The UK's private rented sector is facing a growing crisis, with proposed reforms designed to enhance tenant protections reportedly triggering an exodus of landlords and a subsequent squeeze on housing supply. Industry experts and landlord associations suggest that measures within the Renters (Reform) Bill are leading many property owners to sell their portfolios, rather than continue letting, resulting in fewer homes available for rent and pushing up prices for tenants.
The Renters (Reform) Bill, currently making its way through Parliament, aims to abolish 'no-fault' evictions (Section 21), introduce a Decent Homes Standard for rented properties, and make it easier for tenants to keep pets. While these reforms are broadly welcomed by tenant advocacy groups, landlord organisations argue that the changes, coupled with increased regulatory burdens and rising operational costs, are making buy-to-let an increasingly unviable investment. This sentiment is reportedly driving a significant number of landlords to exit the market.
Data from various property portals and industry bodies supports the narrative of shrinking supply. Rightmove, for example, has consistently reported record-low availability of rental properties, with tenant demand far outstripping the homes on offer. This imbalance is directly contributing to soaring rents, with average asking rents outside London reaching an all-time high of £1,280 per calendar month at the end of 2023, representing an 8.5% annual increase, according to Rightmove. Zoopla also reported that average UK rents grew by 7.8% in the year to January 2024, reaching £1,220 per month, with growth even higher in some regions.
The implications of this trend are profound for a wide range of individuals. For existing tenants, finding a new rental property is becoming a highly competitive and expensive endeavour. Many face 'bidding wars' and significant rent hikes upon renewal or when searching for a new home. First-time buyers, already grappling with high interest rates and deposit requirements, may find themselves competing with former rental properties entering the sales market, potentially propping up house prices in certain areas.
Landlords, meanwhile, point to a combination of factors beyond the reforms, including higher mortgage interest rates and increased compliance costs, as reasons for divesting. The average two-year fixed mortgage rate for landlords stood at 5.59% in April 2024, according to Moneyfacts, significantly higher than rates seen in previous years, impacting profitability. The removal of tax relief on mortgage interest for landlords in recent years has also been cited as a contributing factor to reduced profitability.
Housing charities and tenant groups acknowledge the supply crunch but argue that stronger protections are essential to prevent exploitation and ensure safe, secure housing. They suggest that the government should focus on increasing the overall housing stock through new builds and social housing initiatives, rather than solely relying on the private rented sector to meet demand.