With an ongoing shortage of rental homes available in the UK, and rents rising in line with availability declining, many potential tenants and landlords alike might be wondering why this happening, and when the will market balance out again.
New research from Zoopla* suggests that the UK has only half the ‘normal’ number of homes available to rent right now. According to their findings, the typical UK estate agent has just 8 available homes to rent at present, which is less than half the pre-pandemic average of 16. *
Zoopla also noted that due to supply being historically low, rapid rental growth has been seen across the country, particularly concentrated in big cities like Sheffield, (12.4%), Nottingham (11.9%), Leeds (11.0%), and Liverpool (9.4%). *
Why are there so few homes to rent?
Like every market, the property market is driven by the laws of supply and demand, and since the pandemic, the backlog of potential renters has yet to level out with the UK’s rental supply. The shortage of supply and continuous growth in demand can be boiled down to several inter-related components…
A lack of investors
The number of privately rented homes has remained somewhat static over the past 6 years – at around 5.5 million homes across Britain. According to Zoopla, this follows over a decade of steadfast growth as buy-to-let mortgages were more accessible and private investors bought up homes to rent out, keeping supply steady. The dynamics of today’s market have drastically shifted, with new regulatory changes being introduced and an unsteady economic climate, many potential investors could be missing out on the possibility of higher yields than ever before by deciding to take a ‘wait it out’ approach.
More long-term renters and tenants staying put
One of the most fundamental factors driving the lack of supply is that renters are staying put for longer. This is due to a shortage of choice on the market, and the continuous rental growth that is keeping tenants from moving out of their homes while prices rise elsewhere. The English Housing Survey showed the average length of a tenancy has grown to 4.4 years, a jump from less than 3 years, as recorded a decade ago.*
This trend is creating a tumultuous cycle for renters, as the faster rents rise, the more likely tenants are to stay put, thus compounding rental housing shortages, and adding to upward pressure on rents.
Localised supply pressures
The tourist hotpots of the UK, such as large cities and seaside towns, homes for rent are sparsely found within a short-term let dominated market. Landlords
offering long-term lets in these locations can achieve high rental income due to supply being at such a shortage. This is a huge challenge for overall supply in popular tourist hubs, as availability for those looking for a long-term home is once again squeezed by unmet demand.
When will availability for homes to rent improve?
Currently, there is no end in sight for this tug of war between supply and demand, and a notable increase in rental homes isn’t likely to be seen in the near term. The UK’s private rental market has been in a period of consolidation since the pandemic, where many landlords fled the market in fear of economic headwinds and others had to re-evaluate their investment strategies. Meanwhile, tenants flooded to the market and will continue to do so for the foreseeable.
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Zoopla*
The English Housing Survey*
