London // How did Monica afford such a cool Manhattan apartment in the hit comedy series Friends?
The chances are that while Monica, a chef, was (illegally) sub-letting her grandmother’s apartment, it was also subject to rent controls.
Rent controls are one economic instrument that divides opinion the world over. Some think of them as an unnecessary state intervention – practically Communist – while many argue that they are the only way to control rents so that the world’s most successful cities can be homes to a genuine mix of people, rather than simply the rich elite.
Having receded in use, except in a small number of countries, rent controls are back on the agenda again, as governments around the world try to put the brakes on booming rents.
At the beginning of June, Berlin, where 47 per cent of residents rent, became the first city in Germany to introduce a cap on what landlords can charge new tenants.
Landlords are now barred from raising rents by more than 10 per cent above the local average. Such controls were already in place for existing tenants but now apply to all new contracts.
For young Berliners caught up in a rapidly gentrifying city, the move has been welcomed. Reiner Wild, the managing director of the Berlin Tenants’ Association, says the move will stop Berlin becoming like London or Paris, where low-income people are forced to live further and further out from the centre of the city.
Rent rules in New York – the ones that made Monica’s flat affordable – have just been extended by New York State’s government for another four years, despite some fears that the regulations would be lifted.
“You have certain voices saying rent regulations should just go away. That is not going to happen any time soon,” says the New York governor Andrew Cuomo.
About one million apartments in New York City are covered by the rules, and the New York City rent guidelines board has just voted to freeze rents for those signing renewals or one-year leases, for a year.
Rents have risen while incomes have remained largely stagnant in New York City. Between 2005 and 2013, median rent rose 11.8 per cent, while median household income rose 2.3 per cent, according to the Furman Center.
In San Francisco, also, there are rent controls on most buildings built before 1979, while newer buildings, condos and single-family homes are not covered. Annual rent increases can only occur on the anniversary of a lease being signed and are linked to inflation. Recent increases have been between 0.1 per cent and 1.9 per cent.
In France, the Socialist government of François Hollande is introducing a new era of rent control next year. They will be imposed on about 28 town and cities including Paris, Lille, Marseille, Aix en Provence, Saint-Nazaire, Menton, Montpellier, Fréjus and Bayonne.
The new rules allow local area authorities to set averge rent limits and if a landlord tries to increase rent by 20 to 25 per cent above average limits, then the prefecture will demand a reduction.
One estimate suggests that a quarter of Parisian rents could fall following the changes.
The proposals have been made during a period when Paris’ and France’s rental markets have been settling down. Paris rents have been flat since May 2012 – in some wealthier areas such as Saint-Germain-des-Prés, they have actually gone down slightly, leaving the average city rent at €30.97 per square metre (Dh126.31) – compared with €9 per square metre in Berlin.
After a prolonged period of stagnation, rents in London are also climbing again and, increasingly, Londoners have been arguing that their city should also be subject to rent controls. An online petition now has more than 60,000 signatories.
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