Rent Controls Raise Rents, Review Finds, as Sadiq Khan Seeks New Powers
Rent Controls Raise Rents, R...
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Rent Controls Raise Rents, Review Finds, as Sadiq Khan Seeks New Powers

16 August 2024
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Rent Controls Raise Rents, Review Finds, as Sadiq Khan Seeks New Powers

UK Election Debate

Rent controls, designed to make housing more affordable, may actually lead to higher prices, fewer available properties, and declining housing quality, according to a review of nearly 200 studies over 60 years across 100 countries.

As the UK approaches a general election, Labour leaders, including the Prime Minister and Chancellor, have hinted at the possibility of rent control measures. However, the Institute of Economic Affairs (IEA) warns that while such controls can lower rents in regulated areas, they often push up prices elsewhere, as seen in cities like New York. These controls can also discourage property maintenance and lead to housing misallocation.

Proponents argue that rent controls could offer renters much-needed relief. In May, Shadow Chancellor Rachel Reeves expressed caution, stating, "I think that should be up to local areas to decide, there may be the case for that in some local areas, but as a blanket approach, I’m not convinced by that.”

Labour’s recent report proposed a “double lock” on rent increases, linking them to local wage growth or inflation. Critics, however, caution that such measures might deter investment, reducing the supply of rental properties and increasing costs for new tenants.

In Scotland, rent controls have already led to a decline in investor confidence. Despite ongoing debates, the UK government currently has "no plans whatsoever" to devolve rent control powers.

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