High housing costs in the private rental sector: The case for action

In the UK today, 2.4 million households renting privately have unaffordable rents, an additional 250,000 since 2023. This is 40 per cent of all private renters in the UK. This is not just limited to those at the very bottom of the income distribution or to those receiving state support – 72 per cent of households struggling to pay rent currently get no government help for their housing.

Without further intervention, affordability will continue to deteriorate. By the end of this decade, an additional 340,000 households will be spending more than 30 per cent of their income on rent compared to 2023/24.

Given this picture, it is time to consider the need for carefully designed price intervention on rents. The history of rent controls is littered with cases – New York, Berlin, Massachusetts, Stockholm – where poorly designed controls have had negative consequences that have shaped the discourse and understanding of rent controls for years. In these examples, even if rents stabilised for tenants in rent-controlled properties, the wider market saw a reduction in the number of rental properties available, a deterioration in the quality of properties, and difficulty for new tenants looking for a rental property. 

But this narrative, that all rent controls are an unmitigated disaster, ignores the milder rent controls adopted across Europe, some of which have been in place for decades. France, Spain, Ireland, and Scotland’s revised scheme demonstrate how careful design can minimise leakage, promote mobility, protect quality standards, and incorporate flexibility for landlords. 

This paper attempts to tackle these cases head-on and demonstrate how a system designed with past failings in mind can significantly mitigate these consequences. Our case for action does not rest on claiming that rent controls are cost free, or without trade-offs, but on careful policy design and the government demonstrating its willingness to put affordability first. 

The government should act to limit rent increases in line with inflation and wage growth, for existing and new tenancies, providing certainty for renters that rents will not exceed income growth, and reassuring landlords that, for the most part, nominal rents will continue to rise; where wages keep pace with inflation, real rental income would be broadly protected. But where wages lag inflation, the policy would share the cost rather than pass it to tenants in full.