The UK’s rental market continues to see rising prices, prompting renewed calls for policies that support landlords rather than penalise them. While tenants struggle with affordability, landlords face mounting legislative challenges, creating an imbalance that could further restrict rental supply.

Rental prices climb as demand outstrips supply
Private rents rose by 8.7% in the year to January, reaching an average of £1,332 across Great Britain, according to the Office for National Statistics (ONS). London experienced the highest rent inflation at 11%, while Yorkshire and the Humber saw the lowest at 5.3%.

Nathan Emerson, CEO of Propertymark, highlighted the fundamental supply issue: “Increases in rental prices across the UK have been an ongoing concern, and our member agents continue to emphasise the continuous trend of lack of rental stock versus an ever-growing number of tenants looking for homes.” He warned that landlords face financial and regulatory burdens that are pushing many to exit the market or switch to short-term lets. “Selling up altogether or turning to the short-term letting market is becoming a more attractive option for landlords due to the challenging legislative changes and increased financial liabilities they face,” Emerson added.

Richard Donnell, Executive Director at Zoopla, noted that while rental growth remains high, there are signs of moderation. “Zoopla data shows there are 22% more homes for rent than a year ago, but availability remains below the pre-pandemic period. The ONS rental index tracks all rented homes and remains high at 8.7%, though Zoopla’s latest index for new lets shows rents have slowed to 4%, down from 8% a year ago.”

Landlords under pressure despite housing market resilience
While rental prices rise, the housing market remains strong, with average house prices increasing by 4.6% in 2024 to £268,000. First-time buyers are now facing an average price of £226,744, further exacerbating affordability challenges.

Richard Harrison, Head of Mortgages at Atom bank, pointed out that the affordability gap continues to widen. “Record high house prices have become the norm, and I expect this trend to continue. The gap between supply and demand has narrowed but remains, pushing prices ever higher.”

At the same time, landlords who are crucial in providing rental homes face ongoing challenges. With changes to taxation and tighter regulations, many landlords feel the pressures outweigh the benefits of staying in the market.

Ross Turrell, Commercial Director at CHL Mortgages, stressed the need for flexibility in lending and regulation. “While demand is high, brokers and borrowers still require support, particularly as rates remain elevated. Ensuring borrowers can access the right solutions will be key to maintaining momentum and supporting their long-term goals.”

Calls for balanced policies to sustain rental supply
Industry experts warn that if landlords continue to exit the market, rental availability will shrink, further pushing up prices. Paresh Raja, CEO of Market Financial Solutions, underlined this point: “There will be mixed emotions across the property industry today. While house prices continue their impressive upward march, the rise in inflation could trigger concerns around potentially higher interest rates for borrowers.”

Despite this, some positive signs exist. “With house prices remaining buoyant, this indicates that the wider economy continues to stabilise, and people are feeling confident in their personal financial positions,” noted Nathan Emerson.

The government has pledged to increase housebuilding to stabilise both the rental and housing markets, but many argue this is a long-term solution that does not address landlords’ immediate concerns. Emerson emphasised the importance of government intervention to ensure a stable rental market: “Governments across all nations have made various pledges regarding housing targets, but a crucial factor is ensuring that good landlords providing secure and decent homes are supported and not penalised.”

With ongoing affordability issues for renters and increasing pressure on landlords, the UK rental market remains at a crossroads. Without urgent action to support landlords, rental supply may continue to dwindle, driving rents even higher and exacerbating the housing crisis.