Rents up 2.6% & set to be up 4-5% - Zoopla

The falling supply caused by the Renters Rights Act is obviously going to increase rents. Why successful Governments who claim to be on the side of tenants are unable to see that is beyond me.

Who wants to be landlord in 2026? A lot fewer that’s the answer which means there are going to be fewer options in the private rental sector. The landlords who were plugging the gap are now looking elsewhere. You might be able to limit what landlords do but you can’t stop them from selling their properties.

From a property finance perspective, the number I’d be watching is rental supply.

We shouldn’t assume the Renters’ Rights Act is responsible for Zoopla’s reported 3% fall in homes available to rent, but landlords are making investment decisions against a changing regulatory and financing backdrop.

Since May, landlords cannot increase the rent during the first 12 months of a new tenancy and can then only increase it once a year. If mortgage, maintenance and other costs are expected to rise, some may factor more of that uncertainty into the starting rent.

Rental income can also affect how much an investor can borrow when refinancing. If the numbers stop working for enough landlords and more properties leave the rental market, tenants face less choice and potentially further upward pressure on rents.

If you're renting and wondering why your rent keeps climbing, the answer is supply. The number of homes available to rent has fallen 3%, the first drop in three years, and when fewer places chase the same tenants, prices only go one way. Some of that is landlords selling up. The market is churning: a few professional landlords are still buying, but more smaller ones are heading for the exit, and the net result is fewer rental homes. The Renters' Rights Act is well meant, and tenants clearly need protection, but capping how often rents can rise can backfire. If a landlord can't adjust later, they price higher at the start, or decide it isn't worth the hassle and sell, which tightens supply again. That's the uncomfortable part: measures designed to help renters can lift rents for everyone still looking. Without more homes coming into the rental market, no cap will hold rents down for long.

This was anticipated, and the reason I tell tenants day in day out, to seriously consider if they can buy a place of their own whilst it is still a buyer’s market with many a bargain to be had.

Whatever we believe, there has to come a point when we have to be honest with ourselves when asking if our lot could have been better if we’d made different choices, as opposed to blaming other people for our dissatisfaction of where our lives are today.

There’s currently a clamour for direct rent controls - by people and organisations that are yet to provide a single home for rent. If they get their way, I believe it will only make matters worse for those who most need protection. Rent controls will only be relevant to those who have a place to rent, yet history tells us such a move will only further shrink supply.

Ministers have managed to punish landlords and tenants with the same policy, which takes real talent. We already have a housing shortage, so the answer was to charge landlords £65 per property just to exist, cap how often they can raise rent, and drive them out of the market. Now ask who buys those homes. Not the tenants, because rent at these levels leaves nothing for a deposit, so they get moved on and then outbid for the house they lived in. Fewer homes to rent, the first fall in three years, and rents heading for 5% by Christmas. This was sold as protection for renters. It's a tax on having nowhere else to go, and the Government wrote every line of it.

Renters are footing the bill for a tax and regulation raid on landlords. At 2.6%, rent rises are actually below trend: rents surged 12% in 2022 and are up over a third since 2020.

The real story is the direction of travel. Supply has fallen for the first time in three years because landlords facing higher taxes, higher mortgage costs and the Renters' Rights Act, have slowed down in buying new investment properties, and when you can only raise the rent once a year, you price that risk in on day one, so new tenants pay upfront for the protections they've been given. Zoopla's 4% to 5% forecast is the predictable result of squeezing the people who supply the homes.

Additionally, homes sitting empty by law is the strangest housing policy I've seen Britain produce in years. A landlord who serves notice to sell cannot re-let, or even advertise the property for 12 months if the sale collapses. Half of rental sales failed to complete last year, so this is not a rare occurrence.