Rachel Reeves considering rent freeze to curb Iran war economic crisis

Landlords in England could be banned from raising rents for a limited time under the Chancellor's new proposals, which are being debated as part of a major cost-of-living package in the coming weeks.

Reeves has resisted including rent controls in the government’s recent renters' rights reforms, which come into force on Friday.

Sources say that ministers are significantly concerned that the conflict in Iran and the blockade of the Strait of Hormuz will increase mortgages and household budgets.

Labour has been braced for heavy losses in the upcoming local elections, alongside mounting calls for Keir Starmer to stand down as prime minister, which have led to ministers considering exceptional measures on how to ease voters' financial burdens.

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George Bangham, the head of social policy at the New Economics Foundation thinktank, told the Guardian: "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."

However, critics have warned that the freeze could discourage developers from building housing, causing long-term affordability problems.

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."

Reeves is said to exempt new-build properties from the freeze in a bid to encourage developers to continue housebuilding.

Previously, Labour vowed to oversee the building of 1.5 million homes during their leadership, but they are currently about a third of the way below target.

This comes as the economic fallout from the Iran war has been forecast to hit the UK the hardest out of all the world's advanced economies, the International Monetary Fund (IMF) warned.

Reeves said the war “will come at a cost to the UK” following the IMF’s dire outlook.

Oil and gas prices have surged higher in the following weeks, with energy production and transportation impacted by attacks on facilities and the blockade of the Strait of Hormuz.

The UK's downgrade of half a percentage point is the largest of the world's advanced economies.

In its latest economic outlook, the IMF said UK economic growth will be weaker than previously expected as a result.

It said UK gross domestic product (GDP) is set to grow by 0.8% in 2026, with this improving to 1.3% in 2027.

However, as recently as January, the IMF had predicted 1.3% growth in 2026 and 1.5% in 2027.

The Ministry of Housing, Communities and Local Government and HM Treasury were contacted by LBC for comment.