London Working Rent – 2020 Vision!
As a proactive community of small business owners, we refuse to let the divisive rhetoric of the last three years get in the way, instead, we’ve rolled up our sleeves, discovered what our proudly diverse community has in common so we can fight together as one for an inclusive economy that works for small local enterprise and the neighbourhoods we serve.
The common enemy that binds our members together in solidarity is a property market that is out of control, one that contradicts capitalism that is, in fact, anti-market and anti-competition because it erodes the value created by small businesses in London. This erosion is achieved by the displacement of enterprise or the restriction of innovation through rent levels which are out of reach for even the most viable of small businesses.
So on ‘Brexit Day’ last Friday, Leni Jones Guild member and Managing Director of our sister organisation – Guardians of the Arches led a group of tenants with our partners the New Economic Foundation to sit at the table with Blackstone and Telereal Trillium, the two largest global investment firms in the world to present our tenant led research and solutions.
Prior to this meeting, representatives of the East End Trades Guild and Guardians of the Arches also met with Transport for London and the Greater London Authority to test where our ideas would gain the most traction.
It is important to reflect just how significant this is. Only through members of the East End Trades Guild and Guardians of the Arches taking action and organising together has this recognition, respect and a seat at the table with two largest landlords of small businesses in the country and London’s governing body become a reality. We have further still to travel to make a real difference, however, our progress is meaningful.
The Guild received funding from the London Economic Action Partnership (LEAP) to deliver research with the New Economics Foundation and Guardians of the Arches to support an evidence base for a Working Rent policy to ensure rent levels that allow small enterprises to thrive. In the last few weeks we discovered that the thematic areas most important to small business tenants within arches are directly in line with our previous research funded by Tower Hamlets Council with small business tenants more broadly and fall into three main policy areas;
Security of Tenure
Tenancies within the Landlords & Tenants Act 1954 have security of tenure. This post-war legislation has been successful in preserving the balance of power between landlords and tenants because disputes over tenancies under the Act go to the courts. In reality, this is very rare but the possibility of arbitration has held the balance of power in check.
Due to Statutory Instrument 3096 of 2003 however, it has become easier to get tenants to contract outside the Act with no security of tenure.
This Statutory Instrument, combined with overwhelming market power that appears to be a monopoly of railway property and a lack of transparency, has allowed a distortion of rents and security of tenure that goes against the public policy contained in the act. A good landlord seeking to support the social value generated by local enterprises should ensure that small business leases are within the Act.
A key contributor to the current issues facing small business tenants is a lack of transparency on comparable rents. The rents currently paid by tenants who have a lease under the 1954 Act are legally disclosable.
In practice, getting access to data on comparable rents is time-consuming and expensive for tenants who are facing a rent review or negotiating a new lease.
Our members know through experience that when we talk to each other at street level about rent issues, shared knowledge enables us to negotiate rents lower than we would otherwise. Our new web-based app RENTCHECK aims to make these conversations between members easier.
Full transparency on comparable rents via EETG and GOTA members using RENTCHECK in the short term and via a register of arch comparables owned by Transport for London and The Arch Co would go some way to slowing the rise of rent levels, creating openess and fairness in the rental market, helping to prevent artificial rent rises.
The RENTCHECK app will be launched at a members only event on 2nd March at Newspeak House.
Rent Levels and Social Value Leases
A new approach to the management of arches, new developments and council-owned stock could include the following mechanisms to ensure affordability for small businesses:
- Security of tenure
- RPI-linked rent rises
- Initial rent level set by fair comparables
- Cap rent at 10% of turnover
- Social value leases (e.g. as currently being piloted by Haringey Council): rent discount conditional on social value outcomes
In the longer term, the Mayor has the opportunity to preserve permanently affordable business space in the Transport for London arches.
This would involve recognition of the tenants’ contribution to many of the mayor’s priority policy areas, including Economic Fairness, Skills and Prosperity; Social Integration; and Culture.
A Working Rent system in the TfL arches would allow the space to be managed in a way that protects and maximises the tenants’ social value contribution to London, as opposed to the current model of maximum rent extraction.
In the coming weeks, our coalition of Queen Mary University of London, legal firm Colman Coyle and the New Economics Foundation convened by the East End Trades Guild and Guardians of the Arches will be refining these policy proposals to update our Affordable Workspace Manifesto, first launched in 2018 for the local elections with new proposals for the next Mayor of London.