Rental housing crisis set to worsen as tenant demand soars

9 Feb 2024 02:01 PM

Two thirds of landlords say the demand for private rented housing is continuing to increase, according to new research commissioned by the National Residential Landlords Association (NRLA).

In the final quarter of last year 63 per cent of landlords reported increased demand from tenants according to data compiled by research consultancy BVA-BDRC. This is a substantially higher proportion than prior to the pandemic. In Q4 2019 25 per cent of landlords reported increased demand.

The release of these findings follows the NRLA’s warning that the demand for private rented housing is set to increase substantially. In its Budget submission to the Treasury, the NRLA highlights:

• Projections from UCAS which show there could be a million applicants for higher education in a single year in 2030, almost a third higher than in 2022. 
• The number of those aged 15-29 is set to increase by over 6 per cent over the next decade according to the Office for National Statistics.
• Net migration flows are likely to settle at 245,000 annually by 2026/27 according to the Office for Budget Responsibility. Data shows that migrants are three times more likely to be in private rented accommodation than the UK-born population. 
• Continued difficulties for many who aim to become homeowners. Hamptons forecasts a repeat of the situation which followed the 2008-09 financial crisis, which saw an extra one million potential homeowners unable to afford higher mortgage payments and instead turn to the rental market for accommodation. 

Despite the growing demand, the NRLA’s survey data shows that landlords are far more likely to sell rather than invest in new properties to rent. Whilst 11 per cent plan to increase the number of homes they let, 30 per cent plan to cut the number they rent.

Amidst a chronic shortage of homes to rent to meet demand, the NRLA is calling on the Chancellor to scrap damaging tax hikes which cause misery for tenants. 

The Treasury needs to end the 3 per cent stamp duty levy on the purchase of homes to let. This step could see almost 900,000 new private rented homes made available across the UK over the next ten years according to Capital Economics. It would also lead to a £10 billion boost to Treasury revenue through increased income and corporation tax receipts. 

Ben Beadle, Chief Executive of the National Residential Landlords Association, said:

“The demand for private rented housing is only set to grow. As it does, would-be tenants will face the reality that there are not enough homes to meet their needs. This is a result of deliberate efforts using the tax system to dampen supply.

“The country needs more of every type of housing, and that has to include new homes for private rent. The quicker the Government takes this into account, the sooner we can relieve the struggles renters face when finding a place to call home.”     

Notes:

• The market research agency BVA-BDRC undertook 398 online interviews with members of the National Residential Landlords Association between 9th and 29th December 2023. 
• UCAS projects that there could be up to a million higher education applicants in a single year in 2030, up from more than three quarters of a million in 2022.  
• According to the Office for National Statistics, the number of those aged 15-29 in the UK is projected to increase from 12,614,000 in 2023 to 13,396,000 2033, an increase of 6.2%.  
• The Office for Budget Responsibility forecasts that net migration will fall back towards its assumed long-run level of 245,000 by 2026-27. 
• The University of Oxford’s Migration Observatory notes that between 2019 and 2021, migrants were almost three times more likely to be in private rented accommodation than the UK born population. 
• Hamptons notes: “The end of an era of cheap money seems set to put downward pressure on the homeownership rate. Would-be buyers will be forced to rent for longer, unless they have a large deposit and so can take on a smaller mortgage."
  “In the four years after the global financial crisis of 2008-2009, an extra one million people, unable to afford higher mortgage payments, turned to renting. We forecast a repeat of this period of stretched affordability.”   
• The NRLA’s Budget submission can be accessed here.
• The modelling by Capital Economics can be found on page 28.
• Further information about the NRLA can be found at www.nrla.org.uk.  It posts on X @NRLAssociation.
• The NRLA’s press office can be contacted by emailing press@nrla.org.uk or by calling 0300 131 6363.