A new report from the Intermediary Lenders Association (IMLA) has revealed how the buy-to-let industry has changed in the wake of regulatory and tax changes in recent years.

The IMLA report warns that the PRS is still absorbing the adverse effects already in train as a result of tax and regulatory changes, which may force some landlords out of the sector. Further changes, IMLA warns, could adversely affect much-needed tenant choice and potentially raise rents.

It is therefore calling for a moratorium on any further government intervention in the buy-to-let market

The English Private Landlord Survey 2018 published by the Ministry of Housing, Communities and Local Government (MHCLG) already suggests the number of landlords with just one rental property fell by 33 percentage points in just eight years to 45%. In contrast, 17% of landlords now own five or more properties; a 12% increase since 2010.

Professional landlords now represent 48% of the PRS, up from 38% in 2010, while the number of single-property landlords make up just 21% of the PRS today, down from 40% over the same period.

The IMLA report points to a number of catalysts for this market shift, including a highly constricted mortgage market during the financial crisis and a trend towards large institutions investing in build-to-rent accommodation. But primarily, recent government intervention has made small-scale property investment less profitable. The 2018 English Private Landlord Survey found that of those landlords planning to sell some or all of their properties, 61% cited legislative changes as the reason.

The PRS has seen enormous growth over the past two decades, taking it from 9% of Great Britain’s housing stock in 1999 to 20% by 2016. But, assuming that the total housing stock grows by 230,000 a year over the next decade, IMLA notes that the PRS would increase in size by just 160,000 by 2030 to stabilize at around 18% of the housing stock by 2030. This represents a dip of two percentage points on today’s levels.

Buy-to-let lending for house purchases recovered robustly from the financial crisis, increasing by almost 250%, from £4.5 billion in 2009 to £15.6 billion in 2015. But since then, purchases have fallen by more than 40% to £9.1 billion. At the same time, buy-to-let remortgaging has increased, up 25% since 2015, from £22.3 billion to £27.9 billion, as many landlords have refinanced to take advantage of competitive rates from lenders.

IMLA’s report compares mortgage activity with the growth of outstanding buy-to-let debt. It notes that without the continued growth in numbers of smaller landlords that was experienced at the start of the century, net growth in buy-to-let debt has dropped sharply.

Kate Davies, executive director of IMLA, said: “The UK’s Private Rented Sector is under significant pressure. Landlords up and down the country are effectively having to fill the gap left by a shrinking social housing sector that is struggling to accommodate demand from lower income households. At the same time, it must continue to meet the needs of people who either want the flexibility of renting or who are not yet able to step onto the housing ladder in the face of increasing house prices and tighter mortgage regulation.

“We are concerned that layers of government intervention have adversely affected small-scale landlords’ ability and appetite to invest in properties over recent years.

“As increased tax and regulatory responsibilities increasingly dis-incentivise landlords, we face a possible topping out of the PRS. While it’s good to see professional and institutional investors increasing their stake in the nation’s housing stock, the number of one-property buy-to-let investors has fallen by almost half.

“Squeezing the PRS puts the pressure on millions of renters in Britain. We are strong advocates of a fair market with a quality supply of homes. Restricting the PRS risks a lack of supply, rising rents and a fall in the quality of rental accommodation.

“We have repeatedly called for government to put the brakes on regulating and taxing our nation’s landlords. We urge a more moderate approach to ensure our private rental sector remains strong for the millions of renters who rely on it.”