Saw the Lloyds data this morning, prices flat, growth at 0.1%, South East and London both negative. Mortgage approvals still well below the 2017-19 average. Meanwhile fixed rates heading north of 5.6% and nobody expects a base rate cut before 2027 at the earliest. So landlords are selling up, tenants are competing for fewer properties, and rents keep climbing. Is anyone actually building the rental stock to replace what is being lost, or are we just sleepwalking into a shortage that makes 2022 look mild?
Every landlord who sells a btl to an owner occupier removes one rental property but also removes one household from the rental market. The net effect on supply is roughly zero. The actual problem is total housing stock not growing fast enough, which has nothing to do with who owns it. Landlords exiting does create churn and disruption for sitting tenants, that’s real, but framing it as a supply crunch is misleading imo. If anything the bigger issue right now is mortgage affordability locking would-be buyers into renting longer than they want to be, which increases demand on the rental side regardless of what landlords do. The fix is building more homes. Nobody wants to hear that because it takes years and doesn’t make for a good headline.
Dex, the net effect is not zero in practice even if it looks that way on paper. The problem is timing and geography. When a landlord sells in an area with strong rental demand, say inner Birmingham or Coventry, the property often gets bought by an owner-occupier relocating from elsewhere, not by a current tenant in that area. So you lose a rental unit from the local market without removing a renter from it. The household that was renting still needs somewhere to live, and the replacement rental stock is not appearing at the same rate because new landlords are not entering the market at anything like the pace they were pre-2016. From recollection the NRLA data showed a net loss of something like 300,000 PRS properties over three years to 2025. That is not a neutral rebalancing, that is a contraction. The question capricorn_dave61 asked is a fair one, whether we are heading for a crunch, and I think in certain areas we already are.
Grumpy, fair point on the timing mismatch, that’s a real friction. But the 300k net loss figure from the NRLA needs context. A lot of that is reclassification (holiday lets, HMO conversions, properties sitting empty during probate) rather than genuine exits to owner occupation. The PRS shrank but the rental vacancy rate in most cities is still near historic lows, which tells you demand has contracted at a similar pace. I’m not saying there’s no local pressure, there obviously is, but framing it as a national crunch when the vacancy data doesn’t support it is how lobby groups get policy concessions they don’t deserve.
Dex, I take your point about reclassification muddying the NRLA figure but the direction of travel is what matters here, not the precise number. The latest RICS survey has landlord instructions at minus 27% and tenant demand roughly flat. That is a market where supply is contracting while demand holds steady, which only goes one way for rents. The Renters’ Rights Act has added another layer of uncertainty for anyone thinking about entering or staying in the sector. I know two landlords locally who have sold up in the last six months, both citing the regulatory burden rather than yields. Neither property was bought by a first time buyer, both went to owner occupiers who already owned elsewhere. So yes, in theory a sale removes a renter and a rental simultaneously. In practice the people buying these ex-BTLs are often downsizers, second home buyers, or people relocating, not sitting tenants graduating to ownership. The mismatch is real even if the arithmetic looks neutral on paper.
Grumpy, two landlords you know locally is not data. The English Housing Survey shows around 30% of ex-rental stock sold in the last two years went to FTBs. Not the majority but hardly zero either. And owner occupiers relocating free up a property elsewhere in the chain, so the net effect on overall housing supply is still roughly neutral. The rental squeeze is real but the cause is underbuilding and population growth, not landlords selling up. Blaming the RRA is convenient but yields in most areas are still above long run averages even after the regulatory changes.
Dex, the EHS figure is from a period when rates were lower and FTBs could actually get mortgages. With two year fixes at 5.63% I doubt that 30% number holds up today. The real question nobody is asking is what happens when rates eventually come down, demand jumps back up, and there are 300k fewer rental properties than there were five years ago. Who absorbs that demand? Not the private sector, they are running for the exits. Not councils, they have no money. So where does everyone go?
Dave, you make a fair point about the EHS data being somewhat dated. The current environment is quite different with two year fixes at 5.63% and mortgage approvals well below their pre-pandemic levels. But that actually reinforces the supply concern rather than undermining it. If FTBs cannot get mortgages to buy the properties landlords are selling, those properties either sit empty, get sold to other investors at a discount, or get absorbed by owner occupiers who are already housed. None of those outcomes add a rental unit. Meanwhile landlord instructions in the latest RICS survey are at minus 27%, which is not a blip, that has been consistently negative for over a year now. Burnham has made all the right noises about housing being a priority but I have yet to see a single concrete policy proposal that addresses private rental supply. The Renters Rights Act tightened the rules further without doing anything to incentivise new supply. From recollection the consultation on a landlord register was supposed to close in July but I have not seen any outcome published.
One thing that has been missing from this discussion is the supply side from government. Burnham has made a lot of noise about social housing investment since taking over but the reality is that even if he follows through, new council housing takes years to come through the pipeline. Planning, procurement, build times, you are looking at 2029 at the earliest for any meaningful numbers. In the meantime private landlords continue to exit. The RICS July data shows landlord instructions to sell still outweighing new investment purchases, and the Renters Rights Act has made the compliance burden heavier for anyone who stays. From recollection the government’s own projections for new social units were around 30,000 per year, which barely covers demolitions and right to buy losses. So the gap between private rental exits and new social supply is not closing any time soon. The question is whether rents just keep rising to absorb it or whether you start seeing genuine shortages in certain areas. Parts of the Midlands are already there.