New research has revealed the ongoing lack of rental stock in the UK is getting worse. TwentyEA suggests that the average UK rental property costs £1.652 per calendar month by the end of 2022.  In 2021 it was £1,450 and in 2019 it was around £1,345.  

TwentyEA suggests new instructions were down by around 8% compared to 2021 but since 2019 they are down by 25% which is a significant amount.

Why are there fewer rental properties?

As of 2021 there were around 9,000 social landlords in the UK vs 1.6m private landlords.  That is skewed a bit as social landlords tend to have more stock each than private landlords do.  Again as at 2021, the figures suggested that social landlords hold around 4m properties vs 5m with private landlords.

Now we are not discussing social landlords here but just to give an idea of the numbers.  Specifically that the UK has a huge reliance on private landlords.  Love or loathe them they provide a lot of housing.  So why are private rentals dropping so much?

There are a few key reasons but the primary one is that private landlords are leaving the market.  The reasons for that include;

• Tax.  The changes in tax treatment for private landlords is far less attractive than in previous years reducing profitability.
• Regulatory change.  In an effort to improve standards in the private sector new minimum energy efficiency standards as one example mean, it will be too costly for landlords to upgrade so the property is sold.
• More recently interest rates are squeezing landlords more which drives up rental prices.  In Scotland especially the SNP currently prevent private landlords from increasing their rent in many cases.
• Finding tenants might not seem like a problem but it can be now that rental prices have gone up so much.

The list goes on.  Again, love or loathe them private landlords buy a property and rent i as an investment as well as to make an income.  They are not social landlords.  If they can't make money or regulation makes it financially unviable to do so, they won't do it.

The worst affected areas

Data suggests London, Manchester and Edinburgh have suffered the most.  Further afield in Dublin, there were recent scenes of over 150 people queued up waiting to view a property.  In other parts of the UK, the issue was less significant or in some cases fairly flat overall.

One thing is for sure, the increasing interest rates are going to make the situation far worse before it gets better.  Landlords will pass on the hits from interest rates and that may be exacerbated by rising inflation.  TwentyEA reports the situation in Scotland, Northern Ireland and London is deteriorating considerably.

The solution?

Inflation stabilising and interest rates coming down will make a solid difference but it's not enough.  Whilst the government's efforts to improve standards in the private sector are admirable, the issue is that private landlords either don't want, can't afford or perhaps both when it comes to meeting new energy standards.  Many landlords that are staying in are choosing to sell older properties and replace them with newer ones that already meet the new energy standards.

Whilst it's easy to criticise private landlords when they provide 5m homes for the rental market, you can't do without them.  Perhaps the government needs to do a bit more to help them.  Not suggesting standards are dropped but there are other ways they could consider.

In the meantime, rental stock is going to continue falling and prices are going to keep rising.