Rent caps can reduce rental supply, discourage maintenance and leave some families in homes that don’t meet their needs, according to new research.

The Institute of Fiscal Studies (IFS) says most studies find rent controls lead to a significant decline in property quality, because landlords facing restrictions on rents have less incentive to spend on renovation and maintenance.

“Landlords faced with plenty of would-be tenants may be able to cut back on renovation or maintenance costs without further lowering their rents, recovering some of the profit they would otherwise lose as a result of controls,” its report suggests.

The IFS argues that rent controls can result in people living in properties that don’t suit their needs because tenants become less likely to move and properties become harder to find.

Reason

“Part of the reason tenants move less often when there are rent controls is that…they find it harder to find a new property when they want to move. This is especially true if landlords can reset rents to a higher level in between tenancies, as in these cases tenants will only be able to enjoy below-market rents as long as they stay put.

“Families whose children have left home may be less likely to downsize, making it harder for expanding families to move into larger properties and forcing them into overcrowding.”

Despite Housing Secretary Angela Rayner dismissing the idea earlier this summer, tenants groups continue to push for rent controls.

Evidence

However, the IFS says where rent controls have been introduced, the evidence shows that the supply of rental properties was reduced. They also meant landlords became more likely to exit the market by selling their property to owner-occupiers or by converting it to a business use. If rents are capped, more renters are likely to want a property at the going rent than landlords are willing to supply, meaning there would be excess demand.

It adds: “If the government wants to reduce housing costs, it should address the underlying causes – the most obvious being low supply of housing overall and if it wants to redistribute income or wealth to poorer private renters, it would be better to pursue this redistribution through tax and benefit policies such as housing support.”

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