Rising rents are a national problem, says think tank

According to NEF research published today, renters are now seeing an increase of between 6% and 9% every year.

The report shows that the lowest income tenants spend just under half of their income (48.5%) on rent, and warns that without further action, affordability will continue to deteriorate across the country.

The research states that the Tenants’ Rights Actwhich came into effect this month was a crucial step forward in protecting tenants from unfair evictions and other abuses.

However, it will not in itself solve the problem of unaffordable rents, the NEF continued.

The proposals call for an ’emergency brake’, with rent increases capped at the lowest value inflation or 2%, combined with a return to a system of ‘fair rents’, used throughout the twentieth century until abolished in the 1980s.

The policy rested on the principle that landlords should receive fair rental income, and in return not exploit tenants by charging excessive rents.

NEF senior researcher Molly Harris said: “It doesn’t matter who you are, to live in an affordable, safe home is the basis of a good life. But private renters are often pushed into overpriced and substandard housing.

“The Renters’ Rights Act is a valuable step forward in making private renting safer and fairer, but it will not solve the problem of runaway rents in Britain.

“Revitalizing a proven system that had been around for over 70 years, but redesigned for the 21stst century, would make life more affordable for private renters across the country.”

Before the pandemic, rent increases were modest and varied across the country, from around 1% in the North East to over 3% in the East of England.

Since then the picture has changed dramatically, with all regions growing by between 6 and 9% and the three fastest growing rental markets are all in cities in the North West.

The report states that decades of policy choices, including the abolition of rent controls, the sale of social housing through Right to Buy and the introduction of buy-to-let mortgages, have worsened housing affordability in every region of the UK.

In the meantime, the consequences are being felt throughout the economy, according to the NEF. High rents transfer income from tenants, who are more likely to spend, to landlords, who are more likely to save or reinvest in assets. This suppresses consumer demand and channels billions in housing benefits to private landlords.

The NEF document proposes a comprehensive reform programme, combining immediate action with a longer-term structural framework:

• An immediate one ’emergency brake’ for runaway rents until a fair rental system is introduced. This would temporarily introduce a cap on rent increases, both within and between leases, at inflation rates or 2%, whichever is lower

• New powers for The Mayor’s Combined Authorities will identify local rent pressures and pilot ‘fair rent’ schemes, setting rent levels based on local indices rather than uncapped market rents

• A gradual implementation of fair rents in parts of the country where rents are spiraling out of control through a long-term, phased process to prevent rental crashes or excessive rental turnover

• An exemption for new-build homes for a period of time from the emergency brake and fair rent system, and then gradually transfer them to the fair rent system

The proposals are based on international evidence, including from France, Germany, Ireland and Spain, all of which have rent control systems in place. Rent controls in Paris, for example, have caused rents to fall by an average of 3.7% to 4.2%, without any evidence of negative effects on rental market supply, the NEF said.

Public opinion strongly favors action on rent controls. Polling by Ipsos MORI in 2024 showed that 71% of the public supported capping annual rent increases at no more than the national inflation rate, while only 8% were opposed. A separate YouGov survey for Common Wealth found that 75% supported a quality and location-based rent control policy.