Today, 2.4 million households in the UK private rented sector are struggling to pay their rent. With the war in Iran pushing up mortgage rates again, affordability will worsen unless government intervenes.
The Renters’ Rights Act is a major step towards a fairer rental sector, but it does not address the cost of renting. IPPR is calling for a national rent stabilisation scheme as the logical next step.
Other levers to lower costs matter but they are either too expensive or cannot ease the pressure quickly enough. New supply takes years to build and longer still to lower rents. Social housing is vital, but delivery is slow and only reaches a fraction of private renters. Increasing welfare provision for renters would be extortionate – 70 per cent of struggling renters currently claim no support for their housing.
Government has been uneasy about rent controls because their history is littered with cases – New York, Berlin, Massachusetts, Stockholm – where poorly designed systems have had negative consequences. But these examples obscure milder rent controls adopted across Europe, some of which have been in place for decades. France, Spain, Ireland, and Scotland’s revised scheme show that risks can be managed.
We recommend that rents should be ‘double-locked’, linked to wages and the Consumer Price Index (CPI), applied nationally, both within and between tenancies. This must be accompanied by exemptions for new-builds, expansion of support to meet new quality standards, and regulation on short-term lets.
Not any rent control scheme will do, and our proposal tackles the key concerns that critics point to head-on: reduced supply; property quality; new housebuilding; inequality; and mobility.
Supply
The most common criticism of rent controls is that by limiting landlord profits, they reduce the supply of rental properties. At a time when vacancy rates are already low, a sudden contraction in supply would place even greater pressure on renters.
This risk can be mitigated through a system that allows rents to rise broadly in line with prices. The aim is not to freeze rents, but to create a more stable and predictable path over time. The double-lock mechanism recognises that indexing to inflation alone leaves renters exposed to inflationary shocks, like Iran. Equally, a system linked only to wages does not allow a gradual closing of the gap between income and rents.
International examples also highlight the importance of preventing landlords from converting their properties. We therefore recommend a licensing scheme, like in Scotland or Wales, and a hard cap on the number of nights a property can be rented out short-term each year, like London.
Even under a mild rent stabilisation scheme some landlords will see lower returns, but recent analysis from JRF shows that most landlords still make substantial profits alongside long-term capital gains. When landlords do sell up, the government must strengthen the wider housing safety net.
Property quality
Controlling rents can remove the incentive for landlords to invest in their properties, but the government’s Decent Homes Standard and Minimum Energy Efficiency Standards will still safeguard quality. In fact, rent stabilisation directly addresses the risk of “renovictions” where landlords pass unaffordable renovation costs to tenants. There is not a single international example of energy efficiency standards being implemented without some form of rent control.
The Warm Homes Plan already includes some support for landlords struggling with compliance, but there is potential to expand this provision. Beyond minimum standards, limited exemptions for significant renovations – such as those in place in Paris – can help support high-quality housing stock.
New housebuilding
Only 8 per cent of new homes are built for rent but perception matters: even limited regulation can raise concerns about investor confidence.
Exempting new-build properties for a limited-time can help reduce this risk and doesn’t disadvantage struggling renters, as new-builds tend to serve the higher end of the market. Compared to other markets the UK rental market remains lightly regulated, and countries such as France and Spain demonstrate that strong housebuilding pipelines are possible with robust rent controls in place.
Finally, policymakers shouldn’t stick their heads in the sand about the already faltering housebuilding pipeline. A more active role for government is already needed to deliver housebuilding at the scale required.
Inequality and mobility
Rent controls have been known to create divisions between tenants benefitting from rent controls and those who don’t, which in turn can create disincentives to move. While London faces the most acute pressures, unaffordability is a problem for renters across the country. In the North East – where rental unaffordability is the lowest – 18 per cent of people are still facing high housing costs.
Implementing controls nationally prevents rent increases outside the controlled area as well as protecting from local government volatility. Applying controls for both sitting and new tenants reduces the disincentive to move out of a rent-controlled property.
Rebalancing power in the rental market
The cost of living is the public’s number one concern, and housing is people’s number one expenditure. Rent controls – if designed well – have the potential to directly tackle affordability and should be firmly on the table for any government making a serious offer for renters.
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