Rents are still skyrocketing in London — would a cap from Labour make a difference?

From sky-high deposits to eye-watering monthly rates, it’s no secret that renting in London is a wildly expensive – and often unhinged – ride.

Now, speaking to the stark realities of renting in London, new data has revealed that prices have skyrocketed by an average of 32% over the last five years – from £744 to £983 per month.

Analysing postcodes across the capital, SpareRoom’s research finds that the largest increases have been seen in locations across the East and South East, with the biggest being SE2 (spanning parts of Greenwich and Bexley, including Abbey Wood). Marking a 54.7% spike, monthly averages here have risen from £531 to £820.

Other postcodes of note include EC2 (Shoreditch and Liverpool Street, with a 53.4% increase), N9 (Edmonton and Enfield at 49.7%), and SE9 (parts of Greenwich, Bromley, Bexley and Lewisham at 49.6%), as per SpareRoom’s figures.

There could be hope of respite, though, as London Mayor Sadiq Khan remains keen to introduce a cap on private rents for city-dwellers, committing to building at least 6,000 rent-controlled homes as part of his mayoral election pledge earlier this year.

He has also continually pressed for a two-year rent freeze, something he claimed could provide ‘vital relief’ for London’s tenants – and save them £3,374 on average.

However, Sadiq needs the support of the Labour Government to implement such a policy. And the party hasn’t officially committed to it.

‘While Labour believes action needs to be taken to address extortionate within-tenancy rent rises, rent controls are not national Labour Party policy as we remain mindful of the risk they could pose to the availability of rental properties and the harmful impacts any reduction in supply would have on renters,’ a Labour spokesperson told the Evening Standard in May.

So, with all that in mind, why are rent prices still skyrocketing in London? And what impact would a potential rent cap from Labour have?

Why are rents in London rising so rapidly?

As Max Royston, senior valuer and director at Gaffsy tells Metro.co.uk, the stark increases in London’s rent prices have mainly been driven by rising interest rates – as is the story across the rest of the country.

‘The elevated property values mean the cost of servicing a buy-to-let mortgage has increased dramatically,’ he explains.

Elsewhere, there’s the issue presented by the rising cost of building materials, contractors and energy, which Max notes has caused ‘service charges in many leasehold blocks to more than double.’

He adds: ‘This financial pressure has led many landlords to pass on some of these increased costs to renters through higher rents. Others have opted to sell their buy-to-let properties, reducing supply.’

East London specifically remains the city’s ‘creative hub’ and a ‘centre for London’s nightlife,’ which has further sparked demand and, in turn, driven up rental prices.

And, inevitably, the Elizabeth Line has improved connections for several East London areas – including Whitechapel, Liverpool Street, Canary Wharf and Custom House – which Max argues has ‘boosted demand from renters’ and ‘allowed landlords to charge even more for their properties.’

‘We used to see London as having a North-South divide in terms of affordability, but it’s become an East-West divide in recent years, particularly as transport has improved in the South and East of the capital,’ comments Matt Hutchinson, director at SpareRoom.

What would a potential rent cap mean for London rents?

Labour’s official party line on rent caps might’ve been somewhat lukewarm, but as senior consultant and specialist in conveyancing for Setfords Law firm, Sarah Gillbe tells Metro.co.uk, they’re ‘nothing new.’

‘We had these from the end of the First World War until the Thatcherite deregulation of rents in the Housing Act 1988,’ she says.

‘Given the announcements made in the King’s Speech, it is clear this government is keen to move housing as a topic up the agenda.

‘As ever the devil is in the detail about how this policy [could] be enacted – it is not yet clear who is going to measure local wage growth and how these figures will be validated.’

And while Sarah believes that rent controls could help tenants, she says much of the result ‘depends on the mechanism used to determine them.’

Sarah adds: ‘Rent controls could also have unintended consequences as landlords exit the market because their profit motive is harmed; this could result in an even lower supply of properties to rent.

‘On the other hand, if landlords decide to sell up because their investments are no longer profitable, we could see a spike in first-time buyer purchases as those properties come back onto the open market.

‘The value of typical rental properties could also decrease if the market for these cools significantly – this would again be good news for first-time buyers but less helpful for landlords leaving the market who perhaps will make less of a gain on their original investment.’

Essentially, it could go either way. But if the current climate is anything to go by, you may think it’s worth the risk.

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