Landlords exiting the private rental sector is “highly unlikely” to be the main driving factor behind the significant increases in rental prices, a report from Resolution Foundation has revealed.
The report, 'Through the roof: Recent trends in rental-price growth', suggested landlords leaving the sector may not be unilaterally driving rental prices, which have increased by a fifth since the beginning of 2022.
It acknowledged there has been a fall in buy-to-let mortgages being taken out, from 13 per cent of all loans to individuals in 2019 (around £9bn worth of mortgages) to an average of 8 per cent of all loans taken out in 2023 (under £5bn of mortgages).
The overall balance of outstanding BTL mortgages in the UK was also reported to have shrunk from £243bn in the last quarter of 2022 to £234bn by Q4 2023.
This is consistent with the idea that landlords are selling mortgaged properties, or are not entering the private rental sector in as large a number as previously.
However, the report pointed out the impact on private rents from any shrinking of the PRS is likely to be even smaller than the less than 1 per cent fall in the number of properties available to rent.
“A property moving from the PRS to become owner-occupied should also involve a corresponding fall in the demand for private rented housing if, for example, a previously renting household leaves the sector to become owner-occupiers,” it explained.
As a result, the only long-run impact of the properties shifting from the PRS to owner-occupation arises because homes that are owner-occupied tend to be less intensively occupied than those in the PRS.
National Residential Landlords Association chief executive, Ben Beadle, said: “Rising rents are a result of a range of factors. Whilst wage growth plays a role, a key driver is the imbalance between supply and demand.
“As the report highlights, an increasing number of people at all stages of their life now rely on the private rented sector.
“However, with demand far outstripping available supply, there are an average of 15 prospective tenants chasing every rented property, double the pre-pandemic level.
“The impact of rising interest rates and tax increases should not be downplayed.”
Rental price
The report also provided insight into exactly how much rents had increased in recent months, describing the growth as “dramatic”.
Through comparing the measurements of five different sets of data, the report established that rents had increased by between 14.8 and 19.8 per cent between January 2022 and January 2024.
This was compared to earnings which increased by 12.7 per cent over the same period.
The rapid rise in rental prices was described as “concerning” as private renting has “long been” the least affordable form of housing, with the average private renter spending 33.8 per cent of their income on housing costs.
This is compared to the 10 per cent of income spent by the average mortgagor.
The report added that this is affecting more people as the report also detailed that the proportion of families privately renting has nearly doubled, rising from 11 per cent in the late 1990s to nearly one in five today.
