Interest rate rises and tax changes have hit landlords harder than a two-year rent freeze would have, a new report arguing for rent controls has claimed.

Research by the UCL Institute for Innovation and Public Purpose and the New Economics Foundation, shows that a 10% reduction in rents - equivalent to freezing rents in May 2024 – would save the average renting household £1,300 year. This would have made 2% of individual landlords unprofitable, compared with the 4.8% who have been made unprofitable because of tax changes and interest rate rises since 2021.

Using HMRC data, the researchers worked out that if rent controls made private rents 20% cheaper – saving the average renting household £2,400 a year – mortgaged landlords would be making profits more than four times higher than the average UK business. Landlords without a mortgage could expect to see even larger profits. This reduction would save the government at least £2 billion a year in housing benefit spending.

Profits

Report author Dr Beth Stratford says landlords are making much larger profits than other UK businesses, even after recent interest hikes and tax rises. “Well-designed rent controls, combined with the right fiscal and legal framework, create a historic opportunity: a managed transfer of homes out of the insecure and unaffordable private rented sector and into home ownership or secure and permanently affordable ownership by councils, housing associations and community-led organisations,” she adds.

While the introduction of rent controls would likely lead to some landlords selling their properties, the report argues that this is an opportunity for homes to be transferred from the private rented sector back to ownership by councils, housing associations and community led organisations.

Calculate

The researchers calculate that over ten years, the savings in housing benefit spend that the government could accumulate from a 20% reduction in rent would be sufficient to support the purchase of around half of all homes that are rendered unprofitable by that rent reduction and convert half of these to social rent.

As rent controls will trigger some landlords to sell, they also recommend that notice periods should be extended to a minimum of six months, so tenants have enough time to find alternative accommodation, and to receive compensation.

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