Labour urged to introduce ‘double lock rent’ cap – how it could hit your buy-to-let portfolio

Landlords are only just getting used to the Renters’ Rights Act but there are already calls for more reforms on rent.

A raft of new rental regulations were introduced earlier this month including the end of ‘no fault’ evictions and a shift to rolling tenancies.

The aim is to give tenants more rights and security but it adds to the extra administrative burden faced by landlords running a buy-to-let portfolio.

Property investors already face extra stamp duty charges and restrictions on mortgage interest relief, all dampening the profits from buy-to-let.

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But now a think tank has called for rent caps for tenants.

The Treasury recently ruled out rent caps but the Institute for Public Policy Research (IPPR) has released analysis this week calling for a “double lock” rent cap.

The think tank recommends the government stabilises rents, with annual rent increases limited by a “double lock” linked to whichever is lower: inflation or wage growth.

What is a “double lock” rent cap?

The IPPR argues that recent global shocks – from inflation to rising interest rates – have been passed from landlords directly onto renters, who have little ability to absorb or avoid sudden rent increases.

Its report suggests more than 45% of private renters live in unaffordable housing – an increase of over 250,000 households since 2023/24.

This is defined as households spending 30% or more of their post-tax, post-benefits income on rent.

Without intervention, it warns this is going to grow to 2.5 million by the end of the current parliament – an increase of 340,000 since 2023/24.

The think tank recommends the government stabilises rents, with annual rent increases limited by a double lock linked to whichever is lower – inflation or wage growth.

Its analysis suggests that, had such a system been in place since 2020, rents would be around 7% lower by the end of the decade – saving the average renter around £850 per year in England, and more than £1,700 in London, and reduce the number of households facing unaffordable rents by 140,000 compared to no intervention.

Dr Maya Singer Hobbs, senior research fellow at IPPR, said: “Millions of renters are being pushed to the brink by a housing market that simply isn’t working for them. This is no longer a marginal issue affecting a small group – it is a mainstream cost-of-living crisis hitting working households across the country.

“Without action, things will get worse. The current system leaves renters exposed to global shocks and rising costs they have no power to control.

“Government has taken important steps to strengthen renters’ rights, but it now needs to go further. A fair system of rent caps would rebalance the market, protect households from sharp increases, and ensure that rents grow in line with what people can actually afford.”

Do rent caps work?

Rent caps may sound good to tenants but the risk is that landlords are further deterred from the sector, reducing supply and ultimately pushing up pricing.

The National Residential Landlords Association has previously warned: “Imposing rent controls could mean locking in mandatory annual price rises for tenants. History has also shown it reduces the quality of the rented homes out there, with less cash coming in to be invested in improvements.

“In addition to locking new residents out of cities, it could see landlords quit the market, which in turn would reduce the overall number of homes available to rent.”

The IPPR aims to address these concerns by suggesting the cap should be accompanied by policies such as time-limited exemptions for new-build properties, to make sure more houses continue to be built and rental properties get added to the market.