IFS warning on rent caps puts London landlords on notice over fees, repairs and thin margins

There is no new rent control law in force — but the IFS warning matters because the first thing tight margins usually break is compliance.

The Institute for Fiscal Studies is not setting policy. Its analysis is a reminder of what rent caps have often done elsewhere: reduce rental supply, weaken maintenance, distort pricing between controlled and uncontrolled homes, and encourage attempts to recover income through other charges. That is not the same as a draft Bill for England, a cap percentage or an implementation date. Landlords should treat it as a serious policy signal, not a legal change.

For London, that distinction is important. The city has more highly leveraged stock, more leasehold costs, more licensing schemes and more tenancies close to the £50,000 annual rent threshold than most of England. If in-tenancy increases were ever restricted while mortgage costs, service charges, insurance and repair bills kept rising, the pressure would not be theoretical. It would show up immediately in cashflow, maintenance decisions and fee compliance.

The immediate risk is not the headline cap but compliance drift

When margins tighten, landlords rarely fail all at once. More often, standards slip around the edges: repairs are delayed, inspections become less regular, paperwork goes missing, and prohibited charges start to look tempting.

That is where the current legal risk sits. Existing duties do not soften because the politics have changed. Landlords still need to stay on top of gas safety, electrical safety, EPC requirements, smoke and carbon monoxide alarm rules, deposit protection, statutory repairs under section 11 of the Landlord and Tenant Act 1985, and fitness standards under the Homes (Fitness for Human Habitation) Act 2018.

In London, weak records can be as dangerous as weak maintenance. A leak, damp complaint or heating failure backed by poor files is far more likely to turn into a borough inspection, licensing issue or defence in possession proceedings.

The clearest current danger area is unlawful charging

If landlords try to replace restricted rent with extra charges, the law is already clear. The Tenant Fees Act 2019 bans most tenant fees in England and caps tenancy deposits at five weeks' rent where annual rent is below £50,000, and six weeks' rent where annual rent is £50,000 or more.

That threshold matters in London. At roughly £4,167 a month, a tenancy reaches the higher annual-rent band. Any attempt to make up margin through inflated deposits, invented admin charges, paid-for extras that should be included, or informal side payments would create a compliance problem now, regardless of whether rent control proposals go any further.

Stress-test each property before policy becomes legislation

The sensible response is to model exposure, not guess at politics. For each property, run at least three scenarios:

1. a 12-month rent freeze
2. a cap below current inflation
3. a cap affecting sitting tenants only

Test those scenarios against actual costs, including interest payments, service charges, licensing fees, insurance, repairs, voids and arrears. For HMOs and licensed properties, include amenity standards, utility exposure and management intensity. If the portfolio sits in a company structure, look beyond headline yield to debt-service cover and lender covenant pressure.

Exposure will vary sharply across London. A leasehold flat with rising service charges may be far more vulnerable than a freehold house with lower running costs. A Camden family let and a lower-rent outer-borough flat will not react the same way to any future cap. Treat this as an asset-by-asset exercise, not a portfolio average.

Review tenancy documents now, not when a Bill lands

The next job is paperwork. Landlords should know exactly how each tenancy currently allows rent increases and what could be affected by future transition rules.

Check:

• rent review clauses
• statutory rent increase procedures
• whether the tenancy is fixed term or periodic
• start dates and review dates
• any side agreements or non-rent charges

If ministers eventually publish legislation, the fine print on exemptions and transitional arrangements could matter more than the headline announcement. Properties that are newly built, recently let or mid-term may not be treated the same way. The worst time to discover gaps in your tenancy data is during a fast-moving consultation or legislative push.

London landlords should act now, but only on what is real

The IFS analysis does not require landlords to rewrite rents today. It does, however, expose where many portfolios are fragile: maintenance budgets, documentation, fee compliance and thinly modelled cashflow.

The right response is disciplined preparation. Stress-test the numbers, tighten the files and remove any charging practices that would not survive scrutiny now.

R&S can help by reviewing your London tenancy documents, deposit settings and property files against current fee, repair and safety rules before any rent-cap proposal reaches Parliament.