New analysis published today by the Joseph Rowntree Foundation (JRF) on the impact of rent controls on the future cost of uprating LHA outlines that relinking LHA to local rents at the upcoming Budget would cost £1.7bn in 2027/28.

Without rent controls, JRF suggests that the cost of relinking LHA to local rents each year would increase to £2.7 billion in 2030/31, however, the introduction of inflation-linked rent controls would see this cost reduced to £1.6bn instead, a saving of 40%.

It would also leave low-income renters outside the benefits system 10% better off overall in that year.

Repeated freezes have left LHA rates trailing far behind real rents, and high and rising rents are driving the cost of restoring them. The JRF argues that the ongoing freeze of LHA gives the false appearance of creating savings in Treasury forecasts while failing to account for the costs that show up elsewhere in the system, most visibly in the cost of temporary accommodation.

It suggests that uprating LHA so that it keeps pace with the real-world cost of rents, as it was originally designed to do, would be a “far better solution”.

Ahead of the upcoming Budget, JRF is calling on the government to restore LHA rates to the 30th percentile of local rents and commit to uprating them annually thereafter. Rent controls should be introduced both within and between tenancies to curb rent growth, thereby reducing the cost of future LHA uplifts and improving affordability for renters outside the benefits system.

For the JRF, a smooth introduction of rent control, and its potential impact on the small minority of financially exposed landlords, could materialise by reinstating mortgage interest relief to protect mortgaged landlords. It suggests this should be paid for by charging landlords National Insurance Contributions (NICs) on their rental income, primarily affecting landlords who own their properties outright and have been making above normal profits due to this favourable tax treatment.

Rosie Worsdale, senior policy adviser at JRF, said: “Every year that LHA stays frozen renters see the value of this vital support slip further away from the real cost of rents. They’re left to plug the gap by spending less on food and other essentials or, in the worst cases, face being pushed into homelessness. As well as the devastating cost to individuals and their families this is costing local councils, who are now spending enormous sums on temporary accommodation.

“We need a permanent return to uplifting LHA, making sure that it reflects the cost of real-world rents. Introducing a rent control would significantly reduce the cost of doing so over time by controlling rents as well as protecting government finances from large jumps in rents.”