The Institute for Fiscal Studies has flagged the downside of rent controls in the UK rental market. Their analysis shows that while renters spent on average 28% of their household income on housing costs in 2024–25, compared to just over 11% for owner-occupiers, imposing rent caps could reduce the number of homes available to rent. This is because landlords may find returns less attractive and choose to sell or convert properties out of the private rental sector.
Our data at Prop AI Deals aligns with this view. In areas where local authorities have experimented with rent controls or caps, we have seen a measurable slowdown in new rental listings. Investors tend to respond to tighter regulations by reallocating capital to less regulated markets or different asset classes, which reduces rental stock over time.
This contraction in supply could exacerbate affordability issues for tenants, especially in high-demand urban centres. While rent controls aim to ease cost pressures, they risk a supply-side squeeze that pushes rents up in unregulated segments or forces tenants into less suitable housing.
For investors, the IFS findings reinforce the need for a cautious approach to markets considering rent regulation. Diversifying portfolios and focusing on areas with stable regulatory environments may offer more sustainable returns. The rental market’s dynamics remain sensitive to policy shifts, and supply constraints could become more pronounced if controls spread without complementary measures to support landlords.
Source: https://www.property118.com/rent-controls-cut-home-supply-institute-for-fiscal-studies/
