The UK's rental market is facing a perfect storm, with the Renters' Rights Act being blamed for driving up London rents and prompting landlords to sell their properties in droves. New analysis from Knight Frank reveals a stark link between the legislation and a reduction in available rental stock, leaving tenants struggling to find homes.
Tom Bill, head of UK research at Knight Frank, has sounded a warning bell for policymakers, describing the reforms as a 'cautionary tale' that highlights the unintended consequences of economic policies. The Act aimed to empower tenants by addressing issues such as rent-setting and repossession procedures, but Mr Bill suggests it may have gone too far in targeting landlords.
Since the Act's introduction, there has been a noticeable trend of landlords selling up, contributing to a shortage of available rental properties – particularly in parts of London. Knight Frank's data shows that average rents in prime outer London rose by 3.2% in the year leading up to May, the highest annual increase since June 2024.
The imbalance between supply and demand is becoming increasingly severe. With six prospective tenants vying for every new rental property entering the market, the pressure on landlords is mounting. Rightmove data highlighted by Knight Frank reveals that new rental listings in both prime central and prime outer London were 13% below the five-year average and 11% lower than the same month last year.
Mr Bill points to a series of policy changes – including higher stamp duty rates, phasing out tax breaks, and stricter energy efficiency requirements – that are driving landlords away. He warns that any further increases in Capital Gains Tax could be the final straw, pushing rents even higher as investors abandon the buy-to-let market.