Rachel Reeves considering rent freeze to limit Iran war fallout
Rachel Reeves is considering imposing a one-year rent freeze on private sector homes amid growing alarm in government about the impact of the Iran war on voters’ budgets.Landlords in England would be banned from raising rents for a limited period of time under the proposals, which are being debated within government as part of a major cost of living package to be launched in the coming weeks.The measure would be a significant reversal from the chancellor, who has resisted including rent controls in the government’s renters’ rights reforms, which come into force on Friday.But sources informed of the government discussions say ministers are now sufficiently worried about what the conflict in Iran will mean for mortgages and household budgets that they are willing to consider exceptional measures.With Labour braced for heavy losses at the local elections, Keir Starmer looking vulnerable as prime minister and economists predicting a surge in inflation, ministers are looking for immediate ways to ease the cost of living for voters.
George Bangham, the head of social policy at the New Economics Foundation thinktank, said: “We have an affordability crisis in the private rented sector, which dates back to before the pandemic.Other countries in western Europe already do this, and England used to from 1915 until 1989.“We know rent controls can fix an affordability crisis if done carefully, we just need to be willing to impose them.”Others, however, warn that controls on private sector rents will discourage developers from building housing and therefore exacerbate affordability problems in the long term.Robert Colvile, head of the Centre for Policy Studies, said: “This feels like a mind-boggling scale of intervention in the private market.
If the government wants to bring rents down it should build an awful lot more houses.”The Treasury said it would not comment on “speculation”.Discussions are understood to be at an early stage, although Reeves is said to be looking at a number of interventions in the rental markets to keep housing costs down.Sources say that of these, her favoured option was an outright freeze, which would last a year.The chancellor is expected to exempt new-build properties from the freeze in a bid to encourage developers to keep working on new schemes.
Labour has promised to oversee the building of 1.5m homes over the course of the parliament, though the numbers now being built are about a third below where they would need to be to hit that target.Labour commissioned a report while in opposition from Stephen Cowan, the leader of Hammersmith and Fulham council, which recommended a rent cap in England and Wales ensuring rents do not rise by more than either inflation or local wages.Shadow ministers dismissed the idea at the time and did not include it in their package of reforms, which comes into force this week and will make it illegal for a landlord to evict a tenant without a reason.The freeze that Reeves is now considering would go further however – albeit for a limited period of time – reflecting the fact that Labour officials consider these to be extraordinary circumstances.
The idea is one of a number of policies being looked at as ministers try to limit the impact of much higher inflation triggered by the Iran war and the closure of the strait of Hormuz,The International Monetary Fund warned this month that the UK would suffer the sharpest growth downgrade and joint highest inflation rate in the G7 this year, even if the fallout from soaring energy costs could be contained by the middle of 2026,Speaking to Sky News on Monday, Starmer said people might need to change their travel plans or what groceries they buy, depending how long the conflict lasts,He said: “I think we’ll see how long the conflict goes on,I can see that if there’s more impact, people might change their habits … Where they go on holiday this year, what they’re buying in the supermarket, that sort of thing.
”Reeves is considering a package of support to help with some households’ energy bills later this summer and is under pressure to cancel a planned rise in fuel duty,Ministers hope that bold proposals to ease the cost of living could help shore up Starmer’s position in the weeks after the local elections next month, at which Labour is expected to suffer heavy losses,Several councils, especially in urban areas, are expected to fall to the Green party, prompting concern among Labour MPs that they are losing voters to their left,The Greens have proposed rent controls in England and Wales,But while Zack Polanski, the party leader, has called for a one-year rent freeze in Wales until those controls come in, he has said the path to rent controls in England “might be longer”.
Other countries have announced or imposed their versions of rent controls in recent months,They include Scotland, where MSPs have passed a bill to allow ministers to cap rent in certain areas, and Spain, where the government has introduced a temporary measure allowing renters to demand a rent freeze for up to two years,
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