If you listened to most Labour politicians, you’d think private rents in London were skyrocketing. Up 5% or 10% a year! This is, after all, the way they justify their calls for rent controls, which almost every economist thinks would reduce the quantity and quality of housing and thus increase rents in the long-term (eg see here).
Like all inflation, rent inflation is driven by expectations. If you think rent is rising quickly, your expectations of the sorts of rent you have to pay – both now and in the future – will be higher than they would otherwise be. So people pay higher rents, and it becomes a self-fulfilling prophesy.
But rents are not going up by 5% a year – even in London. London rents did very briefly rise 5% year-on-year in 2012, but 2012 was 5 years ago. In the last year, they rose by less than 1.4%. That’s the smallest rise since 2010.
Across the rest of Great Britain (Northern Ireland stats are counted separately), rents rose by 2.1% last year and the pace of increase hasn’t exceeded 3% for over a decade. So rents are rising by less than average wages or prices generally are rising, ie rent is an increasingly small part of the average pay packet or cost of living.
As a private renter myself, I have a vested interest in rents falling. But my rent has stayed the same – thus fallen relative to everything else I have to pay for – since I moved to my current flat in Hampstead village, despite two tenancy renewals in that time.
Indeed, back in 2012, when private rent rises were peaking, what were Camden Labour doing? Hiking rents they charged their own social tenants by 8% a year! So even when rent rises were at their worst, Labour were hiking rents by almost twice as much. And today, Camden Labour want to hike social rents by 6% a year: four times the rate in the private sector.
Rent controls don’t work – theoretically, historically, or where they’re still used right now. But they’re also addressing a problem of rising average rents that we simply do not face in 2017. Rents rises are slowing, and the more that people talk about it, the more they’ll slow even more.