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Tuesday, 21 August 2012

Inflation and the Cost of Rents in London

The cost of living in London has become almost unaffordable for the renter. Many people in who are considering renting property in the London area have become discouraged due to the high cost of renting. At the present time, it is estimated that the cost of living in a London flat can take up as much as one half of the tenant’s monthly income. However, there may be a way to ease the situation.

A renewed rent control regime would be of significant benefit for potential renters. However, the Mayor of London, Boris Johnson is likely to strongly oppose this idea. Mayor Johnson is of the opinion that a rent control program would diminish the value of property. In addition, the National Landlord's Association [NLA] is also likely to oppose the idea. Their feeling on the issue is that, if the Government becomes involved, it would contribute little in assisting tenants, even in desperate times.

Due to the rapid rate of inflation, the Housing Charity Shelter has been forced to become much more focused on offering tenants long-term security benefits rather than price control programs.

Rent controls are in effect at the present time. The Rent Act (1977) provides that certain rent increases are limited to the amount linked to the Rental Price Index. The rule, commonly known as the "fair rent" rule, means that a single-bed flat in the Wimbledon Village area would cost the tenant 350 GB pounds per month. A landlord of a similar flat located in the same area would cost 1,500 GB pounds each month. If the tenant pays their rent on time, the tenant is prohibited from being evicted. Disputes that may arise will be settled by a panel of London rent assessment authorities.

Over 100,000 tenancies in the UK which are protected by the "fair rent" system. The fair rent system is in effect for the boroughs of London of Merton, Camden, Chelsea and Westminster. While the rule still contains many flaws, it protects tenants from rent increases, many of whom are among elderly tenants. Landlords can also take advantage of this rule in that they can obtain 7-8% in yearly rent increases. If the landlord is capable of showing that property improvements have been made by them, they can further raise their rents..

London now is considering another possibility of remedying the high cost of London rents by implicating the same tax levies as New York. The mayor would negotiate with private landlords in the hope of cutting costs as well as increasing property accommodations.

An additional approach to controlling the high cost of rental in London would be the introduction of a five-year tenant contract. This would apply to families who have children. "Mystery shopper" checks issued to officials can ensure all standards of maintaining homes are met in a manner satisfactory to the tenant, to include rental accommodations at affordable rent prices.

As landlords are not likely to financially benefit by capping on London properties, millions of public GB pounds can be saved for the tax payers benefit, making rent capping very attractive to the renters of London properties.

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