A significant reduction in private rental housing is expected over the coming years, with research suggesting that around 220,000 homes could be lost from the sector in England by the end of 2026. The findings, produced by Pepper Money, indicate that changes in legislation and wider market pressures are encouraging many landlords to exit the sector.
This potential decline would represent around 5% of the current rental stock, marking a notable reversal after years of steady growth in the private rented sector. Over the past decade and a half, the number of rental households has expanded significantly, but recent trends suggest that momentum is now shifting in the opposite direction.
Long-term growth now beginning to reverse
The private rented sector has grown strongly over time, increasing from just over 3 million households in the late 2000s to nearly 5 million in recent years. However, new data shows that this expansion may now be slowing, with more landlords choosing to sell properties rather than expand portfolios.
Recent figures also show a decline in the overall value of rental housing, as more properties are sold to owner-occupiers. This shift suggests that the balance between renting and home ownership is gradually changing.
Financial and regulatory pressures on landlords
Landlords have faced a series of tax and regulatory changes over recent years, which have reduced profitability and increased compliance costs. These include higher stamp duty charges on additional properties, limits on mortgage interest tax relief, and stricter rental regulations.
For many smaller landlords in particular, these changes have made long-term letting less attractive, leading some to consider selling their properties altogether.
Impact of upcoming rental reforms
A key factor influencing current decisions is the upcoming Renters’ Rights Act, which is expected to bring major changes to the rental sector.
Once in force, the legislation will remove “no-fault” evictions, requiring landlords to provide a valid reason—such as selling the property—if they wish to regain possession. Fixed-term tenancy agreements will also be abolished, allowing tenants greater flexibility to end contracts with notice.
In addition, the reforms aim to strengthen tenant protections around rent increases, property conditions, and upfront payments, while also restricting practices such as bidding wars and excessive advance rent demands.
Why landlords are choosing to sell
Industry specialists suggest that the combination of tax changes and new regulations is prompting more landlords—particularly smaller “accidental landlords”—to exit the market. Many are long-term property owners who now feel that continuing to let is no longer financially viable.
There is also concern that gaining possession of properties may become more difficult once the new rules are introduced, adding further uncertainty for landlords.
Risk of reduced rental supply
Analysts warn that if a large number of landlords exit the market, the supply of rental homes could fall significantly. Research suggests that only a minority of properties sold by landlords are likely to be bought by other investors, meaning many will move into owner-occupation instead.
This shift could reduce availability in the private rented sector, particularly in high-demand areas, and may place further pressure on rents over time.
Regional differences in landlord exits
The expected reduction in rental homes is not evenly spread across the country. The South East is forecast to see one of the largest absolute declines in rental stock, while the North East has the highest proportion of landlords planning to sell.
In London, higher property prices and lower rental yields are contributing to a more cautious approach, with some landlords choosing to wait and assess how the market develops following the introduction of new rules.
What this could mean for renters
If rental supply tightens, tenants could face increased competition for properties, potentially leading to higher rents in the long run. However, any short-term disruption will depend on how quickly landlords exit the market and how demand responds.
There are also concerns that reduced availability could increase pressure on social housing and make it harder for renters to secure suitable accommodation in certain areas.
Outlook for the rental market
While not all landlords are expected to leave the sector, many are reassessing their position in light of changing regulations and financial pressures. Some are shifting towards more managed investment approaches, while others are waiting to see how the new system operates in practice.
Overall, the rental market appears to be entering a period of transition, with supply, regulation, and affordability all shaping its future direction.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property