Rent controls, as being explored by the new Labour government, would do more harm than good – pushing up rents in the uncontrolled sector, according to a new study.
A review of schemes across the globe for the Institute of Economic Affairs (IEA) also shows landlords are likely to leave the sector, exacerbating the housing shortage.
The briefing paper by Dr Konstantin Kholodilin, Senior Researcher at the German Institute for Economic Research, examined 196 studies undertaken over 60 years across almost 100 countries.
Other findings on the negative impact of rent-control schemes include:
- Less maintenance spending;
- Poorer quality housing;
- Conversion to owner-occupation;
- Fewer new rental properties being built;
- Reduction in residential mobility.
The study was published as reports emerged about the rental supply in Buenos Aires jumping by nearly 200% following Argentina’s President Javier Milei’s repeal of rent-control laws.
According to Dr Kholodilin, rent controls can also create excess demand for housing. This can result in new residents struggling to find places to live, which decreases labour mobility, increases discrimination against marginalised groups, and boosts black-market activity.
The policy can also result in people staying in their existing apartments for longer than they should, such as a widow remaining in a large rent-controlled apartment long after her family has moved out. The lack of movement leads to a misallocation of available housing, resulting in further economic damage.
