The UK rental market is once again showing the same uncomfortable pattern that has defined much of the past decade: tenants need more homes, but landlords are not supplying enough of them.
The latest RICS data points to a rental sector still under serious pressure. Tenant demand remains positive, landlord instructions remain negative, and rent expectations have risen to their strongest level for a year. In simple terms, more people are looking for rental homes, fewer properties are coming onto the market, and rents are expected to keep rising.
This is not a short-term problem. It is the result of years of policy decisions, tax changes, regulatory uncertainty, higher borrowing costs and political pressure on private landlords. Successive governments have promised to make renting fairer for tenants, but too often they have done so without addressing the basic economics of supply. When landlords are discouraged from entering or remaining in the market, the number of available homes falls. When the number of homes falls, tenants face fewer choices, more competition and higher costs.
What is happening in the rental market?
The current rental market is not simply a story of landlords increasing rents. It is a story of a sector struggling to balance demand and supply.
RICS reports that tenant demand continues to rise while landlord instructions remain weak. This means agents are seeing more people looking for rental accommodation, but not enough landlords bringing homes to the market. At the same time, rent expectations have increased again, suggesting that many professionals expect rents to continue rising over the coming months.
Other market data suggests that rent growth may have slowed in some areas, mainly because tenants are reaching the limit of what they can afford. That does not mean the market is healthy. It means affordability is now acting as a brake on rents, even though supply remains constrained.
This is an important distinction. Rents can slow because the market is improving, or they can slow because tenants simply cannot pay any more. For many landlords and tenants, the current position looks much more like the second scenario.
Supply is the core problem
The private rented sector depends on landlords being willing and able to invest. That investment may come from small landlords with one or two properties, larger portfolio landlords, or institutional investors. Whatever the structure, the principle is the same: if the returns do not justify the risk, money goes elsewhere.
For many years, governments of different political colours have treated private landlords as an easy target. Measures have often been presented as ways to improve fairness for tenants, but the cumulative effect has been to make rental investment less attractive.
This matters because tenants do not benefit when landlords leave the sector. A property sold by a landlord is not automatically available to the people who were renting it. In many cases it is bought by an owner-occupier, removed from the rental market, or becomes unaffordable to the type of tenant who previously lived there.
The result is a smaller pool of rental homes. That increases competition among tenants and places upward pressure on rents.
How government policy has restricted growth
The current supply problem did not happen overnight. It has been building for years.
One of the most significant changes was the restriction of mortgage interest relief for individual landlords, commonly associated with Section 24. This changed the way many landlords are taxed and means some are taxed on rental income before full finance costs are taken into account. For highly mortgaged landlords, this can produce a tax bill that bears little relationship to real profit.
At the same time, landlords buying additional properties face higher stamp duty costs. This increases the upfront cost of investment and makes it harder for new landlords to enter the market or existing landlords to expand.
More recently, higher interest rates have added further pressure. Many landlords coming off older mortgage deals have faced substantially higher monthly costs. Where rent increases are restricted by affordability, regulation or market conditions, some landlords find that the numbers no longer work.
Regulation has also increased. Much of it is well-intentioned and aimed at improving standards, but it has added complexity, cost and risk. Licensing schemes, energy efficiency requirements, deposit rules, documentation obligations, selective enforcement powers and now the Renters’ Rights Act have all changed the way landlords must operate.
For professional, well-advised landlords, these changes can be managed. For smaller landlords, particularly those with modest margins, the cumulative burden can be enough to make selling look like the more rational option.
The Renters’ Rights Act has changed the risk profile
The Renters’ Rights Act represents one of the biggest changes to the private rented sector in a generation. Section 21 “no fault” evictions have ended, fixed-term assured shorthold tenancies have been replaced by assured periodic tenancies, and landlords must now rely on specific legal grounds if they need possession.
The Act also changes how properties are advertised, how rents can be increased, how tenants can challenge increases, how upfront payments work, and how landlords must deal with requests such as keeping pets.
Many landlords support good standards and responsible renting. However, the issue is not whether tenants should have protection. The issue is whether the system now gives responsible landlords enough confidence to remain in the market.
Possession risk is central to that confidence. A landlord may need to recover a property because of rent arrears, antisocial behaviour, a decision to sell, or a need to move back in. If that process becomes slower, more expensive or less predictable, landlords will price in that risk or leave the market altogether.
This is particularly important when rent arrears occur. The financial and emotional cost of dealing with a problem tenancy can be substantial. Where landlords believe the legal process is weighted against them, many will decide that the risk is no longer worth taking.
Tenants are affected most when supply falls
The debate around private renting is often framed as landlords versus tenants. In reality, both groups are affected by the same underlying problem: a shortage of homes.
When supply falls, tenants face:
- fewer available properties;
- more competition for each home;
- less negotiating power;
- higher rents over time;
- longer searches;
- greater pressure to compromise on location, size or quality.
This can be especially difficult for families, people with pets, those receiving benefits, people with imperfect credit histories, and tenants who need to move quickly for work or personal reasons.
Policies designed to protect tenants can therefore have the opposite effect if they discourage supply. A tenant may have stronger rights on paper, but those rights do not help them find a home if fewer landlords are willing to let properties in the first place.
Landlords are being asked to operate like businesses but taxed and regulated differently
Modern landlords are expected to behave professionally. They must comply with a growing list of rules, keep accurate records, understand changing legislation, manage safety requirements, handle tenant communications correctly and navigate possession rules carefully.
That is reasonable in principle. Housing is important, and tenants deserve safe, well-managed homes.
The problem is that landlords are increasingly being treated like businesses for regulatory purposes, while being treated differently and often less favourably for tax purposes. Unlike most businesses, many individual landlords cannot fully offset finance costs in the normal way. They face additional stamp duty costs, increased compliance duties and political uncertainty, while still being expected to provide long-term homes at affordable rents.
This imbalance discourages investment. If the government wants a larger, more professional private rented sector, policy needs to encourage responsible landlords to stay and invest. Constantly increasing risk and cost while expecting supply to grow is not realistic.
Rent controls would not solve the supply problem
When rents rise, rent controls are often proposed as an answer. While they may sound attractive, they do not create more homes. In fact, if badly designed, they can reduce supply further by making investment less viable.
The main reason rents have risen is that demand has exceeded supply. Controlling the price without increasing the number of homes does not remove the pressure; it simply changes how that pressure appears. It can lead to landlords leaving the market, reduced investment in property standards, fewer homes available to rent, and more competition for the limited stock that remains.
A sustainable rental market needs more homes, not just more rules.
What needs to change?
If policymakers want to improve conditions for tenants, they must focus on supply. That means making it viable for responsible landlords to provide good-quality homes.
A healthier approach would include:
- a more stable and predictable regulatory environment;
- tax rules that recognise landlords as genuine housing providers;
- faster and more reliable court processes where possession is justified;
- encouragement for long-term investment in rental property;
- practical support for improving property standards;
- policies that increase total housing supply, not just shift homes between tenures.
The private rented sector cannot solve the housing crisis alone, but it is an essential part of the housing system. Weakening it without replacing the lost supply simply moves the problem onto tenants.
What landlords should do now
Landlords need to look carefully at their position. The market remains strong in many areas, but the risks and responsibilities have increased. Good management is now more important than ever.
Landlords should review their tenancy documents, rent levels, mortgage arrangements, insurance cover, referencing process, compliance records and long-term investment plans. They should also consider whether their properties remain financially viable under the new rules.
The landlords most likely to succeed in this market will be those who treat letting as a professional activity, keep up to date with changes, protect themselves against risk and take advice where needed.
The bottom line
The UK rental market is under pressure because demand remains strong and supply is not keeping pace. Successive governments have added cost, tax pressure and regulation to the private rented sector without doing enough to encourage new supply. The result is a market where many landlords are cautious, some are selling, and tenants are left competing for too few homes.
Improving tenants’ rights is not enough on its own. Tenants need rights, but they also need homes. Unless government policy recognises the importance of landlord confidence and rental supply, the same pattern will continue: fewer available properties, higher costs, and a more difficult market for the very tenants the reforms are intended to help.
NetRent has supported landlords for many years and understands the pressures facing the private rented sector.
Telephone: 01352 721300
Email: support@netrent.co.uk
Disclaimer: NetRent does not provide legal advice. This article represents our understanding of rental property law and market conditions at the time of writing. Landlords should seek appropriate professional advice before making decisions about their property or tenancy arrangements.