Why the growing consensus on rent controls shows us now is the time to act

Rents are too high. Since the turn of the millennium, private renters in the UK have been paying around a third of their income on rent, and much more in higher cost cities. Recent, above inflation rent increases have worsened this situation, pushing the rents even higher.  

Behind these figures are stories of people struggling under the weight of high rents. Families are cutting back on spending, going without the essentials or losing their home altogether when they’re hit with a rent rise they cannot afford.

At the same time, this affordability crisis is placing significant cost on the public purse, through a growing housing benefit bill and spiralling temporary accommodation costs which are pushing councils to breaking point. 

The current government has been right to place a significant focus on new housing supply, repeatedly stating its intent to build 1.5 million homes over the Parliament with a view to lowering house prices and rents. This target, and their efforts to deliver if through planning reform and funding, are welcome. But these efforts – as important as they are – will take time and on their own will be insufficient. OBR analysis shows that were this target to be met, rent and house prices will still not fall through this Parliament.

Furthermore, hitting this target looks increasingly unlikely (and exceeding it unlikelier still). Market housebuilding has slumped – a function of low effective demand driven in large part by higher interest rates – and this will take time to recover. While the finances and strained capacity of councils and housing associations make it harder to build more social homes to counter any fall in private output.  

Why action is needed now

Action on rents is needed now and, given the pressures on renters and the challenges Government faces acting on them with the tools currently available to them, intervening more directly on rents looks increasingly appealing. This is why an increasing number of organisations – JRF included – have recently called for caps on rent increases.

As our research has found, capping rent increases would have significant and immediate impacts for renters. Implementing a cap on rents which limited them to rising by CPI within tenancy and CPI + 2% between tenancies would save renters around £400 a year. Government finances also benefit from rent controls.  If rent controls had been in place since 2025/26, they would create £600 million in net savings to the Housing Benefit bill by 2030. Rent controls offer a practical, fiscally sensible strategy for driving down rents – with further benefits in giving renters certainty that their rents won’t suddenly jump, allowing them to plan and preventing them being forced out of their homes by unaffordable rent hikes.

Some argue that intervening on rents in this way would present challenges, first to investment in the existing stock of homes and second to construction of new ones. It is therefore worth setting out why we feel it is possible to confront these challenges.

Understanding profit in the Private Rented Sector

On the first, it is often argued that reducing landlords’ ability to hike rents would either lead them to invest less in the homes they rent out, reducing their quality, or to exit the market completely. Landlords exiting is not in itself a problem, as once sold the homes are either bought by someone to live in or by another landlord, social or private. Studies of rent controls even show a positive impact on homeownership rates, which may be a desirable consequence. But too rapid a sell off could cause problems for renters unable to move quickly into home ownership, if fewer homes are available to rent where there’s high demand.

To understand this risk further we commissioned the Autonomy Institute to look at landlord returns. Their work found that landlords have historically been making returns far in exceedance of those from other investments or ‘normal’ benchmarks. Even in the most recent period they studied (2024), after interest rates have risen and inflation has pushed costs up, most landlords were found to be making above average returns.

This tells us that it is possible to push down these returns while keeping most landlords in profit.

Our research has also found that the minority of landlords whose returns are particularly exposed to higher costs (principally borrowing costs) can be protected from the impacts of a rent control.  Were the Government to bring back landlords’ ability to offset their mortgage interest costs against their tax liability, while applying employer and employee NICs to rental income (to offset the lost revenue) we find that the share of landlords making a loss, even in a scenario with rent controls, would fall. In fact, applying these tax changes and a rent control would see fewer landlords making a loss by the end of the Parliament than if the Government does nothing.

Protecting future housing supply

On the second challenge, it is important that action on rents doesn’t stop homes being built, but we believe it is possible to introduce a rent control and protect housebuilding. While international evidence is clear that rent controls can worsen construction rates, the same research finds that well designed rent controls, with for example exemptions for newly constructed homes, have no impact on housebuilding.

Moreover, there is no reason to think a rent control should have this impact in the UK. The typical UK landlord does not build homes. Rather, as the research on landlords’ returns above shows, the growth in the Buy-to-Let sector was marked by landlords buying up existing homes. It is perfectly possible for a rent control to be designed in such a way, and sit as part of a broader package of reforms, which could reorient our housing market away from this model of an unproductive and extractive rental market, towards a rental model more focussed on the creation of new, high-quality homes.

Renters need action now, and capping rents can and should be part of the solution.

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