Despite promises by government and developers, there seems little progress on the house building front. Will build-to-rent have any effect on rent levels?
The problem is exacerbated by the time it takes to build new homes; the incentives for developers to build them is debatable and the exodus of small-scale private landlords from the private rented sector reduces supply.
Build-to-rent is having an impact but it’s slow. There’s a long way to go at just 3 per cent of the private rented sector to become anything like the large scale institutional investment that exists in the United States, at around 40 per cent.
Demand continues to outstrip supply in the UK’s private rented sector according to the latest propertymark Housing Insight Report, with the average number of applicants per member branch sitting at 10 people for each available property in February 2025
Most propertymark member agents reported that rents remained generally static, 12% reporting an overall fall with 31% reporting an increase.
There were some notable exceptions to the generally static market with, for example, Luton rent rises reported at 10% over the past year - figures produced by the Office for National Statistics show that the average private rent in Luton is £1,172 per month over the year to March, that’s up by 10 per cent from the £1,061 figure recorded the previous year and 32 per cent over 5 years, risen form £886.
Propertymark, the professional membership organisation for estate and letting agents, conducts regular market surveys of its member agencies – published as the Housing Insight Report. The latest available report warns that the UK private rented sector faces "sizeable challenges" given that there’s an average of 10 people waiting to rent each available property.
The rented sector in the UK has experienced high tenant demand for years, which is a plus for private landlords. However, landlords have been discouraged by increasingly stringent regulations adding to the burden of tenancy management, a less than encouraging tax regime and the imminent introduction of a Renters’ Rights Act that will afford greater protection for tenants.
All this is having the effect of “scaring off” some traditional small-scale landlords, while the promised professionalisation of the sector, the growth of large-scale landlords has some way to go before it catches up with the shortage of rental housing, as more private landlords leave.
Nathan Emerson, chief executive of Propertymark, has said that the sector continues to face "sizable challenges from a magnitude of different angles".
"We continue to see a considerable mismatch between supply and demand, with an average of 10 people wishing to rent each property currently available across the UK.
"In addition, we are seeing vast legislative changes that will affect how and if some landlords are able to continue operating within the sector.
"Throughout the last twenty years, renting a property has become enormously more popular with people, and it’s vital there is targeted support and investment in the sector to keep pace with ever-intensifying demand."
Despite higher market rents, landlords’ profitability has declined especially in the small-scale buy-to-let sector where properties are owned in-person as opposed through a limited company – it often doesn’t make sense to incorporate for one or two rental properties. Higher taxes and other costs along with increased admin time make the business of buy to let less attractive than it was.
What’s more, the high rents are bearing down on tenants with affordability is some cases stretched to the limit. Landlords are prevented from putting rents higher for this reason with many tenants forced to spend a too high proportion of their income on rent.
All this, while Housing Benefit payments fail to keep pace with rising costs many tenants are struggling to pay for decent heating while, while at the extreme, are going hungry. Even relatively affluent high earners are finding it difficult to save for a deport to buy their first home.
Increased supply should in theory lead to reduced rents. But the impact may not be all that dramatic or quick. An increased supply of homes is needed, especially in areas with high demand, and providing these are of the right type of houses, it can put downward pressure on both prices and rents.
But there are other factors involved: some studies suggested that for every 1% increase in supply, prices could drop by 1 to 2 percent. The impact on rents is less direct, and it all depends on locations, types of properties built, interest rates, wages, and the overall state of the economy.
Housing completions are not increasing anywhere near the government’s targets, yet. This is due to a combination of factors, including the challenges of introducing reforms in the planning system, funding constraints, the economics involved and a downturn in the housebuilding industry – developers will only build houses if they can see a profit, why would developers increase housebuilding only to sell at reduced prices?.
The planning system has been blamed for the failure to build enough homes in the past and this has been particularly acute in areas of exceptional need. Funding has been constrained, particularly in the social housing sector, while the housebuilding industry has been in a general downturn since 2022. Posing a significant challenge to the government’s aim of reaching 1.5million new homes this parliament.
Even if the government could reach its target of 1.5 million homes over the next five years, something that looks increasingly unlikely, it would fall well below what is needed to meet the UK’s housing requirements. The Centre for Cities has estimated that the country has a backlog of over 4 million homes, a deficit that at the current optimistic rate of building would take at least 50 years to catch up, assuming 300,000 homes could be built each year. Over double that target would have to be built every year if Housing Secretary Angela Rayner’s planned surge is to make any impact on the current chronic housing shortage.
In the UK, institutional ownership of rental properties is yet only a small fraction of the market compared to the traditional, small-scale private landlords. While institutions, encouraged by successive governments, own a growing percentage of rental homes, they still make up a relatively small proportion of the overall private rented sector. It is estimated that institutional ownership is currently around 3% of total UK rented housing stock – the rest, 97 per cent is owned by small to medium scale landlords.
The institutions - pension funds, investment firms, large companies working with large-scale developers are increasingly investing in the UK rental market. They are attracted by the potential for stable income streams because of high tenant demand and asset appreciation. Initially at least they have restricted themselves to city centre developments offering economies of scale and premium rents. Even with the later trend of providing small family homes for rent on estate developments, the overall impact on supply is slow.
One developer behind a high-rise apartment development in Cardiff city centre claims that the new supply will bring the city's rising rents down. Many of the city’s agents are sceptical. The project is an initiative by finance and insurance company Legal & General. It is projected to build 1,000 rental Welsh capital with agents claiming 3,000 more to be built.
But these are premium rentals with rents to match. They catch a small proportion of renters who can afford the high rents and one letting agency in Cardiff says that with one-bedroom apartments costing £1,300 per month, most tenants are priced out of these.
According to ONS figures, private rents in Wales rose by 8.5% over the last year, while in Cardiff itself they have increased by over 9%. Wales is the least affordable part of Britain for first-time buyers and is following major cities like Liverpool and Manchester with major apartment block developments of build-to-rent accommodation.
These properties are generally high-end desirable rentals convenient to city centre workplaces with a price tag to match. They typically offer a concierge service, on-site gyms, communal spaces for socialising and recreation. These one-bed apartments will go for around the £1,300 monthly rent point, whereas the traditional landlord offer in Cardiff is much closer to the £900 per calendar month mark.
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