The UK Needs 230,000 New Rental Homes p.a.

According to new research by Capital Economics, the UK will need 227,000 new rental homes to meet the current demand if growth continues. It is anticipated over the next decade that 1.8 million new households according to the research.

The UK property market has suffered from severe housing supply delays over recent years. With the housing market delivering nowhere near the required 340,000 homes p.a. which are estimated to be required. This lack of supply puts pressure on both prices and also rents as an increasing number of buyers and tenants compete for a limited number of properties. Private rents outside London grew at their fastest rate over the past year, increasing by 9.9%.

However, it is not just a lack of new supply putting further pressure on rents. There are several other factors putting pressure on rents.

new rental homes

Increased interest costs

Interest rates have already started to move and will continue to rise further over the coming years, from historic lows. Landlords will attempt to pass on some if not all of these increased expenses to tenants.

Section 24

New rules referred to as ‘Section 24‘ of the tax code, now prevent landlords from offsetting 80% of their interest costs against their tax expenses. This has a significant impact on private landlords, especially those who derive their principal income in the UK.

Landlords leaving market

Many landlords are leaving the market following significant gains in the value of their property and choosing to sell and invest elsewhere. This housing stock is typically purchased by owner-occupiers and is not being replaced by new rental stock.