A cap on rents paid by tenants would trigger a decline in house prices across the UK, a leading think tank has warned.
Rent controls, such as limiting how much tenants’ bills can rise each year, would probably force landlords to sell their properties, driving down home values, according to the Institute for Fiscal Studies (IFS).
Matthew Oulton and Tom Wernham, from the IFS, warned that although a cap would be helpful for renters in the short term, there would be “unintended consequences” because “in practice housing markets are complicated”.
They said: “Alongside reducing the supply of rental properties, rent controls often result in a reduction in the sale price of properties.”
International studies show the policy consistently reduces the supply and quality of rental properties.
Although a landlord sell-off and ensuing drop in purchase prices could allow renters who have sufficient income and savings to get on the housing ladder, this would not help the majority of renters, the IFS economists warned.
They said: “Many renters would be unable to afford to buy.
“There is clear evidence from a range of housing markets that, in practice, rent controls reduce supply.
“There is no clear reason why the UK housing market would be any different, meaning we would also expect UK rent controls to similarly reduce the availability of rental properties.”
The analysis comes after Labour’s buy-to-let crackdown triggered a plunge in rental homes in London, with 22pc fewer properties on the market compared with before the 2024 general election, according to Savills.
