The private rented sector (PRS) is facing significant challenges, with industry experts calling for a pause on further government-led reforms to prevent landlords from exiting the market. A reduction in supply could drive rental costs higher, exacerbating existing pressures.

This was a key discussion point at the first Landlord Trends workshop, organized by Pegasus Insight in collaboration with Hometrack/Zoopla and the National Residential Landlords Association. More than 20 organizations involved in the PRS attended to examine current challenges and the impact of forthcoming legislation.

Research presented at the workshop highlighted structural changes within the PRS, largely influenced by increasing tax and regulatory measures. In 2010, single-property landlords comprised 78% of the sector. By 2024, this figure had declined to 45%. Today, 50% of PRS properties are owned by just 20% of landlords, reflecting a shift towards larger portfolio investors.

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

This regulatory uncertainty is already influencing landlord decisions. The workshop found that:

81% of landlords intend to be more selective when choosing tenants once the Renters’ Rights Bill takes effect.

62% plan to increase rents.

23% expect to reduce spending on maintenance.

Only 5% of landlords plan to expand their portfolios in 2025, compared to 18% in early 2022, the lowest level on record. Those intending to buy expect to acquire an average of 1.9 properties, while those planning to leave the market expect to sell an average of 2.9 properties, indicating a continued net reduction in rental stock.

The lack of investment in the PRS is a significant concern, particularly as demand continues to rise. An estimated 150,000 new households per year are expected to enter the sector between now and 2036, while only 45,000 new rental properties are being added annually.

Bethan Cooke, director at Pegasus Insight, emphasized the importance of these findings for policymakers.

She stated: “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.”

The message from landlords is clear: policy stability is essential. Without it, further reductions in rental stock and increased rental costs are likely outcomes.