Rent controls are popular – but backing them is still a big gamble for Sadiq Khan

London mayor Sadiq Khan. Image: Getty.

Sadiq Khan has kicked off his bid to be re-elected as mayor of London, announcing that he will make rent control a central pillar of his campaign.

On the face of it, the politics are largely positive for Khan: rent control is hugely popular among all voters, and particularly renters, who make up a great and growing slice of the capital’s voters.

But it also represents a big gamble on the mayor’s part. First of all, the London mayor does not at present have the power to control rents. Khan will be running not on a promise to deliver rent control but on a promise to ask to deliver rent control.

It emphasises one of the weakest areas of Khan’s mayoralty: his failure to expand the powers of the mayoralty. In 2016, he pledged to seek further powers from central government over transport, housing, youth justice, probation, the courts, and tax raising. He has received none of them. That’s not really his fault, and it may be that had David Cameron not lost the Brexit referendum in June 2016, then a devolution-minded George Osborne might well have handed over those additional powers and the Khan record would be altogether more successful.

In the real world, however, David Cameron did lose the Brexit referendum and there is no appetite from the present Conservative Party to give Khan further powers – even in areas where there is widespread political and expert consensus that it would be a good thing for the Mayor of London to have and exercise those powers.

In addition, it means making a policy that, while popular, has been consistently found not to work. Rent control incentivises landlords to remove their properties from the private rental market and instead to use them for the tourist market on AirBNB or other listings services, and creates steeper barriers to entry for new tenants.


Rent control does create some winners among renters, but crucially only among existing renters and at the expense of those starting new tenancies. Here, the dire state of tenants’ rights in the United Kingdom and the unintended consequences of rent control could create a particularly toxic cocktail: most renters don’t stay in the same rental contract for long, and it is very easy for landlords to move tenants on if they opt to move out of the private rented sector and into the holiday lettings market.

The policy is popular now, but with more than a full year to go before the next mayoral election, there is no guarantee it will remain so. It’s a boost to Khan that his Conservative opponent, Shaun Bailey, is a weak and a gaffe-prone campaigner; but it is still not certain than a year of public debate about the rights and wrongs of rent control end in a good place for Khan.

More worrying for the Labour campaign is that Khan is selling the pass as far as the question of what the mayoral election will be about. Sian Berry, who finished third last time, will surely hope that a combination of a weak Tory candidate in Bailey, the general feeling that Khan has it in the bag, and growing discontent in the capital with the sub-par efforts to tackle climate change or air pollution by national government, make it an ideal election for the Greens to come second by emphasising their opposition to Brexit and Heathrow; while the Liberal Democrats’ Siobhan Benita will want to do the same.

And in campaigning for a power he doesn’t have, Khan has legitimised his rivals in making issues that aren’t devolved to the capital the centrepiece of their election campaigns as well.

Stephen Bush is political editor of the New Statesman.

 
 
 
 

A new wave of remote workers could bring lasting change to pricey rental markets

There’s a wide world of speculation about the long-lasting changes to real estate caused by the coronavirus. (Valery Hache/AFP via Getty Images)

When the coronavirus spread around the world this spring, government-issued stay-at-home orders essentially forced a global social experiment on remote work.

Perhaps not surprisingly, people who are able to work from home generally like doing so. A recent survey from iOmetrics and Global Workplace Analytics on the work-from-home experience found that 68% of the 2,865 responses said they were “very successful working from home”, 76% want to continue working from home at least one day a week, and 16% don’t want to return to the office at all.

It’s not just employees who’ve gained this appreciation for remote work – several companies are acknowledging benefits from it as well. On 11 June, the workplace chat company Slack joined the growing number of companies that will allow employees to work from home even after the pandemic. “Most employees will have the option to work remotely on a permanent basis if they choose,” Slack said in a public statement, “and we will begin to increasingly hire employees who are permanently remote.”

This type of declaration has been echoing through workspaces since Twitter made its announcement on 12 May, particularly in the tech sector. Since then, companies including Coinbase, Square, Shopify, and Upwork have taken the same steps.


Remote work is much more accessible to white and higher-wage workers in tech, finance, and business services sectors, according to the Economic Policy Institute, and the concentration of these jobs in some major cities has contributed to ballooning housing costs in those markets. Much of the workforce that can work remotely is also more able to afford moving than those on lower incomes working in the hospitality or retail sectors. If they choose not to report back to HQ in San Francisco or New York City, for example, that could potentially have an effect on the white-hot rental and real estate markets in those and other cities.

Data from Zumper, an online apartment rental platform, suggests that some of the priciest rental markets in the US have already started to soften. In June, rent prices for San Francisco’s one- and two-bedroom apartments dropped more than 9% compared to one year before, according to the company’s monthly rent report. The figures were similar in nearby Silicon Valley hotspots of San Jose, Mountain View, Palo Alto.

Six of the 10 highest-rent cities in the US posted year-over-year declines, including New York City, Los Angeles, and Seattle. At the same time, rents increased in some cheaper cities that aren’t far from expensive ones: “In our top markets, while Boston and San Francisco rents were on the decline, Providence and Sacramento prices were both up around 5% last month,” Zumper reports.

In San Francisco, some property owners have begun offering a month or more of free rent to attract new tenants, KQED reports, and an April survey from the San Francisco Apartment Association showed 16% of rental housing providers had residents break a lease or unexpectedly give a 30-day notice to vacate.

It’s still too early to say how much of this movement can be attributed to remote work, layoffs or pay cuts, but some who see this time as an opportunity to move are taking it.

Jay Streets, who owns a two-unit house in San Francisco, says he recently had tenants give notice and move to Kentucky this spring.

“He worked for Google, she worked for another tech company,” Streets says. “When Covid happened, they were on vacation in Palm Springs and they didn’t come back.”

The couple kept the lease on their $4,500 two-bedroom apartment until Google announced its employees would be working from home for the rest of the year, at which point they officially moved out. “They couldn’t justify paying rent on an apartment they didn’t need,” Streets says.

When he re-listed the apartment in May for the same price, the requests poured in. “Overwhelmingly, everyone that came to look at it were all in the situation where they were now working from home,” he says. “They were all in one-bedrooms and they all wanted an extra bedroom because they were all working from home.”

In early June, Yessika Patapoff and her husband moved from San Francisco’s Lower Haight neighbourhood to Tiburon, a charming town north of the city. Patapoff is an attorney who’s been unemployed since before Covid-19 hit, and her husband is working from home. She says her husband’s employer has been flexible about working from home, but it is not currently a permanent situation. While they’re paying a similar price for housing, they now have more space, and no plans to move back.

“My husband and I were already growing tired of the city before Covid,” Patapoff says.

Similar stories emerged in the UK, where real estate markets almost completely stopped for 50 days during lockdown, causing a rush of demand when it reopened. “Enquiry activity has been extraordinary,” Damian Gray, head of Knight Frank’s Oxford office told World Property Journal. “I've never been contacted by so many people that want to live outside London."

Several estate agencies in London have reported a rush for properties since the market opened back up, particularly for more spacious properties with outdoor space. However, Mansion Global noted this is likely due to pent up demand from 50 days of almost complete real estate shutdown, so it’s hard to tell whether that trend will continue.

There’s a wide world of speculation about the long-lasting changes to real estate caused by the coronavirus, but many industry experts say there will indeed be change.

In May, The New York Times reported that three of New York City’s largest commercial tenants — Barclays, JP Morgan Chase and Morgan Stanley — have hinted that many of their employees likely won’t be returning to the office at the level they were pre-Covid.

Until workers are able to safely return to offices, it’s impossible to tell exactly how much office space will stay vacant post-pandemic. On one hand, businesses could require more space to account for physical distancing; on the other hand, they could embrace remote working permanently, or find some middle ground that brings fewer people into the office on a daily basis.

“It’s tough to say anything to the office market because most people are not back working in their office yet,” says Robert Knakal, chairman of JLL Capital Markets. “There will be changes in the office market and there will likely be changes in the residential market as well in terms of how buildings are maintained, constructed, [and] designed.”

Those who do return to the office may find a reversal of recent design trends that favoured open, airy layouts with desks clustered tightly together. “The space per employee likely to go up would counterbalance the folks who are no longer coming into the office,” Knakal says.

There has been some discussion of using newly vacant office space for residential needs, and while that’s appealing to housing advocates in cities that sorely need more housing, Bill Rudin, CEO of Rudin Management Company, recently told Spectrum News that the conversion process may be too difficult to be practical.

"I don’t know the amount of buildings out there that could be adapted," he said. "It’s very complicated and expensive.

While there’s been tumult in San Francisco’s rental scene, housing developers appear to still be moving forward with their plans, says Dan Sider, director of executive programs at the SF Planning Department.

“Despite the doom and gloom that we all read about daily, our office continues to see interest from the development community – particularly larger, more established developers – in both moving ahead with existing applications and in submitting new applications for large projects,” he says.

How demand for those projects might change and what it might do to improve affordable housing is still unknown, though “demand will recover,” Sider predicts.

Johanna Flashman is a freelance writer based in Oakland, California.