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. 


In South Africa's cities, evictions are happening despite a national ban

An aerial view shows a destroyed house in Lawley, south of Johannesburg, on April 20, 2020. The city has been demolishing informal structures on vacant land despite a moratorium on evictions. (Marco Longari/AFP via Getty Images)

On the morning of 15 July, a South African High Court judge ruled that the city of Cape Town’s Anti-Land Invasion Unit had illegally evicted a man when it destroyed the shack where he was living.

That afternoon, the Anti-Land Invasion Unit was out again, removing shacks in another informal settlement.

Evictions were banned in South Africa for nine weeks, after the national government placed the country under a strict Covid-19 lockdown in late March. At present, eviction orders are automatically suspended until the country moves to a lower “alert level” and can only be carried out with a special order from a judge.

Yet major cities including Cape Town, Johannesburg and eThekwini (created through the merger of Durban with several surrounding communities), have continued to use municipal law enforcement agencies and private security companies to remove people from informal housing. In many cases those operations have been conducted without a court order – something required under regular South African law.

Around 900 people were evicted from three informal settlements in eThekwini during the eviction ban, according to the Church Land Programme, a local NGO. Its director, Graham Philpott, says it’s also aware of evictions in other informal settlements.

While evictions aren’t a “new experience” in these communities, the NGO released a report on lockdown evictions because they were “so explicitly illegal”. “There was a moratorium in place,” Philpott says, “and the local municipality acted quite flagrantly against it. There’s no confusion, there’s no doubt whatsoever, it is illegal. But it is part of a trend where the eThekwini municipality has acted illegally in evicting the poor from informal settlements.”

Evictions also took place in Cape Town and Johannesburg during so-called “hard lockdown” according to local activists. In eThekwini and other municipalities, the evictions have continued despite restrictions. In Cape Town, authorities pulled a naked man, Bulelani Qholani, from his shack. That incident, which was captured on video, drew condemnation from the national government and four members of the Anti-Land Invasion unit were suspended. 

The cities say they’re fighting “land invasions” – illegal occupations without permission from the land owner.

“Land invasions derail housing and service projects, lead to the pollution of waterways, severely prejudice deserving housing beneficiaries and cause property owners to lose their investments over night,” Cape Town’s executive mayor, Dan Plato said in a statement. (Plato has also claimed that Qholani did not live in the shack he was pulled from and that he disrobed when municipal authorities arrived.)

South African municipalities often claim that the shacks they destroy are unoccupied. 

If they were occupied, says Msawakhe Mayisela, a spokesman for the eThekwini municipality, the city would get a court order before conducting an eviction. “Everything we’re doing is within the ambit of the law,” Mayisela says. But “rogue elements” are taking advantage of Covid-19, he added.

“We fully understand that people are desperately in need of land, but the number of people that are flocking to the cities is too much, the city won’t be able to provide housing or accommodation for everyone overnight,” he says. 

While eThekwini claims to be a caring city, local activists say the evictions show otherwise.

In one case, 29 women were evicted from shacks during the hard lockdown. With nowhere to go, they slept in an open field and were arrested by the South African Police Service for violating the lockdown, Philpott says.

“These evictions are dehumanizing people whose dignity is already compromised in many ways,” says S’bu Zikode, the president of Abahlali baseMjondolo, a community organization whose Zulu name translates to “the people of the shacks”. 

“It has reminded us that we are the people that do not count in our society.”

Municipal law enforcement and private security contractors hired by cities regularly fire rubber bullets, or even live ammunition, at residents during evictions. Some 18 Abahlali baseMjondolo activists have been killed since the organization was founded in 2005, Zikode says, most by the eThekwini Land Invasion Unit and Metro Police.

(Mayisela says that if city employees have broken the law, Abahlali baseMjondolo can file a complaint with the police. “There is no conclusive evidence to the effect that our members have killed them,”  he says.)

Other Abahlali baseMjondolo activists have been killed by what Zikode calls “izinkabi,” hitmen hired by politicians. Two eThekwini city councillors were sentenced to life in prison 2016 after they organized the killing of Thuli Ndlovu, an Abahlali baseMjondolo organizer. A member of the Land Invasion Unit who is currently facing a charge of attempted murder after severely injuring a person during an eviction remains on the job, Zikode says.

South Africa’s 1996 constitution is intended to protect the public from arbitrary state violence and guarantees a right to housing, as well as due process in evictions. But for Zikode, the South African constitution is a “beautiful document on a shelf”.

“For the working class and the poor, it’s still difficult to have access to court. You’ve got to have money to get to court,” he says. 

The actions by municipal law enforcement are breaking down social trust, says Buhle Booi, a member of the Khayelitsha Community Action Network, a community group in the largest township in Cape Town.

“There’s a lack of police resources and those very few police resources that they have, they use to destroy people’s homes, to destroy people’s peace, rather than fighting crime, real criminal elements that we see in our society,” Booi says.

For him, it’s a continuation of the practices of the colonial and apartheid governments, pushing poor people, most of whom are Black, to the periphery of cities.

Around one-fifth of South Africa’s urban population live in shacks or informal dwellings, according to a 2018 report by SERI. Many more live in substandard housing. City governments maintain that the shacks destroyed during anti-land invasion operations are unfinished and unoccupied. But Edward Molopi, a research and advocacy officer at SERI, says that this claim is an attempt to escape their legal obligations to get a court order and to find alternative accommodation for affected people. 

The roots of the current eviction crisis go back to apartheid, which barred non-white people from living in cities. Between the 1940s and 1970s, tens of thousands of people were forcibly relocated from neighbourhoods like Johannesburg’s Sophiatown and Cape Town’s District Six to remote townships.

In the 26 years following the end of apartheid, deepening economic inequality and rampant unemployment have limited access to formal housing for millions of South Africans. Government housing programs have mostly focused on building small stand-alone homes, often on the peripheries of cities far from jobs and amenities.

While these well-intentioned projects have built millions of homes, they’ve failed to keep up with demand, says Marie Huchzermeyer, a professor at the Centre for Urbanism & Built Environment Studies at the University of the Witwatersrand in Johannesburg. Government-funded housing projects “will never on it’s own be enough,” she says. “It has to be accompanied by land release.”

Government policies call for the “upgrading” of informal settlements and the formalization of residents’ occupation. But “there are still very, very, very few projects” of that nature in South Africa, Huchzermeyer says. “Even if it’s an informal settlement that’s been around for 20 years, there still seems to be a political wish to punish people for having done that.” The government wants people to go through the formal process of being given a house, she says – and for them to be thankful to the government for providing it.

At the municipal level, change will require “real leadership around informal settlement upgrading and around ensuring that land is available for people to occupy,” she says. 

Despite the end of enforced racial segregation, spacial apartheid remains a factor in South Africa. There are few mixed-income neighbourhoods. Those who can afford to often live behind walls in sprawling low-density suburbs, while the poor live in overcrowded slums and apartment buildings.

The creation of the apartheid city “didn't happen by chance,” says Amira Osman, a professor of architecture at the Tshwane University of Technology. “It was a deliberate, structured approach to the design of the city. We need a deliberate, structured approach that will undo that.”

Since last fall, Johannesburg’s Inclusionary Housing Policy has required developments of 20 or more units to set aside 30% of those units for low-income housing.

The policy, which faced significant opposition from private developers, won’t lead to dramatic change, says Sarah Charlton, a professor at the Centre for Urbanism and Built Environment Studies, but it is “an important and significant step.”

Zikode isn’t optimistic that change will come for shack dwellers, however.

“People in the high positions of authority pretend that everything is normal,” he says. “They pretend that everyone is treated justly, they pretend that everyone has homes with running water, that everyone has a piece of land – and hide the truth and the lies of our democracy.”

Jacob Serebrin is a freelance journalist currently based in Johannesburg. Follow him on Twitter.