Calls for PRS policy stability as landlord exodus looms

The private rented sector (PRS) needs a pause on further government-led reforms to prevent landlords from leaving the market, reducing much-needed supply, and driving rents even higher, according to industry specialists.

This was one of the key messages from the first Landlord Trends workshop, hosted by Pegasus Insight with contributions from Hometrack/Zoopla and the National Residential Landlords Association. Representatives from more than 20 organisations involved in the PRS attended the event to discuss the challenges facing landlords and the impact of upcoming legislation.

CHANGING LANDLORD DEMOGRAPHICS

Research presented at the workshop highlighted how the structure of the PRS has shifted under increasing tax and regulatory pressures. In 2010, landlords with a single property made up 78% of the sector, but by 2024, that figure had fallen to 45%. Today, 50% of PRS properties are owned by just 20% of landlords, reflecting a move towards consolidation among larger investors.

The introduction of the Renters’ Rights Bill is expected to accelerate this trend, with 81% of landlords believing the legislation will negatively affect the PRS. The removal of no-fault evictions is a particular concern to landlords, while potential Capital Gains Tax (CGT) increases are seen as an even greater threat, with 85% of landlords citing CGT changes as a key worry.

IMPACT ON RENTAL SUPPLY

The uncertainty surrounding legislative changes is already influencing landlord behaviour. The workshop found that:

81% of landlords intend to be more selective about tenants once the Renters’ Rights Bill is introduced.
62% plan to increase rents.
23% will seek to cut costs by reducing spending on maintenance.

Crucially, only 5% of landlords plan to expand their portfolios in 2025, down from 18% in early 2022, marking a record low. Those planning to buy expect to acquire an average of 1.9 properties, while those looking to exit the market expect to sell an average of 2.9 properties, highlighting the ongoing net loss of rental stock.

The lack of investment in the PRS is particularly concerning given that 150,000 new households per year are expected to enter the sector between now and 2036, yet only 45,000 new rental dwellings are being added annually.

CALL FOR POLICY STABILITY

Bethan Cooke, director at Pegasus Insight, said the research offers a clear warning to government policymakers.

She added: “We were delighted to welcome such a large group of buy-to-let specialists to our first workshop, to analyse our research and discuss the future of the PRS. The findings of this research can help lenders plan ahead as they look to cater for the changing needs of buy-to-let investors in a pressured and professionalising market.

“But mortgage lenders can only do so much. These findings present a stark warning to government. It must find ways to nurture the PRS and encourage more investment in the sector if we are to avoid severely deepening the UK’s housing crisis. As a start point, the government should promise policy stability in order to boost landlord confidence.

“It seems too late to turn back the clock on the Renters’ Rights Bill, but the government should commit to no more legislative changes and no further tax increases for landlords. Research we carried out before the last Budget revealed that 39% of landlords would stop investing and 19% exit the market if CGT on the sale of second properties were increased.

“Rachel Reeves made the right decision in not hiking CGT in October 2024. She must not be tempted to squeeze landlords further in future.”