UK's rental market faces housing shortage as landlords leave

The UK's private rented sector (PRS) is grappling with an escalating crisis, as recent data reveals a substantial shortage of available homes to meet the soaring demand from tenants.  

According to research conducted by Pegasus Insight for the National Residential Landlords Association (NRLA), eight in 10 landlords (79%) are reporting strong tenant demand in the third quarter of 2024.  

The highest demand at 84% was seen in the South East, while the West Midlands saw the smallest demand. 

Despite the high demand, the market is seeing a significant reduction in the number of properties available for rent.  

Across England and Wales, the NRLA says that 19% of landlords have sold property over the past year, more than double the 8% who invested.  

Worryingly, 41% of landlords plan to sell some rental properties in the next year, while only 6% intend to buy. 

'Not enough homes to rent' 

The NRLA's chief executive, Ben Beadle, said: "Tenants the length and breadth of the country know that there are not enough homes to rent.  

"Rather than seeking to tackle it, the Government is instead doubling down on policies that have caused the chasm between supply and demand to widen in the first place. 

"Whilst landlords selling up might benefit a minority of tenants in a position to afford a home of their own, the vast majority will face a growing struggle to access rental homes." 

He added: "It's time for a change of course. We need policies to support the provision of more decent quality homes for private rent alongside all other tenures." 

Landlord instructions fall 

The NRLA's concerns are echoed by the Royal Institution of Chartered Surveyors (RICS) and its residential market survey found that tenant demand increased over the three months to October. 

However, landlord instructions, which measure properties available for rent, fell to their weakest level since the end of 2021. 

The organisation says that the situation is being made worse by the recent Autumn Budget's increasing of stamp duty for second homes. 

This measure, it says, might potentially benefit owner-occupiers, but will lead to a further drop in rented home supply. 

RICS' President, Tina Paillet, said: "Our data continues to indicate that renters are feeling the pressure from a limited supply of rental properties and rising rents.  

"While the Autumn Budget announcement of immediate stamp duty increases for landlords acquiring rental properties may increase opportunities in supply for owner-occupiers, it will make it more challenging to address the critical shortage of rental homes." 

Mass exodus of landlords 

Despite these challenges, recent research by Lomond suggests that fears of a mass exodus of landlords from the rental sector may have been overblown.  

Its analysis revealed a slight drop of 0.6% in the number of tenanted properties listed for sale across England in the two weeks following the Budget.  

Lomond's chief executive, Ed Phillips, said: "It's becoming fairly apparent that the exodus of buy to let landlords has been somewhat exaggerated and the vast majority continue to see the rental sector as a secure and consistent avenue of investment, despite the government's best efforts to dent profitability. 

"The good news is that having escaped a capital gains tax increase, we simply haven't seen a rush for the door following the Autumn Budget." 

He adds: "We expect the buy to let landscape will continue to remain positive now that the budget dust has settled." 

Landlords are selling up 

The managing director of Accommodation for Students, Simon Thompson, said: "Some landlords might disagree with Lomond's assessment that there isn’t an exodus of landlords, but two other surveys confirm landlords are selling up. 

"There will be various reasons for selling but the upcoming Renters' Rights Bill and fears of changes to the capital gains tax rules will be among them. 

"That means there will be fewer homes to rent, and tenants will find that rents will increase because competition will be stiff." 

He added: "Landlords need to keep up to date with what is happening in the PRS and make a decision on whether to invest or sell based on their circumstances. 

"It doesn't have to be this way and it's time the Government had a conversation about the PRS with landlords to ensure that tenants have homes to rent."