Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property Industry Eye. Read the original article for full details.

Landlord Exodus Linked to Renters’ Rights Act Squeezes London Rental Supply

The introduction of the Renters’ Rights Act (RRA) last month has coincided with a reduction in rental supply and rising rents in parts of London. Market data and industry reports indicate that some landlords are leaving the sector following the new legislation, which was intended to strengthen tenant protections.

The RRA brought in wide-ranging changes to the private rented sector, including reforms to rent increases, repossession rules, and tenant rights. While the measures were designed to improve security for renters, evidence is emerging that some landlords have responded by exiting the market, particularly in London.

According to market data, average rents in prime outer London increased by 3.2% in the year to May, with monthly growth of 0.5%—the strongest since September 2023. In contrast, prime central London saw annual rental growth of 1%, which is attributed to a comparatively greater supply of rental properties in higher-value markets.

Rightmove data shows that the number of new rental listings across prime central and prime outer London in May was 13% below the five-year average and 11% lower than the same month last year. At the same time, tenant demand continues to outstrip supply. Knight Frank reported that there were six prospective tenants for every new rental property coming to market in May, the highest ratio since September 2022.

The figures have raised concerns that, while the RRA may improve protections for tenants who remain in the sector, the reduction in available rental homes could place further upward pressure on rents and intensify competition for accommodation.

The RRA is the latest in a series of challenges for landlords, following higher stamp duty rates and the ending of tax breaks. A future requirement for an EPC C rating for rental properties is also noted as a potential deterrent for landlords.

Paragon reported that new mortgage lending to buy-to-let investors fell 4.7% to £774m in the six months to March, attributing the fall to wider economic concerns. Paragon also stated that the RRA is “likely to increase costs for all landlords, which will inevitably generate pressures on tenants’ rental levels over time.”

A RICS survey in April showed a net balance of +14% of respondents reporting an increase in tenant demand, while landlord instructions (supply) recorded a net balance of -17%. The ONS also reported that UK rental value growth increased last month.