Private rented housing: the rent control debate

Private tenants spend more of their income on rent  

The private rented sector (PRS) overtook social housing as the UK’s second largest tenure in 2011-12. An estimated 4.4 million households rent privately (around 19% of all households) according to the English Housing Survey 2020-21. On average, the survey found private renters spend a higher proportion of their income on rent than households in other tenures.

The white paper, A fairer private rented sector (June 2022) acknowledged cost of living pressures from rent increases:

We understand the pressures people are facing with the cost of living, and that paying rent is likely to be a tenant’s biggest monthly expense.

Rent deregulation after 1989

After 1989, PRS rents in most of the UK were deregulated on newly created tenancies. To date, this has remained the case in England and Wales, but different approaches have been adopted in Scotland and Northern Ireland. More reform is on the agenda which will lead to more divergent approaches across the UK (see section 4).

Rent deregulation is attributed with contributing to the growth of the PRS after 1989. Other factors include the removal of long-term security of tenure and the availability of buy-to-let mortgages.

Despite claims that Housing Benefit would “take the strain” of increased rent levels following deregulation, in 2010 the Coalition Government identified a need to address growth in Housing Benefit (HB) expenditure. UK Governments since 2010 have sought to reduce HB spending by limiting and freezing Local Housing Allowance (LHA) rates. In their 2018 report on ‘The evolving private rented sector’ (PDF), Rugg and Rhodes said the LHA “constitutes an increasingly stringent mix of both first and second generation rent control.”

Affordability and limits to the rent safety net have resulted in rent control returning to the political agenda. In the main, debate has focused on rent regulation during the term of a tenancy, rather than controls to restrict rent levels at the outset of a tenancy.

More predictable rent increases in England

The UK Government does not support rent controls but is committed to legislate to ensure more predictable rent increases by:

• Only allowing rent increases once per year.
• Increasing the minimum notice landlords must give of a rent increase to two months.
• Ending the use of rent review clauses in tenancy agreements.
• Preventing First-Tier Tribunals increasing the rent beyond that asked for by the landlord.

The Queens Speech 2022 confirmed a Renters Reform Bill would be introduced in the 2022-23 parliamentary session. On 17 October 2022, Simon Clarke, the then Secretary of State for Department for Levelling Up, Housing and Communities (DLUHC) said “I can confirm that we will introduce the rental reform Bill in the course of this Parliament.” This may mark a shift from introducing the Bill in the 2022-23 parliamentary session.

Opposing views on rent regulation

The housing charity, Shelter, has argued for a “stable rental contract” of five years during which annual rent increases would be index-linked,  for example to the Consumer Price Index (CPI). The campaigning organisation, Generation Rent, would go further and has referred to setting a maximum rent based on Council Tax bands “with a monthly maximum rent amounting to half of the annual council tax band for a home.”

There’s substantial opposition amongst landlords, both individuals and institutional investors and their representative bodies, to interventions which would restrict rents at the start of, and during the term, of a tenancy. It’s argued market intervention would lead to landlords withdrawing investment, both in terms of new supply and the upkeep of existing stock.  

Emeritus Professor Christine Whitehead and Peter Williams, in Assessing the evidence on Rent Control from an International Perspective (PDF, October 2018) concluded the impact of rent control would depend on its form and economic context and on the nature of the welfare system in place. They said:

The focus for reform should be on putting in place a system which allows indefinite tenancies, and which imposes a degree of rent stabilisation alongside a much better enforcement system which tackles both poor landlords and tenants. 

International comparisons

Comparisons are frequently drawn with different rent regulation regimes operated elsewhere in Europe. When seeking to learn lessons from alternative regimes it’s important to bear in mind the UK PRS is not directly comparable to that in, for example, France, Germany and Switzerland, where a much greater proportion of the population sees private renting as the ‘normal’ tenure choice.