The Resolution Foundation has reported a mere one per cent dip in the buy-to-let landlord population, defying widespread expectations of a more significant decrease. This stability in the number of landlords comes amidst an average 18 per cent hike in rent levels for new tenancies since January 2022, a trend that is reshaping the living standards of countless British families. Today, nearly one in five families rents privately, a dramatic climb from just 11 per cent in the late ’90s.

A Widening Pool of Renters

The face of private renting is changing, no longer confined to those in their twenties. The data shows a striking increase in the proportion of lower-income families, with heads aged 30 to 49, who rent. This figure has almost tripled from 11 per cent in the mid-90s to nearly 30 per cent in the recent 2021-22 period.

Debunking Rent Rise Myths

The Foundation challenges the common narrative that blames rising interest rates and tougher regulations for increased rents, suggesting these factors have had minimal impact on the availability of rental properties. Contrary to stories of a landlord exodus driving up rents due to decreased supply, evidence suggests only a slight contraction in the private rental sector (PRS) – just one per cent since mid-2019.

The Real Culprits Behind Rent Increases

A closer examination by the think tank attributes the surge in private rents to a post-pandemic market correction and a significant rise in wages. Historically, rents have tended to follow wage trends closely. The pandemic period, characterised by halted evictions and repossessions, saw rent levels dip to record lows relative to earnings. However, as of early 2022, rent prices began to correct themselves, aligning with long-term trends in the rent-to-earnings ratio.

The Forecast – A Cooling Market

With the post-pandemic adjustment phase largely over and the pace of wage growth slowing, the explosive growth in rents for new tenancies is expected to moderate. Indeed, the rate of increase has already shown signs of slowing, dropping from a peak of 10.4 per cent growth in June 2023 to 7.5 per cent by March 2024.

The Ongoing Challenge for Renters

Despite this cooling trend, the Foundation cautions that the ripple effects of recent rent spikes will persist, affecting the entire private rental sector over the coming years. New renters and existing tenants, particularly those at the end of their tenancy or facing in-tenancy price hikes, are likely to bear the brunt of these increases, with potential rent jumps of around 13 per cent expected within the next three years.