Controlling rent does more harm than good

Capping rent increases does “far more” harm than good, a major global review has found.

There have been mounting demands for rent control in Britain in response to the housing crisis, but limiting how much landlords can hike prices could actually be detrimental, the paper suggests.

The review by the Institute of Economic Affairs (IEA) looked at 196 studies in nearly 100 countries over a 60-year period. The author says that rent control benefits existing tenants “at a significant cost” to broader society.

Reducing rent – but at what cost?

In the places with controlled rents, most studies in the review found:

• higher uncontrolled rents
• less spending on maintenance
• reduced housing quality
• ‘misallocation’ of housing
• reduced residential mobility
• a shortage of housing 
• fewer people owned the houses they live in

Rent control in the UK

Rent control means your landlord is limited by how much they can put your rent up by. The government decides the limit, which is usually below the market value.

Different rules are in place across the UK:

• Only Northern Ireland currently has a cap on the amount of rent a private landlord can charge you.
• Scotland had a temporary cap in place until 31 March 2024, though any rent increases can be challenged.
• If you live in England and Wales, only rent prices for social housing are capped at the moment – but limits for private rents have been proposed in Wales.

Rent control and the housing crisis

Calls for rent control to be reintroduced in England – after being scrapped in 1988 – have risen in recent years. In their election manifesto, the Green Party’s said many people are “simply unable to save for a deposit”, and claimed rent control would solve the housing crisis in England and Wales. Controlled rent has also been backed by the Scottish Greens, who say it’s “crucial” to end the housing emergency.

Prime minister Keir Starmer has promised to tackle the housing shortage by ‘stabilising’ rent– allowing annual increases with four months’ notice. Earlier this year, Labour said that rent controls “aren’t party policy” after a report they commissioned recommended such measures.

How well has rent control worked in Scotland and Northern Ireland?

In 2022, Scotland temporarily stopped landlords increasing rent by more than 3% (or up to 6% in some circumstances). The Scottish government said this would protect residents during the aftermath of the cost-of-living crisis and the Covid-19 pandemic.

But figures from the Office for National Statistics showed that in the 12 months to March 2024,  Scotland had the largest rent increase in the UK (10.5%), closely followed by Northern Ireland (10.1%) – which has controlled rent since 2007.

Scotland’s limit has been extended twice, coming to an end on 31 March 2024. Tenants can still challenge any rent increases though.

Struggling to cover costs?

Rising living costs can make it harder to cover your bills, including rent.

If you’re struggling, it’s better to ask for help sooner rather than later. We’re here for you, whether you need support with budgeting, benefits entitlement or debt advice. You won’t be judged and it could just be the first step you need.