. These are over-subscribed when they come to market, suggesting that the idea was never appropriate for Liverpool on that scale. 

At any rate, it turns out that the Liverpool metropolitan population is pretty much the same as it was at its peak in 1931 (depending where the local borough boundaries are arbitrarily drawn). It just begs the question: why are well educated and supposedly clever people misrepresenting the Liverpool metropolis, in particular, in this way so often? Surely they aren’t stupid are they?

And why are some people so determined to always isolate the City of Liverpool from its hinterland, while London is always described in terms of its whole urban area? It just confuses and undermines what would otherwise often be worthwhile comparisons and discussions. Or, to put it another way: “never, ever, compare apples with larger urban zones”.

In a recent Channel 4 documentary, for example, the well-known and respected journalist Michael Burke directly compared the forecast population growths, by 2039, of the City of Liverpool single local authority area against that of the combined 33 local authority areas of Greater London: 42,722 versus 2.187,708. I mean, what bizarre point is such an inappropriate comparison even trying to make? It is like comparing the projected growth of a normal sized-person’s head with the projected growth of the whole of an obese person, over a protracted period.

Having said all that, there is an important sensible conversation to be had as to why the populations of the Greater Liverpool metropolis and others haven’t grown as fast as maybe should have been the case, whilst, in recent times, the Greater London population has been burgeoning. But constantly pitching it as some sort of rare local apocalypse helps no one.

Dave Mail has declared himself CityMetric’s Liverpool City Region correspondent. He will be updating us on the brave new world of Liverpool City Region, mostly monthly, in ‘E-mail from Liverpool City Region’ and he is on twitter @davemail2017.