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Taking back control of rents: The impact of rent regulation on affordability, public spending and landlord profits | Policy Report No. 2026/03
Authors:
- Dr Beth Stratford | Honorary Research Fellow, UCL Institute for Innovation and Public Purpose
- Dr Joe Beswick | Rosa Luxemburg Foundation
Abstract:
England’s private renters face some of the worst affordability pressures in the developed world. The evidence makes clear that neither new house-building nor increased housing subsidies can realistically address the full scale of the problem. By contrast the historical record across Europe shows that the most decisive improvements in housing affordability in the 20th century came from the direct regulation of rents. This report examines whether rent controls can work again, in the specific conditions of the contemporary English housing market, and whether the risks which they entail – particularly the risk of landlords selling up – can be managed. Our headline findings are as follows:
Savings for households and government
- If rents in England had been frozen in November 2022, the government would have been able to restore housing support payments to cover the cheapest 30% of local rents and would still be saving an estimated £2 billion a year in housing benefit spending by now.
- By now this combination of policies would be saving the average renting household £2400 a year and boosting the disposable income of renters in the poorest quintile by 22%.
- No other available policy instrument can deliver affordability improvements of this scale, at this speed, for the households most at risk in the unfolding cost of living crisis – all while saving the government money.
Landlord profitability
To improve understanding of how many landlords may be incentivised to sell under different rent control scenarios and how many tenants may be affected, we analysed revenues and costs for mortgaged landlords using data obtained from HM Revenue & Customs (HMRC) through Freedom of Information (FOI) requests. Our analysis reveals that:
- For mortgaged landlords, a 20% reduction in rent reduces mean pre-tax profit margins from 70% to 64% – which means they would still be 4.5 times bigger than the mean pre-tax profit margin for UK businesses. Profit margins for unmortgaged landlords (58% of all unincorporated landlords) would be higher still. These figures do not take account of capital gains from house price appreciation.
- A 10% reduction in rents would cause 2.3% of landlords to become unprofitable – significantly fewer than the 4.8% of landlords tipped into loss-making by changes to mortgage interest tax relief (MITR) and interest rate rises since 2021-22.
Opportunity for tenure shift
With the right fiscal and legal framework, rent controls create a historic opportunity: a managed transfer of homes out of the insecure, unaffordable and hard–to–retrofit private rented sector and into home ownership, or secure and permanently affordable ownership by councils, housing associations and community-led organisations. To assess the scale of subsidy required to support a public acquisition programme, so that councils are able to purchase homes that landlords bring to the market, we calculated the viability gap across all nine English regions. The viability gap is calculated as the difference between what a council can afford to borrow against rental income at the current Public Works Loan Board (PWLB) housing revenue account (HRA) rate and the actual cost of acquiring a typical privately rented home.
Within ten years, the savings on housing benefit arising from a 20% reduction in rents would be sufficient to support the acquisition of at least 48% of homes rendered unprofitable by that rent reduction – and convert half to social rent. This figure rises to at least 56% if small reforms to council financing are implemented (see Section 6.6).
KEY RECOMMENDATIONS
Rent controls will only deliver their intended benefits – in terms of enhancing affordability and facilitating tenure shift – if they are well designed and accompanied by a coherent package of parallel policies. We make the following recommendations:
Apply controls between tenancies, not just within them. Jurisdictions that limit controls to existing tenancies – allowing landlords to reset rents to market rates at each tenancy change – have found that wider affordability continues to deteriorate, and that the large gaps opening up between old and new tenancies create perverse incentives for informal side-payments and subletting at a premium.
Freeze rents initially. The immediate priority is a rent freeze for a defined period– giving wages time to begin catching up with rents and providing meaningful relief to households under acute affordability pressure. The freeze would also create the breathing space needed to design a durable long-term regime to replace it on expiry.
Protect tenants facing displacement. Rent controls should be expected to trigger some landlords to sell. To give tenants sufficient time to find alternative accommodation, notice periods should be extended to a minimum of six months, in line with Wales and France. Tenants forced to move through no fault of their own should also receive statutory relocation compensation, as already exists in Los Angeles and San Francisco.
Establish a sequential right of first refusal. Where landlords sell, sitting tenants should have first refusal, at the market sale price.1 Where the tenant prefers to move, the right should pass to councils, housing associations and community-led housing organisations. Washington DC’s Tenant Opportunity to Purchase Act has operated on this model since 1980.
Expand public acquisition funding. The Social and Affordable Homes Programme (SAHP) should establish a dedicated acquisitions stream ringfenced for exiting landlord stock, conditioned on upgrade to at least EPC C, with councils empowered to support community-led organisations through revolving PWLB-backed loan funds.
Raise capital gains tax on residential investment property. This would fund tenure shift and give government a tool to manage the pace of landlord exit. Setting the rate above its long-run intended level creates the option to slow disorderly exit by signalling future reductions. It also creates space for a preferential reduced rate where landlords sell directly to first-time buyers, registered providers or cooperatives, and for the introduction of an investment allowance, which would relieve cash flow pressures arising both from rising interest rates and rent controls.
We conclude that the risks associated with rent controls, though significant, are manageable – and pale against the cost of inaction: spiralling housing benefit spending, rising homelessness, and entrenched poverty and inequality.
Reference:
Stratford, B. and Beswick, J. (2026). Taking back control of rents: The impact of rent regulation on affordability, public spending and landlord profits. UCL Institute for Innovation and Public Purpose, IIPP Policy Report 2026/03. ISBN 978-1-917384-43-8
Available at: https://www.ucl.ac.uk/bartlett/publications/2026/jun/taking-back-control-rents
This policy report is part of the UCL Institute for Innovation and Public Purpose’s (UCL IIPP) publication series.
Explore more working papers and policy reports here.