BLOGS

Introduction

The debate around rent controls has intensified across the UK as tenants face sustained affordability pressures. Propertymark, the professional body representing letting agents and property managers, has issued a stark warning to the Chancellor: well-intentioned rent caps could trigger unintended consequences that ultimately worsen the rental crisis.

With average rents continuing to climb across most UK regions and rental supply constrained, the trade body argues that price interventions risk accelerating landlord exits from the private rented sector. But what does the market data actually reveal, and are these concerns justified?

The case against rent controls: Propertymark's position

Propertymark's intervention reflects growing concern within the property industry about interventionist approaches to rental affordability. The organisation points to several potential consequences of rent caps:

• Reduced investment: Landlords facing capped returns may choose to sell properties rather than continue letting, reducing overall rental stock

• Quality deterioration: With restricted income growth, landlords may defer maintenance and improvements

• Market distortions: Controlled rents can create two-tier markets where existing tenants benefit while new renters face even greater competition for limited stock

REalyse data shows that rental supply has remained under pressure across much of the UK, with average days on market for lettings significantly lower than historical norms in many urban areas. This suggests the market is already supply-constrained before any additional regulatory intervention.

Scotland's rent controls: an early warning?

Scotland provides the most relevant UK case study for rent control impacts. The Scottish Government introduced emergency rent caps in 2022, subsequently extended and modified, placing limits on in-tenancy rent increases.

Analysis of Scottish rental market data reveals mixed signals. While the measures have provided short-term protection for existing tenants, REalyse platform insights indicate that:

• Rental listings volumes in key Scottish cities have shown notable declines compared to pre-control periods

• The gap between advertised rents for new tenancies and existing controlled rents has widened

• Gross yields in Scottish markets have compressed, potentially reducing the attractiveness of buy-to-let investment

Industry surveys suggest that a significant proportion of Scottish landlords have sold or are considering selling properties since controls were introduced. Whether this represents a direct causal relationship or reflects broader economic factors remains debated, but the correlation has strengthened Propertymark's concerns.

The supply-side challenge

At the heart of Propertymark's argument lies a fundamental economic principle: price controls in a supply-constrained market risk worsening shortages. REalyse data tracking rental listings across UK regions shows persistent supply-demand imbalances in most major rental markets.

Key supply-side trends include:

• Landlord sentiment: Rising mortgage costs, increased regulation and tax changes have already prompted landlord exits from the sector

• Build-to-rent growth: Institutional rental development has accelerated but remains a small fraction of overall supply

• Planning pipeline: While residential planning applications continue across the UK, purpose-built rental schemes face their own viability challenges

The private rented sector accounts for approximately 19% of English households. Any significant contraction in this stock without commensurate social housing development would intensify competition and push more tenants into unsuitable or unaffordable situations.

Alternative approaches to affordability

Propertymark and other industry bodies have advocated for supply-focused solutions rather than price interventions. These include:

• Reforming planning processes to accelerate housing delivery

• Reconsidering recent tax changes that have reduced landlord returns

• Supporting institutional investment in purpose-built rental housing

• Expanding social housing to provide alternatives to private renting

REalyse planning and development data shows that residential pipeline activity varies significantly by region, with some areas seeing robust development while others face persistent undersupply. A more targeted approach to housing delivery, matched to local demand patterns, could address affordability without the market distortions associated with rent controls.

Conclusion

The rent control debate encapsulates a fundamental tension in housing policy: the need to protect vulnerable tenants today versus the risk of deterring the investment needed for tomorrow's supply. Propertymark's warnings deserve serious consideration, particularly given emerging evidence from Scotland's experience.

What seems clear from market data is that the UK rental sector already faces significant supply pressures. Any policy intervention must be weighed against its potential impact on landlord behaviour and, ultimately, on the availability of rental homes. As the Chancellor considers options for addressing housing affordability, the industry's call for caution—backed by data showing a market under strain—merits careful attention.