The UK rental market crisis has intensified, with a staggering 21 hopeful tenants vying for each available property. This fierce competition has been driven by a significant reduction in available rental homes, now 24% lower than before the pandemic, according to Zoopla. The lack of supply is attributed to landlords’ reluctance to enter or expand within the market, coupled with existing landlords exiting due to regulatory and tax changes.
Rents across the UK have surged by 30% over the past three years. Although the pace of rental inflation has now slowed to 5.4% annually, it still surpasses the 5.1% growth in average earnings over the past 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, has cautioned that further regulatory or tax changes in the forthcoming budget could exacerbate the current supply crisis. ‘Any new policy or tax changes that result in a reduction in supply will simply push rents higher, hitting low-income renters hardest,’ he warned. Donnell urged policymakers to focus on increasing the supply of rental homes as the key to slowing rental inflation and expanding tenant choices. ‘As things stand, the growing unaffordability of renting is the only route to slower increases in rents,’ he added.
Despite a slight increase in supply from the lows seen during the pandemic, the market remains highly competitive, with demand still far outstripping availability. The average number of prospective tenants per rental property has doubled since before the pandemic. This trend has been influenced by a steady stream of landlords exiting the market since 2016, compounded by the absence of new landlords entering the sector.
In response to high rents in major cities, many tenants are seeking more affordable options in smaller towns and suburban areas. Over the past year, towns like Kilmarnock, Wolverhampton, and Oldham have experienced double-digit rent increases as renters look beyond traditional urban centres. Conversely, rent increases in major cities have slowed, with a 5.8% rise year-on-year, and London rents growing by only 2.5% over the same period. ‘Rental inflation is slowing in some major cities where rents are high but they are still increasing quickly in more affordable areas,’ noted Donnell.
The unaffordability of home ownership, particularly in southern England, is pushing more people into the rental market, further exacerbating the supply-demand imbalance. Zoopla anticipates that this imbalance will persist until at least 2025, with no significant improvement in rental supply expected shortly. The ongoing crisis underscores the urgent need for government intervention to address the underlying issues in the rental market, including incentivising new rental properties and reversing the decline in landlord participation.
Without such measures, the pressure on renters is likely to continue, with rising costs and limited housing options becoming the norm for many across the UK.