A leading UK think tank, the Joseph Rowntree Foundation (JRF), has put forward a comprehensive package of reforms for the private rental sector, including the introduction of rent controls. The charity proposes capping rent increases within existing tenancies at the rate of Consumer Price Index (CPI) inflation. This measure is coupled with significant changes to the tax landscape for landlords, specifically advocating for the reversal of Section 24 mortgage interest restrictions and the application of National Insurance contributions to rental income.
The JRF asserts that these combined measures could deliver substantial financial relief to renters, estimating average annual savings of £1,200 per household by the year 2030. Crucially, the organisation argues that this framework would achieve such savings without triggering a mass exodus of landlords from the market, a common concern raised against the implementation of rent controls. The proposals aim to strike a balance between enhancing tenant affordability and maintaining a stable supply of rental properties.
Contextually, the UK's rental market has experienced significant upward pressure on prices in recent years, driven by a combination of high demand, limited supply, and rising interest rates impacting landlord costs. Data from sources like Rightmove and Zoopla have consistently shown year-on-year rental price increases outstripping wage growth in many regions, making affordability a critical issue for millions of households. For instance, Rightmove reported average asking rents outside London were up 9.3% annually in Q1 2024, highlighting the scale of the challenge renters face.
The reversal of Section 24, introduced in 2017, would allow landlords to deduct all their mortgage interest from their rental income before calculating their tax bill, effectively reducing their taxable profits. This change was implemented to level the playing field between landlords and owner-occupiers but has been criticised by some as increasing costs for buy-to-let investors. The JRF's proposal to reintroduce this deduction, while simultaneously applying National Insurance to rental income, represents a nuanced approach to landlord taxation designed to offset some of the financial impacts of rent controls.
For first-time buyers, a more stable rental market could indirectly offer some relief by potentially reducing the pressure to buy due to spiralling rents, though the primary challenges of deposit savings and high mortgage rates would remain. Existing homeowners are largely unaffected by these proposals, but the health of the rental sector can have broader economic implications. Landlords, particularly smaller portfolios, would face a new financial environment, with potentially lower rental growth but also revised tax liabilities, requiring careful financial planning and potentially influencing investment decisions in the buy-to-let market.
The proposals enter a wider debate about housing policy in the UK, where solutions to affordability crises are keenly sought. Previous government schemes like Help to Buy have focused on homeownership, while discussions around stamp duty reforms often target stimulating market activity. The JRF's intervention shifts focus firmly onto the private rented sector, advocating for direct intervention to protect tenants' financial stability amidst ongoing cost of living pressures.
Source: Joseph Rowntree Foundation