Interest rate rises and tax changes since 2021 have affected landlord profitability more than a two-year rent freeze would have, according to a new report from the UCL Institute for Innovation and Public Purpose and the New Economics Foundation.
The researchers used HMRC data to model two scenarios: a 10% and a 20% reduction in rents. A 10% reduction, equivalent to freezing rents from May 2024, would save the average renting household £1,300 a year and would have made 2.3% of individual landlords unprofitable. That compares with the 4.8% who have been made unprofitable by tax changes and interest rate rises since 2021.
Under a 20% rent reduction, saving the average renting household £2,400 a year, mortgaged landlords would still make profits more than four times higher than the average UK business, the report found.
Landlords without a mortgage, who make up the majority, could expect even larger profits. The researchers also calculate that this scenario would save the government at least £2 billion a year in housing benefit spending.
A 10% rent cut would save renting households £1,300 a year and affect 2.3% of landlords
Tax and interest rate changes since 2021 have made 4.8% of landlords unprofitable
A 20% rent cut could save the government at least £2 billion annually in housing benefit costs
Report author Dr Beth Stratford said rent controls are among the few policies capable of delivering immediate relief to households while easing pressure on the public purse.
"Rent controls are one of the few policies that can provide immediate relief to struggling households and provide a much-needed boost to local economies, whilst saving the government billions," she said. "Our analysis shows that landlords are making much larger profits than other UK businesses, even after recent interest hikes and tax rises."
She argued that, combined with the right fiscal and legal framework, rent controls could support a shift in housing tenure. "Well-designed rent controls, combined with the right fiscal and legal framework, create a historic opportunity: a managed transfer of homes out of the insecure and unaffordable private rented sector and into home ownership or secure and permanently affordable ownership by councils, housing associations and community-led organisations," she said.
Molly Harris, senior researcher at the New Economics Foundation, linked the findings to the organisation's earlier proposals for capping rent increases at CPI or 2%, whichever is lower.
"As a complement to NEF's recent proposals for a rent cap at CPI or 2%, whichever is lower, this is an important contribution to the growing base of evidence which shows action can and must be taken to protect renters from a housing affordability crisis," she said. She added that landlord profitability remains high despite recent cost pressures.
"Everybody deserves a home they can afford and feel secure in, yet far too many private renters are being pushed into overpriced and substandard homes. This report shows that landlords' overall profitability remains very high, despite recent rises in interest rates and taxes. Action to improve affordability for private renters could make significant savings for households and government, while most landlords could continue to be profitable."
Predictions of a landlord exodus following the 2022 interest rate rises have not materialised, the report notes. The Ministry of Housing, Community and Local Government estimates the number of privately rented dwellings in England grew by 96,000 between 2023 and 2025.
The report acknowledges that introducing rent controls would likely prompt some landlords to sell their properties, but argues this presents an opportunity for homes to transfer from the private rented sector into ownership by councils, housing associations and community-led organisations.
Over ten years, the researchers calculate, the housing benefit savings from a 20% rent reduction would be enough to fund the purchase of around half of the homes rendered unprofitable by that change, converting half of those to social rent.
