Sadiq Khan has been told to drop his 'disastrous' pet policy and focus on building houses if he wants to deal with London's property crisis, as a new paper outlines how destructive rent controls would be.
This week Sadiq Khan once again set about lobbying the government to devolve additional powers to him that would allow him to regulate London's rental market.
Mr Khan has been pushing for such powers for eight years now, however was repeatedly slapped down by the Conservative Government.
With a Labor Government now in charge that has signaled it would be open to some form of rent controls, the London Mayor now believes the devolution deal is within his grasp.
However a new paper out this morning reveals that in almost every global case of rent controls being introduced, it destroyed the housing market and made costs worse for residents.
The Institute for Economic Affairs analyzed 196 studies, undertaken over 60 years, covering almost 100 countries across all inhabited continents.
The top think tank found that while rent controls do succeed in lowering rents for the few lucky enough to live in rent-controlled units, they have “significant unintended consequences” for everyone else.
56 of the 65 studies analyzed found that rent controls do lower rents for controlled units. However a whopping 14 out of 17 studies then agreed that rent controls increase rents for everyone else.
12 out of 16 studies also found negative impacts on overall housing supply, while 11 out of 16 found negative impacts on new construction.
15 out of 20 studies found that rent controls lead to reduced housing quality and maintenance, while 25 out of 26 found that the policy reduces residential mobility within the housing market.
The paper's author, Dr Konstantin A. Kholodilin, warns that rent controls benefit existing tenants at a “significant cost” to the rest of society.
By contrast, this week reports emerged from Argentina that rental supply jumped by 195.2% following libertarian president Javier Milei's repeal of rent control laws.
Dr Konstanin said: “Rent control effectively reduces rents in the controlled sector, but does it at a high price”.
“Tenants occupying the rent-controlled dwellings benefit the most, at least in the short run, while newcomers lose from rent control. In the long run, rent control can undermine the rental sector forcing landlords to convert their dwellings and tenants to become homeowners.”
The IEA's editorial director Kristin Niemietz said: “Economists are a notoriously divided profession: ask three economists, and you get four opinions. But there are exceptions to this, and the study of rent controls is one of them”.
“This is an area where the empirical evidence really overwhelmingly points in the same direction.
“The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce mobility among private tenants, and lead to a misallocation of the existing rental housing stock, is as close to a consensus as economic research can realistically get. “
This morning Conservative London Assembly member Neil Garratt told the Express that Mr Khan must accept the real-world impact of his beloved pet policy, and stop “wasting everyone's time”.
He blasted: “We know the most effective way to make renting and buying a home in London more affordable is by building more affordable homes, not by implementing rent controls”.
“Given that Sadiq Khan only managed to build 71 affordable homes across the whole of London in the last quarter, his time would be far better spent building homes for Londoners – not wasting everyone's time with populist nonsense like rent controls, which have been a disaster everywhere they have been tried.”