Are landlords fleeing the private rental sector?

A recent article from the BBC reported that the number of homes available to rent in the UK has dropped by a third. Landlords have been saying the same thing, arguing that upcoming rental reforms are forcing them out of the sector.

But a few weeks ago the Guardian reported that the chief executive of the National Residential Landlord Association said the private rented sector was actually growing in size. So what’s really going on? We know that struggling to find a new home has a huge impact on renters. To get to the bottom of this we decided to look back over the last few years to understand the impact previous changes to regulation have had on the size of the private rented sector.

National housing stock figures

The total number of rental properties has been growing in recent years.

Data from the ONS shows a big increase in the number of privately rented properties between 2011 and 2021. Growth in the sector slowed in 2016, but by 2019 the number of privately rented properties was rising again. So we know the high level numbers are growing, but what if we dig into the detail of who owns these properties?

The buy-to-let market

We started by looking at data from UK Finance on the number of buy-to-let mortgages and re-mortgages that have been issued since 2011. A buy-to-let mortgage does what it says on the tin — it’s a mortgage for people who are buying a property to rent out to tenants. This gives us a good sense of how many new rental properties are entering the housing market.

The graph shows the number of new buy-to-let mortgages that have been issued and the number of re-mortgages of buy-to-let properties. Landlords might re-mortgage a buy-to-let property in order to purchase an additional property or to free up money for home improvements. When new mortgages and re-mortgages are combined we can see a significant increase in the amount of lending being issued for buy-to-let properties between 2011 and 2022.

We’ve looked at the impact that tax reforms and new rental regulation has had on the private rented sector by using buy-to-let lending as an indication of the size of the sector. We focused on the tax and legal reforms that landlords mention most frequently when talking about their willingness to stay in the sector. We found that the introduction of different reforms doesn’t seem to have decreased the amount of buy-to-let lending.

The evidence shows that reforms to the private rented sector are unlikely to cause landlords to leave all at once. Instead, they will allow tenants to feel secure in their homes, improve standards and increase accountability.

Surging Demand?

So if the size of the private rented sector hasn’t changed, why are renters struggling to find new properties to rent?

It’s impossible to understand what’s happening in the private rented sector without looking at the housing market as a whole. The number of local authority properties available to rent has fallen by 29% since 2011. At the same time, rents in the private sector have increased (by 4.4% on average over the last year) and Local Housing Allowance (LHA) has stayed frozen, so competition for affordable homes has intensified. This means that while the number of rental homes has remained mostly the same, demand has increased.

While some people are being pushed into the private rented sector as a result of lack of social housing, others are struggling to make the transition to buy their own homes. Interest rates on mortgages are now at 4% following historic lows and with the cost-of-living crisis eroding household budgets potential buyers may be unable to leave the private rented sector.

Refocusing our attention

Concerns about housing supply are justified. In 2022 we saw the highest numbers of people come to us for advice on how to find homes in both the social and private rented sectors since 2019.

But based on the current data, it doesn’t seem that issues with supply are being driven by landlords fleeing the private rented sector ahead of tenancy reforms.

With this in mind, we should look back towards the need for rental reform and the benefits of effective regulation. Our previous blog outlined the challenges renters are facing right now: from soaring rents and dangerous disrepair, to widespread evictions and landlords who won’t fulfil their responsibilities. The government must follow through on its promises to bring forward rental reform that will make the private rental sector a safer and more secure place to live.

Thanks to Tilly Cook for their contributions to this piece.