One of the thinktanks closest to the Labour government is urging ministers to introduce private sector rent controls in England, as the chancellor weighs up how to ease a surge in living costs caused by the Iran war.

The Institute for Public Policy Research (IPPR) has published a paper calling for a rent “double lock”, which would link rent increases to either wages or inflation, depending on which was lower.

While others on the left have previously called for rent controls, the IPPR’s extensive links inside government will increase pressure on ministers to include the idea in a cost of living package to be announced by Rachel Reeves later in May.

The Guardian revealed last month that Reeves had been considering a one-year rent freeze to deal with a rise in inflation which economists say is now inevitable, but the idea was quickly dismissed by Downing Street.

Maya Singer Hobbs, the author of the paper, said: “There are millions of people living with unaffordable housing costs, and if you want to bring those down quickly there are not many options.

“You could spend a lot more money on housing benefit, but that is expensive. You could invest in new supply, but that takes a long time to feed through into costs. That’s why we are calling for a rent cap, albeit carefully tailored.”

With the war in Iran entering its 11th week and the strait of Hormuz still closed, Reeves has been looking at how to deal with the expected jump in inflation, which is predicted to be the joint highest in the G7 this year.

The chancellor will make a speech later this month setting out her plans, which are likely to include support for energy bills, but government sources say she has been looking at a number of other ways to reduce prices for consumers.

One option under consideration until recently was a one-year freeze on private sector rents, something the government had previously dismissed as part of its renters’ rights package, for fear that it would reduce the rate of housebuilding.

A day after the Guardian revealed details of the plan, Downing Street ruled it out. But the chancellor is understood to be looking at other ways to keep housing costs low.

She told the Commons last month: “I will do everything in my power and use every lever we have to bear down on the cost of living, including for people in the private rented sector.”

The IPPR has calculated 2.4 million people in the UK now have unaffordable rents, meaning it costs more than 30% of their gross income. That number is expected to rise another 340,000 by the end of the decade.

Under its plans, private sector rents would be capped at whichever was lower of the 12-month average of either consumer price inflation or wage growth. This would also apply to new tenants moving into a property.

Any new building would be exempted from the cap for the first 10 years in a bid to encourage developers to continue building new homes.

A landlord who has done extensive work on their property – such as installing double glazing or solar panels – would also be allowed to raise rents beyond the cap.

As part of the thinktank’s plan, housing benefit would be increased to cover the cheapest 30% of rents, costing an additional £600m a year.

And to avoid landlords converting their properties to Airbnbs instead, the institute is recommending a new licensing system for short-term lets and a cap on the number of nights a property can be rented out for on a short-term basis.

Staff at the IPPR have been presenting their ideas to officials in the Treasury, Downing Street and the Ministry of Housing, Communities and Local Government in recent weeks.

Other countries have introduced rent controls at various times, with mixed success. The Scottish government introduced temporary rent controls in 2022, but rents then jumped sharply after they expired last year.

Academics say that while controls typically keep costs down on those properties covered by a cap, rents on those which are not covered rise more quickly than they otherwise would have done.