The UK rental market is facing an ongoing crisis as landlords continue to sell off properties, exacerbating an already severe housing shortage. New research highlights the growing struggles of private sector tenants, with rental demand surging while available housing stock shrinks.
According to the latest data from Pegasus Insights, commissioned by the National Residential Landlords Association (NRLA), almost 77 per cent of landlords in England and Wales reported strong demand from prospective tenants in the final quarter of 2024. The South West led the way, with 81 per cent of landlords reporting high demand, followed closely by 80 per cent in the South East and North West.
Landlords Selling Off Properties at an Alarming Rate
Despite this high tenant demand, landlords are leaving the market at a concerning pace. Over the past 12 months, 20 per cent of landlords sold at least one rental property, a figure nearly three times higher than the 7 per cent who expanded their portfolios by purchasing new rental properties.
The outlook for the next 12 months is even more troubling. A staggering 41 per cent of landlords plan to reduce the number of properties they rent out, while only 5 per cent intend to increase their rental portfolios. Government data further reveals that selling property is now the most common reason for ending tenancies—nearly three times more frequent than any other cause.
What’s Driving Landlords Out of the Market?
Several factors are prompting landlords to exit the rental sector, including increasing taxation, policy uncertainty, and financial pressures. The stamp duty surcharge on additional property purchases, introduced in recent years, has made acquiring rental properties less attractive.
Moreover, changes to Section 21 “no-fault” evictions, coupled with delays in the court system, have made repossessing properties more complicated and risky for landlords.
Compounding the issue, the Government’s decision to freeze Local Housing Allowance (LHA) rates from April 2025 will make it even harder for lower-income tenants to afford rising rents, putting additional pressure on landlords managing tenancies for benefit-reliant renters.
Calls for Urgent Government Action
The NRLA is urging the Government to take immediate steps to restore landlord confidence and prevent further erosion of the private rental market. Their key demands include:
- Scrapping the Stamp Duty Hike: The additional tax burden imposed on new rental property purchases should be reversed to encourage investment in the sector. Paul Johnson, director of the Institute for Fiscal Studies, has warned that such measures will ultimately “reduce the supply of rental housing and so increase rents.”
- Speeding Up Court Processes for Evictions: With the upcoming abolition of Section 21 under the Renters’ Rights Bill, landlords must have a fair and efficient legal mechanism to reclaim properties in cases of non-payment or breach of tenancy agreements. The NRLA echoes calls from The Law Society for increased investment in the justice system to ensure possession claims are processed more swiftly
- Reinstating Housing Benefit Increases: Freezing Local Housing Allowance rates will severely impact tenants reliant on benefits, making it harder for them to secure and sustain tenancies. The NRLA is pushing for a reversal of this decision to support those on lower incomes.
The Future of the UK Rental Market
If the Government fails to act, the exodus of landlords from the sector will continue, driving rents higher and making it even harder for tenants to find homes. The rental market’s supply-demand imbalance will worsen, disproportionately affecting lower-income households and those on housing benefits.
For landlords still in the market, this presents both challenges and opportunities. With fewer rental properties available, competition among tenants may lead to higher rental yields. However, increased regulation and financial pressures require landlords to carefully assess their portfolios, ensuring compliance with changing laws while maximising profitability.
Final Thoughts
The UK rental market is at a crossroads. Without decisive action from policymakers, the imbalance between supply and demand will only grow, making life harder for both tenants and landlords. For property investors, staying informed about legislative changes and market trends will be crucial in navigating the challenges ahead.
With demand for rental housing at an all-time high, landlords who can adapt to the shifting landscape may find opportunities amidst the turbulence. However, unless the Government takes urgent steps to support the sector, the outlook for the UK rental market remains uncertain.
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