The UK rental market is facing a serious crisis, with an average of 21 potential tenants competing for every available property, while the number of properties available to rent continues to shrink.
According to Zoopla, a leading property search platform, rental property availability is now 24% lower than before the pandemic, driven by landlords’ reluctance to enter or expand the market.
Rents in Britain have risen by 30% over the past three years, and although the rate of rental inflation has slowed to 5.4% per year, this still exceeds the 5.1% growth in average incomes in the UK last year. As of July, the average national rent reached a record high of £1,245 per month, £63 more than a year ago.
Richard Donnell, executive director at Zoopla, warned that further changes to regulations or taxes in the upcoming budget could worsen the current supply crisis. “Any new policy or tax changes that result in a reduction in supply will simply increase rents, hitting low-income renters the hardest,” he warned. Donnell urged policymakers to focus on increasing the supply of rental housing as the key to slowing rental inflation and increasing choice for renters. “As things stand, the growing unaffordability of rents is the only route to slower rent increases,” he added.
Despite a slight increase in supply from the pandemic lows, the market remains highly competitive, with demand still far exceeding availability. The average number of potential tenants per rental property has doubled since before the pandemic.
Since 2016, there has been a steady stream of landlords leaving the market, a trend exacerbated by the lack of new landlords willing to enter the sector. This exodus has been influenced by various regulatory and tax changes, which have made property rental less attractive to investors.
In response to high rents in major cities, many renters are looking for more affordable options in smaller towns and suburban areas. Over the past year, cities such as Kilmarnock, Wolverhampton and Oldham have seen double-digit rent increases as renters look beyond traditional urban centres. Conversely, rent increases in major cities have slowed, up 5.8% year-on-year, and rents in London have risen by just 2.5% over the same period. “Rent inflation is slowing in some major cities where rents are high, but they are still rising rapidly in more affordable areas,” Donnell said.
The unaffordability of home ownership, especially in southern England, is driving more and more people into the rental market, further exacerbating the imbalance between supply and demand. Zoopla expects this imbalance to persist until at least 2025, with no significant improvement in rental supply expected in the short term.
The ongoing crisis underlines the urgent need for government intervention to address the underlying problems in the rental market, including encouraging new rental properties and reversing the decline in landlord participation. Without such measures, pressure on tenants is likely to continue, with rising costs and limited housing options becoming the norm for many in the UK.