The Institute for Fiscal Studies has highlighted a clear trade-off in the ongoing debate over rent controls in the UK. Their research shows that while private renters spent an average of 28% of their incomes on housing costs in 2024–25, introducing caps on rents is likely to reduce the overall supply of rental homes. This outcome stems from landlords facing diminished returns, which may prompt some to exit the market altogether.
For investors, this presents a critical consideration. The rental sector has been absorbing demand that the owner-occupier market struggles to meet, especially in high-demand urban areas. Any policy that discourages investment in rental properties could exacerbate shortages, pushing rents higher in the long term despite short-term relief. Our data at Prop AI Deals confirms a tightening of rental availability in cities that have experimented with rent caps, alongside a slowdown in new buy-to-let acquisitions.
The 28% income share spent on rent underlines the affordability pressure on tenants but also signals that landlords still command significant rental yields. Rent controls might ease tenant burdens temporarily but risk undermining the market dynamics that sustain supply. Investors should monitor these policy developments closely, as a shrinking rental stock could lead to increased competition and volatility in the sector.
Source: Property118
