Rent controls in London
and savings. A rent freeze may aid young people gain increased disposable incomes to save towards entering the housing market or spend on amenities and goods, increasing quality of life.
A further argument for action by the local authorities to reduce housing costs is labour immobility. Home location is highly important to residents. Moving house, as many may have to do in the coming months, with a reported 34% of Londoners having struggled to pay their rent in the last six months, 9 can pose difficulties. Renters may need to live near work, family, or friends. Suitable accommodation may not be available in the area, and some may be priced out of the area they live in altogether. Apart from the basic humane issue with this, it also poses an economic issue. High rent impedes the geographical mobility of labour as people are unable to afford housing in the vicinity of jobs. One may argue that there is no shortage of people who are willing and able to rent property in London, hence the higher prices than in the rest of England. However, this does not account for who can afford it. Median wages in London in 2021 were £39,716 while the next highest earning region had a median pay of $32,810. 10 People already working and living in London are more likely to be able to afford London prices than those outside. People from regions with lower housing costs and higher unemployment such as the Northeast, with a 5.1% unemployment rate may be priced out of the market by the current rent increases. 11 With people from many regions of the UK seeking work and unable to find accommodation in London in order to find a better paying job, social mobility will be restricted. Only people with more wealth or higher incomes will be able to afford the private rent in London, preventing access to higher paying jobs to those on lower incomes outside the capital, consolidating the poverty trap. Theoretically, a rent freeze could allow more unemployed workers to afford London prices for the two-year duration, allowing them to increase their wages so that they afford the market rate after the freeze. Basic economics dictates that the price of a good is determined by its supply and demand. With increasing demand due to population growth in the UK, especially London, prices will naturally rise based on free-market principles. For example, between January 2015 and May 2021, private rental prices in the UK increased by 10.4%. 12 Without government provision and assistance with the construction of housing, or the reduction of housing regulation that may stifle construction efforts by firms, increasing demand shall not be exceeded by increasing supply. An effective maximum price on housing rent for two years, a market distortion would emerge which would grow year in year out.
If rents were frozen, it might lead to increased demand for rental property in London. Workers, whose nominal income would increase along with inflation (although not necessarily proportionately), whether through direct increases in wages or through government action, would become able to afford
9 Mayor calls for rent freeze. https://www.london.gov.uk/press-releases/mayoral/mayor-calls-for-rent-freeze 02/09/22. 10 Clark Median annual earnings for full-time employees in the United Kingdom in 2021, by region. https://www.statista.com/statistics/416139/full-time-annual-salary-in-the-uk-by-region 02/09/22. 11 Clark Unemployment rate in the United Kingdom in June 2022, by region. https://www.statista.com/statistics/297167/uk-regional-unemployment-rate 02/09/22. 12 Index of Private Housing Rental Prices, UK: May 2021. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/may 2021 02/09/22.
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