Rent controls would leave tenants worse off, says new research

Tenants – particularly those on low incomes – would be left worse off by rent controls, according to a new report from economic research group The Institute for Fiscal Studies. 

The independent body has added its voice to the rent control debate this week, warning controls could have a major impact on the supply of homes to rent and housing quality, echoing our argument that lower income households would be hit the hardest. 

In the report, Do Rent Controls Work? researchers outline what they describe as the ‘unintended consequences’ of rent controls, giving their analysis of what ‘empirical research’ reveals about how controls could work in practice in the UK. 

The team concluded that while controls would mean lower rents for some tenants, consequences would include an imbalance between supply and demand that would make it much harder for some families to find affordable homes. 

They said: “While it is theoretically possible in certain conditions for rent caps to be imposed without reducing supply, the international evidence suggests that these conditions are not common. Instead, there is clear evidence from a range of housing markets that, in practice, rent controls reduce supply.  

“There is no clear reason why the UK housing market would be any different, meaning we would also expect UK rent controls to similarly reduce the availability of rental properties.”

Property standards

The body also cited the introduction of rent controls in New York as a cautionary tale – warning they led to a notable decline in property standards as landlords were hit in the pocket, concluding: “Most studies have found rent controls lead to significant declines in property quality.”

Government view

Rent controls have never been far from the headlines in recent months, with new PM Andy Burnham having backed their introduction during his time as Greater Manchester mayor. 

Since then, however, the Government has dismissed suggestions such proposals are on the cards, with Angela Rayner telling BBC Breakfast: “We won’t be looking at rent controls… We’ve seen what’s happened in areas like Scotland, it hasn’t necessarily brought rents down.”

A costly solution

We have long argued rent controls would be disastrous for landlords and tenants citing the same issues - with a risk rents could end up being diven higher if the supply of homes fell even further. Instead we are calling for pro-growth taxation policies to encourage landlords to stay in the market and continue to invest.

Concluding its report, the institute, argues rent controls would be a ‘costly way to alleviate pressure on housing costs and support renters’, saying decisionmakers should instead look at the underlying causes of the national housing shortage, either by direct investment in new housing or planning reform. 

It said: “Rent controls might partly achieve policymakers’ distributional aims by decreasing costs for some tenants and reducing tenants’ uncertainty over rents (at the expense of landlords).  

“But the experience of other countries where controls have been introduced suggests other tenants would likely be made worse off by these controls, as more tenants struggle to find homes to meet their needs and the quality of rental homes declines.  

“Lower-income and lower-wealth tenants with less scope to leave the private rented sector are likely to be particularly affected.” 

To read the report in full click here.