Around 5% of England’s private rental stock could be lost from the sector by the end of this year, according to projections from specialist lender Pepper Money.
The lender estimates that 220,000 households will leave the sector as landlords reassess their options, although this could provide opportunities for property investors who do want to expand.
Smaller landlords are more likely to leave the market, according to Pepper Money’s research, with those who own a single property twice as likely to exit as those who own two or more properties.
The upcoming Renters’ Rights Act is one of the biggest drivers of change, prompting landlords to withdraw more than 65,000 households from the PRS in England by the end of the year.
It comes as the abolition of section 21, the move to periodic tenancies and major changes to rents, notice procedures and property management obligations reshape landlords’ ambitions and portfolios.
Paul Adams, sales director at Pepper Money, said: “Our research highlights how the combination of changing legislation and rising operating costs is prompting many landlords to review their portfolios.”
A squeeze on rental stock
But he warned of the challenges ahead as rental stock is squeezed. “Whilst we welcome the additional protections for tenants introduced through the Renters’ Rights Act, and the continued focus on improving standards across the private rental sector, it’s important to recognise the potential unintended consequences for supply and pricing at a time when the sector is already under pressure,” he said.
“These legislative changes follow a series of fiscal and regulatory shifts that have cumulatively squeezed landlord returns and altered the economics of buy-to-let investing.”
“With just 5% of landlords buying a new rental property in the last year, and new starts in build-to-rent remaining subdued, it’s unlikely this exiting stock will be replenished at the same rate, meaning we could see a dip in rental dwellings this year.”
The changes will also lead to a significant shift in the sector’s make-up, according to Adams.
He said: “Smaller landlords, particularly those with just one property, are significantly more likely to leave the market as they reassess their portfolios. Larger landlords who are better equipped to absorb additional costs and regulatory requirements are choosing to remain, contributing to a gradual professionalisation of the private rented sector.”
Regional impact
The South-East is projected to see the highest volume of dwellings exiting the PRS, with more than 46,000 dwellings leaving the market, representing more than a fifth of exits across the UK as a whole, with 15% of all private landlords planning to sell.
One in five (21%) of landlords planning to sell in 2026 in the North-East, marks the region with the highest proportion of landlords exiting, although this accounts for only 8% of the total PRS exits nationally.
