The Chancellor is considering a freeze on rents within the private sector for a limited period as higher prices caused by the Iran war continue to put household budgets under significant pressure, it has been reported.

Such a rent freeze would be unprecedented – even the Covid pandemic failed to prompt the Johnson government to make such a move – and restricting rents in England would require parliamentary approval.

Wales recently rejected such a move while Scotland has implemented a limited system of rent controls due to go live next year.

Newspaper revelations

Rachel Reeves’ decision to revisit rent rises in the private rented sector are within claims made by The Guardian newspaper last night, revealing that ministers are so alarmed by current and looming cost of living rises caused by ballooning oil prices that they believe such a move is necessary.

It also follows political lobbying by tenants’ groups and several unions including a central London march last weekend calling for rent controls.

Nevertheless such a policy change would be a U-turn of politically seismic proportions – despite regular calls by London Mayor Sadiq Khan to let him restrain rent increases by private landlords Labour HQ has consistently said such a move would reduce investment within the sector.

‘Detrimental’

Only a few days ago housing minister Matthew Pennycook told MPs that “evidence from other countries shows rent controls detrimental to tenants”.

He said: “I have looked at a wealth of evidence, particularly international evidence, of what the impact of first and second-generation rent controls are, as well as more subtle forms of rent control, which can have differential impacts on different groups.

“Such controls typically benefit settled and better-off tenants more than those looking for a home or needing to move.”

Pennycook and the Chancellor’s change of heart has been applauded by the left-leaning thinktank the New Economics Foundation but its right-of- centre counterpart, the Centre for Policy Studies, says this would be a “mind-boggling scale of intervention in the private market”.

Industry reaction

Ben Beadle, Chief Executive of the National Residential Landlords Association

“Introducing a rent freeze would be a disaster for landlord and investor confidence and consequently the supply of homes in England,” he says.

“Any hope of growing the market– or even retaining the homes that millions of families rely on – would be lost.

“There is no evidence to suggest that it would make rents more affordable. In fact, the impact on supply would inevitably drive new rents still higher. Such a move would run completely counter to good economic sense and the Government’s own prior decision to rule out such measures.

“At a time when demand for rental housing continues to significantly outweigh supply, we agree with the Housing Minister’s view that any form of rent controls would make life more difficult for renters.

“Even if these reports prove to be speculation, it is reckless for this kind of uncertainty to be created in the same week that major reforms already causing concern among landlords come into force. For many, it may be enough to conclude that this is the moment to exit the private rented sector for good.”