Argues for a "double lock" rent cap and how it might affect landlords

A rent cap based on inflation and wages has been suggested by a think tank to curb increases, but would the plan be effective?

Even though landlords are still getting used to the Renters Rights Act, more rent reforms are already being called for.

Earlier this month, a number of new rental rules were introduced, such as the switch to rolling tenancies and the termination of no-fault evictions.

Although the goal is to give tenants more security and rights, it increases the administrative burden on landlords managing a buy-to-let portfolio.

Current BFIA issues. Investors in real estate already have to deal with additional stamp duty fees and limitations on mortgage interest relief, which reduces buy-to-let profits.

Current Videos From IMG IMG However, a think tank has now advocated for tenant rent caps.

The Institute for Public Policy Research (IPPR) published analysis this week advocating for a "double lock" rent cap, despite the Treasury's recent rejection of rent caps.

The think tank suggests that the government stabilize rents by limiting annual rent increases through a "double lock" that is connected to either wage growth or inflation, whichever is lower.

A "double lock" rent cap: what is it?

The IPPR contends that recent global shocks, such as inflation and rising interest rates, have been directly transferred from landlords to tenants, who are ill-equipped to absorb or prevent abrupt rent increases.

According to its report, over 250,000 households have moved into unaffordable housing since 2023-2024, accounting for over 45% of private renters.

This is characterized by households paying rent with at least 30% of their post-tax, post-benefits income.

It warns that if nothing is done, this will increase by 340,000 since 2023-2024 and reach 2.5 million by the end of the current parliament.

The think tank suggests that the government stabilize rents by limiting annual rent increases with a double lock that is tied to either lower wage growth or inflation.

According to its analysis, if such a system had been in place since 2020, rents would have decreased by about 7% by the end of the decade, saving the average renter about 850 annually in England and over 1,700 in London. Additionally, compared to no intervention, the number of households facing unaffordable rents would have decreased by 140,000.

According to Dr. Maya Singer Hobbs, senior research fellow at IPPR: "A housing market that isn't working for them is pushing millions of renters to the brink." This is now a widespread cost-of-living crisis affecting working households nationwide rather than a minor problem affecting a select few.

"If nothing is done, things will worsen. Due to the current system, renters are vulnerable to uncontrollably rising costs and worldwide shocks.

"The government has made significant progress in bolstering renters' rights, but more needs to be done. In addition to rebalancing the market and shielding households from abrupt increases, a just rent cap system would guarantee that rent increases are commensurate with what people can truly afford. A "

Do rent caps apply?

Tenants may find rent caps appealing, but there is a chance that they will further discourage landlords from entering the market, which would lower supply and eventually drive up prices.

"Imposing rent controls could mean locking in mandatory annual price rises for tenants," the National Residential Landlords Association had previously cautioned. Additionally, history has demonstrated that it lowers the standard of rental properties because there is less money available for upgrades.

In addition to preventing newcomers from entering cities, it might cause landlords to leave the market, which would lower the total number of rental properties. The "

In order to allay these worries, the IPPR proposes that in order to ensure that more homes are constructed and rental properties are added to the market, the cap should be accompanied by measures like time-limited exemptions for new-build properties.