Interest rate rises and tax changes introduced since 2021 have had a greater impact on landlord profitability than a two-year rent freeze would have, according to a new report from the UCL Institute for Innovation and Public Purpose (IIPP) and the New Economics Foundation (NEF).
Using HMRC data, the researchers modelled the impact of reducing private rents by 10% and 20%. They estimate that a 10% reduction in rents—equivalent to freezing rents at May 2024 levels—would save the average renting household around £1,300 a year while making 2.3% of individual landlords unprofitable. By comparison, the report says 4.8% of landlords have already been pushed into unprofitability by higher interest rates and tax changes introduced since 2021.
Under a 20% rent reduction scenario, the researchers estimate the average renting household would save around £2,400 a year. They argue that landlords with mortgages would still generate profits well above the average UK business, while landlords without borrowing would continue to achieve even higher returns.
The report also estimates that reducing rents by 20% could lower government housing benefit expenditure by at least £2bn a year.
Report author Dr Beth Stratford said: “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. Our analysis shows that landlords are making much larger profits than other UK businesses, even after recent interest hikes and tax rises.”
“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.”
The researchers argue that fears of a large-scale landlord exit following interest rate increases in 2022 have not been borne out. Citing Ministry of Housing, Communities and Local Government data, the report notes that England’s private rented sector grew by an estimated 96,000 homes between 2023 and 2025.
While acknowledging that rent controls could prompt some landlords to sell, the report argues this could provide an opportunity for councils, housing associations and community-led organisations to acquire more homes. It estimates that housing benefit savings generated over a decade under a 20% rent reduction could support the purchase of around half of the homes made unprofitable by the policy, with around half of those subsequently converted to social housing.
Molly Harris, senior researcher at the New Economics Foundation, commented: “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.
“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.”
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