Labour often talks a good game on housing. Sir Keir Starmer’s party acknowledges the need to reform planning laws to deliver abundant housing, beautiful architecture, supportive infrastructure and green spaces — which makes it even more disappointing that the party can’t, or won’t, rule out a policy that would make the housing sector more dysfunctional: rent control.

Rachel Reeves, the shadow chancellor, recently left the door open for rent caps, stating that while they weren’t national policy, “local areas should decide”. Sadiq Khan, Labour’s London mayor, and Andy Burnham, Manchester’s mayor, have lobbied for such powers, while a Labour-commissioned report recently recommended a renters’ “double-lock”. Under this proposal, landlords could raise rents within tenancies only by the lower of local wage growth or inflation each year.

Economists reject rent controls, in large part because the empirical evidence against them is so devastating. A recent meta-study by Konstantin Kholodilin for the Journal of Housing Economics confirms that rent controls lower the supply of rental units, curb new construction and reduce the quality of rentable homes.

Economists reject rent controls, in large part because the empirical evidence against them is so devastating. A recent meta-study by Konstantin Kholodilin for the Journal of Housing Economics confirms that rent controls lower the supply of rental units, curb new construction and reduce the quality of rentable homes.

In 2021, St Paul, a city in Minnesota, capped rent increases at 3 per cent per year; new building permits for accommodation blocks fell by 80 per cent. Berlin froze rents for many properties in 2019; it led to a rapid decline in units advertised relative both to other German cities and to properties exempt. When rents are capped, marginal affected landlords sell, occupy their properties, put them on Airbnb or rent in black markets.

Since owning a home requires a hefty deposit and homeowners want larger properties, rent controls eliminate cheaper shared-house options. Rent controls also encourage tenant beneficiaries to stay in homes unsuitable for their families’ size or needs, while giving landlords an incentive to favour “low-risk”, wealthier tenants. All this means rent controls can be regressive and can reduce economic mobility.

In theory, the tenancy rent controls proposed by Stephen Cowan, the Labour leader of Hammersmith and Fulham council, would be less destructive than simple rent increase caps. Since rents can adjust between tenancies, prices won’t deviate as much from market rates over time. The benefit for renters would be more certainty that rents won’t suddenly jump within tenancies, protecting them against “economic eviction”.

In practice, as the recent Scottish experience showed, tenancy rent controls still spook landlords, reducing the supply of rental accommodation and pushing up prices. Landlords rightly perceive that these controls’ failure to improve affordability will create political pressure to extend rent regulations to periods between tenancies. Given the present government’s proposals to abolish “no-fault evictions”, effectively creating indefinite tenancies, tenancy rent control could become very much like old-school rent caps, anyway.

Under tenancy rent control, landlords will frontload rents to hedge against faster-than-expected prices growth and will opt for tenants who are more likely to be mobile, such as the childless. When inflation is high and volatile, these controls become especially destructive. In Argentina, Javier Milei removed tenancy rent controls as one of his first presidential acts. Since December, the formal supply of rental housing in Buenos Aires has risen by 240 per cent.

Nobody pretends that tenancy rent controls would be as destructive here as in hyperinflationary Argentina. Yet decades of insufficient housebuilding amid rising incomes and high immigration have made our property market a zero-sum basket case. The only sustainable route to affordable rents is planning reform and a flexible housing supply. Without that, even relief via housing benefit payments primarily push up house prices rather than encouraging new construction.

Rent control clearly would be a retrograde step, but local politicians like to signal that they care about tenants. Unfortunately, it’s not easy to reverse course when the harmful consequences are felt. After its wartime introduction in 1915, rent control persisted in various forms until Margaret Thatcher abolished it in 1989. Over that period, the private rental sector collapsed from nine-tenths to one-tenth of the housing stock. Please, Sir Keir: no turning back.