160,000 rental properties lost as landlords exit the market amid rising costs and regulatory uncertainty

The number of rental properties in the UK has fallen dramatically, with landlords selling off their buy-to-let investments due to rising interest rates and uncertainty over upcoming regulations.

According to a report by Hamptons Estate Agents, there were 40% fewer homes available to rent last year compared to April 2019, and a total of 163,000 privately rented properties were off the market from 2019 to the end of 2023.

The reason for this exodus was a series of tax increases, starting with the introduction of a 3% additional stamp duty on second homes in 2016, followed by the phasing out of mortgage interest tax relief from 2017. The recent rise in interest rates and the upcoming Tenant Reform Act has further discouraged many landlords from maintaining their investment in the rental sector.

The long-term shortage of housing stock has worsened the situation, driving up rents. Last year, tenants extending their existing contracts saw an average rent increase of 8.3%, taking the average rent to £1,151 per month. However, this is still cheaper than rents for newly let homes, which average £1,329 per month, although rent growth for these properties has been slightly lower at 6.4%.

Aneisha Beveridge of the Hamptons noted that higher market rates have forced many tenants to stay longer. According to the English Housing Survey, the number of renters moving home fell by 17% in 2022-23 compared to the five-year average before the pandemic. “The large difference between market rates and the rates paid by many tenants is a major disincentive for them to relocate if they don’t have to,” Beveridge said. “Moving more frequently means less home for more money.”

Official figures published this week show that more than 2,000 households in England face homelessness every month due to owners leaving the sector. Ben Beadle, chief executive of the National Association of Landlords, highlighted that the biggest challenge facing tenants is the sale of properties by landlords. “The only solution is to give responsible landlords the confidence to stay in business and maintain their leases,” he added.

According to Hamptons, in 2023, 140,000 owners sold their properties and 100,000 entered the sector. While year-over-year rental inventory increased by 28%, the rate of growth has slowed, peaking at 34% in January 2024. These figures do not include properties added by institutional build-to-rent investors, which Hamptons claims does not this was sufficient to offset the overall decline in rental space.

Separate Rightmove data shows that an additional 50,000 rental properties are needed to restore the supply of rental homes to pre-pandemic levels. As the market continues to adapt to these pressures, both tenants and landlords face ongoing challenges in navigating the changing rental property landscape.