How is the increased demand for rental properties impacting landlords and tenants?

By Georgia Galloway | Thursday 2nd May | 8 minute read

Due to increased demand for rental properties, landlords are raising rents, and tenants face increased costs due to record levels of competition.

71% of landlords experienced increased demand for their rental properties in 2023.

As of 2024, almost 5 million homes in the UK are rented - 20% of all homes. In 2000, it was 10%. Demand is outstripping supply, and there are now an average of 13 enquiries for every home to rent, twice the demand since the COVID-19 pandemic.

Increased demand for rental properties

How many landlords experienced an increase in demand?

A combined 71% of UK landlords experienced an ‘increase’ (46%) or ‘significant increase’ (25%) in demand for their rental properties in 2023, according to our survey of 755 UK landlords.

26% of landlords said they experienced no change in demand in 2023, while just 2% felt they had less demand. 0% felt a significant decrease in demand for their rental properties.


Where did rental demand rise most?

7 out of 10 landlords saw demand for their rental properties increase, but in which regions did landlords experience rental demand increase in the UK? 

Landlords that owned at least one property in London experienced the greatest increase in tenant demand in 2023, with over 8 out of 10 (83%) citing either an increase or significant increase in demand. 15% of London landlords felt demand stayed the same, with just 2% experiencing a decrease in demand.

The South West closely followed London, where 82% of landlords identified increased demand. 

The only regions where less than 70% of landlords experienced increased demand were Yorkshire & the Humber and Wales. But even still, landlords in these regions experienced a 67% and 63% increase in demand, respectively.

Region

% of Landlords that experienced an increase in demand for their rental property in 2023

London

83%

South West

82%

Northern Ireland

76%

Scotland

76%

East Midlands

75%

West Midlands

75%

North East

74%

East England

74%

South East

74%

North West

71%

Yorkshire & the Humber

67%

Wales

63%


What's driving the rise in rental costs? 

The lack of rental property supply is a key reason for the increase in demand. Landlords are leaving the market, not enough rental properties are being built, and tenants are finding it increasingly difficult to move from renting to home ownership, all contributing factors to increased demand for available properties.

What demographic groups are driving the surge in rental demand?

In 2011, the average age of first-time house buyers was 29. Since then, it has increased to 32. Although this is only an increase of 3 years, the trend demonstrates that first-time buyers are getting older, and therefore, younger people are having to rent for longer than before.

Born between 1980 and 1994, millennials dominate the UK rental market, with 44% of all rented households. Generation Z, born between 1995 and 2012, makes up 36% of renters.

But it’s not just Millennials and Gen Z creating the increased demand for rental properties; since 2010/11, the number of 55+ households renting has grown from 506k to 867k, a rise of over 70%.

Are there specific types of rental properties that are in higher demand?

In order, the 5 most popular types of property owned by landlords are:

  1. Apartment
  2. Flat
  3. Semi-detached
  4. Terrace
  5. Detached

Apartments experienced the greatest increase in demand. 83% of apartment owners saw an increase, or significant increase, in demand for their property in 2023. Flats, detached and semi-detached properties were close behind in terms of increased demand. Terraces received the lowest increase, but these landlords still experienced a 70% increase in demand. 

Property type

% of Landlords that experienced an increase in demand for their rental property in 2023

Apartment

83%

Flat

75%

Detached

74%

Semi-detached

73%

Terrace

70%

What’s causing the rental supply/demand imbalance?

  • Housing shortage: The UK has experienced a chronic shortage of housing supply, particularly in densely populated urban areas. This shortage puts pressure on the rental market as more people turn to rent due to unaffordable property prices or the inability to secure mortgages.
  • Population growth: The UK's population has steadily increased, driven by natural population growth, immigration, and urbanisation. This growing population increases the demand for housing, including rental properties.
  • Economic factors: Economic conditions, such as job growth, wages, and affordability of homeownership, influence the demand for rental housing. Economic downturns can lead to increased demand for rental properties as people may be unable to afford to buy homes or choose to rent due to uncertainty.
  • Regulatory environment: Government policies, such as taxation on landlords, changes to eviction laws, and regulations on short-term rentals, can impact the supply of rental properties. Some landlords may choose to sell their properties or exit the market in response to regulatory changes, further exacerbating the supply-demand imbalance.
  • Property investment landscape: The attractiveness of property investment compared to other investment options also affects the supply of rental properties. Fluctuations in property prices, property refurbishment finance costs, rental yields, and interest rates can influence investor behaviour, leading to fluctuations in rental supply.
  • Housing affordability: High property prices relative to incomes in many parts of the UK make it difficult for individuals and families to afford homeownership, driving up demand for rental properties. This increased demand can strain the rental market, particularly in areas with limited supply.

How does the lack of appropriate housing stock affect renters?

The lack of homes available impacts rental affordability, limits choice and affects the overall UK housing market.

Increased Competition

  • Higher Demand: With fewer properties available, more renters compete for the same spaces, making it harder to find suitable accommodation.
  • Faster Decision-Making: Renters may feel pressured to make quick decisions or commit to leases without proper consideration because they fear missing out on available properties.

Rising Rental Prices

  • Affordability Issues: Supply and demand means landlords can charge higher rents when rental stock is low. This can make finding affordable housing challenging, especially in desirable areas.
  • Greater Financial Burden: Higher rents consume a larger portion of renters’ incomes, potentially leading to financial stress or limiting their ability to save money - especially those looking to become first-time buyers.

Reduced Housing Quality

  • Lower Standards: In a market with high demand and low supply, landlords may not feel as compelled to maintain or improve properties, knowing they can easily find tenants regardless of the property's condition.
  • Limited Options: Renters may be forced to accept properties in poorer conditions or less desirable locations because their budget limits their options.

Housing Insecurity

  • Short-term Leases: Landlords may opt for shorter lease terms to take advantage of rising market rents, which can lead to increased instability for renters.
  • Eviction and Displacement: Renters may face a higher risk of eviction or displacement as landlords might seek to vacate properties for renovation, sale, or conversion into short-term rentals due to the high market value.

Social and Economic Consequences

  • Commuting and Relocation: A lack of affordable rental options can force people to relocate further from work or education centres, leading to longer commutes and increased transportation costs. Should there be transportation delays or strikes, workers unable to get to their workplaces can negatively impact them.
  • A Barrier to Employment: The difficulty in finding affordable housing close to employment opportunities can be a barrier to accepting jobs, impacting both individual economic opportunities and broader economic productivity.
  • Increased Homelessness: In extreme cases, the lack of affordable rental options can contribute to homelessness, especially for the most vulnerable populations.

Mental Health Impact

  • Stress and Anxiety: The uncertainty and instability associated with finding and keeping rental accommodation can have significant mental health impacts, including stress, anxiety, and a sense of insecurity. Our 2023 Renters' Report discovered that 27% of UK tenants have experienced anxiety due to renting.

In 2023, 71% of landlords saw a rise in demand for their rental properties, marking a significant 14.5% growth from the 62% who reported increased demand in 2022.


How have Landlords responded to increased rental demand?

Put up rent

Across the UK, increasing costs are leading landlords to raise their rental fees. However, landlords who experience an increase in demand for their rental properties are more likely to do so. In 2023, 56% of all landlords increased their rental fees. However, a higher percentage of landlords who experienced an increase, or significant increase, in demand also increased their rent (60% and 65%, respectively).

Despite the increase in demand, landlords still sold up

32% of UK landlords sold at least one of their rental properties in 2023, but even landlords that saw demand for their properties increase sold up. 35% of landlords that had an increase, and 41% that had a significant increase in demand sold a rental property last year. This confirms that even when landlords have the added security of increased demand, the costs are still too high for over a third of them. 


What's the outlook for tenants?

Demand is expected to remain high, and rents are expected to increase further, but current predictions are mixed, and tenant demand is expected to cool in 2024. 

If demand rises further, what will happen?

  • Increased rental prices: With higher demand for rental properties, landlords may seek to capitalise by raising rents. This could result in tenants facing increased financial pressure as they allocate more of their income towards housing costs.
  • Decreased affordability: Rising rental prices could make it even more challenging for individuals and families to afford suitable accommodation, particularly in high-demand areas with elevated rental costs. This could lead to overcrowding, housing insecurity, and homelessness.
  • Competition for available properties: A surge in rental demand could intensify competition among prospective tenants for available rental properties. This could result in properties being let more quickly and with multiple applicants vying for the same accommodation, potentially leading to bidding wars and higher rents.
  • Investor interest: An increase in rental demand may attract more investors to the buy-to-let market, seeking to capitalise on the potential for rental income. This could lead to an influx of investment in rental properties, which may help alleviate some supply-demand imbalance in the long term.
  • Policy responses: Heightened rental demand could prompt measures to address housing affordability and increase rental supply. This could include initiatives to incentivise property development, regulate rental prices, or provide financial assistance to renters facing housing cost burdens.

If rental demand declines, what will happen?

  • Decreased rental prices: With lower demand for rental properties, landlords may be compelled to lower rents to attract tenants. This could result in more affordable housing options for renters, potentially easing financial burdens for those with high housing costs.
  • Increased vacancy rates: A decline in rental demand could lead to higher vacancy rates as landlords struggle to fill their properties. This could result in properties remaining empty for longer periods, leading to lost rental income for landlords and potentially contributing to neighbourhood blight.
  • Impact on landlords' income: Lower demand for rental properties could reduce landlords' rental income, affecting their financial viability and potentially prompting more landlords to consider selling their properties or exiting the rental market altogether.
  • A shift in investment patterns: A decrease in rental demand may prompt some investors to reconsider their investment strategies, potentially reallocating capital to other sectors or investment opportunities perceived as more lucrative.
  • Policy responses: Declining rental demand could prompt policymakers to implement measures to stimulate demand or support the rental market. This could include initiatives such as rental subsidies, tax incentives for landlords or programs to encourage home ownership.
  • Potential oversupply: If rental demand declines significantly, there is a risk of oversupply in the rental market, particularly in areas where new developments were planned or underway to meet previously high demand. This oversupply could put further downward pressure on rental prices and exacerbate vacancy rates.

Lifestyle choice

Our 2023 survey of over 1,000 UK renters discovered that 84% wanted to own a property in the future. Buying a home

But the increasing difficulty of saving enough to buy a first-time property has coined the term ‘Guppies’ - the group of young adults who are “giving up on property.” A quarter of adults under 40 do not own a home, 42% of whom have stopped trying to own their first home for at least the next 10 years.


Final thoughts

With 71% of landlords experiencing increased demand in 2023, the market is witnessing record levels of competition and rising rents, directly impacting landlords and tenants. This trend is further exacerbated by a chronic shortage of housing supply, with the number of available rental properties falling by a third over the past 18 months.

As a result, tenants, particularly Millennials and Gen Z, face affordability challenges, limited housing options, and heightened housing insecurity. While landlords are capitalising on increased demand by raising rents, a significant portion also opt to sell their properties, highlighting the complex dynamics. The outlook remains uncertain, with predictions of cooling demand in 2024 potentially reshaping the rental market landscape once again.

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