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'red' Ken Would Cap London Private Rents

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London mayor candidate Ken Livingstone has said he will cap private sector rents throughout London if he wins the next contest.

He would not allow tenants to pay rents higher than landlords pay for mortgages.

Livingstone said: “Tenants should not be paying more on the rent than it costs to have a mortgage on the same property. I would cap the rents. We want to have rent control.”

But Labour’s mayoral candidate seems ignorant of the widespread requirement among buy-to-let mortgage lenders that rent should cover 125% of monthly repayments.

Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “Most BTL mortgages are assessed / determined on a formula that requires the rental income to be significantly more than the expected actual rent that the property will achieve. This is typically 125% of the monthly rent, and can be 130%.

“Some lenders’ BTL formula are determined not on the initial rate of interest that the borrower will be repaying on the actual mortgage product but on a notional rate or reversionary rate, often the rate that the product will revert to once any initial rate has ceased.

“Therefore any plans to cap rents to the level of the mortgage payment are likely to result in potential or existing landlords being unable to obtain the financing that they need to provide much-needed private rented property.”

Jonathan Samuels, CEO of Drawbridge Finance, said: “Ken Livingstone’s proposal for capping rents at mortgage repayment levels is impractical and goes against free market economics.

“Landlord demand would fall as yields would be too low to cover ongoing maintenance and other costs. Property prices, currently under pressure, would inevitably fall as demand for investment properties would drop. This is not to mention that getting mortgages would be impossible, as lenders generally require rents to cover 125% of the mortgage repayment.

“If he wants to send the property market into a nosedive, this would be the way to do it!”

Paradoxically, while wanting to cap rents charged by private landlords, Livingstone also attacked plans by the Government to cap housing benefit – Local Housing Allowance – paid to tenants in private rental property.

He said: “The cap is wrong. It will cause tens of thousands of people to be displaced to the outer boroughs where there is no housing.”

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Didn't see that coming. If that's a pledge then he has just won my vote in one move.

Sentiment against landlords and BTL is definitely turning for him to float something like this.

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Didn't see that coming. If that's a pledge then he has just won my vote in one move.

Sentiment against landlords and BTL is definitely turning for him to float something like this.

Not local to that election in that london, but this would be enough to get me to vote for him!

Is this a notional mortgage? What happens if someone has a 50% mortgage or owns outright (someone must, somewhere..). Would be good if they could only charge the interest on the remaining mortgage! ie max rent might be £1500/mn for a 75% mortgage, £1000 for a 50% mortgage, free when owned outright (ok, THAT won't happen, but let me dream).

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Not local to that election in that london, but this would be enough to get me to vote for him!

Is this a notional mortgage? What happens if someone has a 50% mortgage or owns outright (someone must, somewhere..). Would be good if they could only charge the interest on the remaining mortgage! ie max rent might be £1500/mn for a 75% mortgage, £1000 for a 50% mortgage, free when owned outright (ok, THAT won't happen, but let me dream).

The rules and regulations around this would be enormous! :D

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If someone owns outright then I would possibly just exclude them from this policy.

Let the market decide that.

Instead, I would use it as a tool to dampen speculation using other peoples cheap money.

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Will never happen ... and not sure it should.

What we need is an even bigger reduction in housing benefit. I read that 40% of rents in London are HB, so the govt already are the market.

... but then, is it just me or are rents quite low in London. They don't seem to have gone up in the 10 years I've been renting here.

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I presume the idea would be to calculate a "notional mortgage" on 100% of the property value and use that to cap rent. Seems workable to me, all they need to do is get a valuation and go from there. Would mean that you would have to have a significant equity to make a profit from renting which seems entirely fair and reasonable. #

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Will never happen ... and not sure it should.

What we need is an even bigger reduction in housing benefit. I read that 40% of rents in London are HB, so the govt already are the market.

... but then, is it just me or are rents quite low in London. They don't seem to have gone up in the 10 years I've been renting here.

ive got money on these from a wager in 09 being reintroduced within the whole of the UK before 2015, its interesting to see it put out there for the first time. Clearly a completely bad idea , for me its just another sign of the cycle which has swung towards property ownership over the last 30 years naturally swinging away from it from acorns grow oaks just like LVT talk

Edited by Tamara De Lempicka

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So ken wants a cap on rents but not a cap on HB ? Is he a nutter ?

Is Ken going to cap hotel prices too?

And why not prices on anything else where excessive (according to him) profits are being made in London: top restaurants, law, media etc. etc. The list is endless.

The man's clearly a communist, opportunistic lunatic.

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They don't seem to have gone up in the 10 years I've been renting here.

That's because spending power hasn't really gone up and landlords don't like it when you pay the rent by credit card. That statement is indicative of the bubble we have been living in.

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Is Ken going to cap hotel prices too?

And why not prices on anything else where excessive (according to him) profits are being made in London: top restaurants, law, media etc. etc. The list is endless.

The man's clearly a communist, opportunistic lunatic.

this is only a step away from centralised bread pricing

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So he presided over how many years of runaway rent increases and did ****** all about it - but NOW he thinks he can fix it?

******** meter twitching sharply.

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The man's clearly a communist, opportunistic lunatic.

I'm not convinced a communist approach to allocating land would be worse than what we have now. Under the current system you have fully employed people in their 30s living with their parents because they cannot afford to buy or rent a decent home despite the fact that we have one house for every 2.2 people in this country, you have a tiny rentier class extracting virtually all of the profit from the system through charging for access to land, and you have a financial system which has broken its back on the property market and is sucking untold billions from the taxpayer in "temporary" support.

If genuine capitalism is not on offer (and I see nobody with any power offering to restore it) I would prefer communism to feudalism.

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Is this the same Ken Livingstone whom I pinned down on the Victoria Line one night back in 2001 when he WAS already mayor, and badgered him on what he was going to do about soaring rents, runaway house prices and the increasing costs of living in the capital. His answer:

"Sorry, I can't do anything about any of those - thats the free market I'm afraid" (or basically words to that effect)

What a fucking hypocrite! And one that will do and say anything to become mayor again. :angry:

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      • down 5% +
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