Goodlord and Vouch have today released the sixth annual State of the Lettings Industry report, which brings together the views of more than 2,000 letting agents, landlords and tenants from across England, Wales, and Scotland, who were surveyed on more than 100 topics.

Following many months of media discussion around rising tenant demand and landlords leaving the market, this year’s report offers tangible insights into what’s happening on the ground.

Over the last 12 months, 78% of letting agents polled saw increased demand for tenants looking for homes. However, 58% of agents also reported an increase in the scarcity of available properties.

According to agents, this imbalance has been caused by several, often overlapping, factors:

+ 76% said it was due to landlords selling up or reducing their portfolio

+ 59% said it was due to not enough new landlords coming into the sector

+ 51% said it was due to more tenants were remaining in rented accommodation (as opposed to buying their own homes)

Some 76% of tenants who moved between July 2022-July 2023 said they found it difficult to find a rental property. And 13% of tenants said that they paid more rent per month than the originally advertised rate this year.

The stress of finding a property is also adversely affecting tenants. Of more than 1,000 responses, almost three-quarters – 73% – of tenants agreed that finding a new rental property was “one of the most stressful things they have ever done.”

There is growing evidence that landlords are leaving the market. Over the last 12 months, 95% of letting agents saw at least one of their landlords sell at least one of their properties. Nearly a quarter of letting agents saw up to 20% of their landlords selling at least one of their properties.

However, whilst a full-blown landlords exodus has not yet come to pass, 80% of letting agents said they expected more landlords to leave the sector in the next 12 months – 36% said they believed it would be a “significant amount”.

According to the landlords themselves, 30% of landlords said they had put at least one property up for sale. A further 17% said they were considering doing so in the next 12 months, indicating a lack of confidence in the future of the rental market.

Some 53% of landlords said they did not sell or attempt to sell a property this year.

When asked for the reasons why landlords may be selling their properties, 82% of agents and 70% of landlords cited an economic or financial reason, including; the impact of higher mortgage rates, changes in taxation, the impact of higher other costs, and better investment opportunities outside the sector.

The study also found that many landlords are overall feeling pessimistic about the introduction of the new rules – with 25% feeling “very” pessimistic and 29% feeling “somewhat pessimistic” (54% in total). Only 14% of landlords are feeling at all optimistic.

Letting agents are more mixed, with 43% feeling either somewhat or very pessimistic about the Bill. However 29% are feeling optimistic about the changes.

Over half – 55% – of agents cited the upcoming Renters (Reform) Bill as a factor driving landlords out (a statistic which is 15% higher than when agents were polled on this question last year). 56% of landlords also cited the Renters (Reform) Bill as a reason for leaving the sector.

Landlords hold the most negative views regarding the introduction of a new ombudsman – a key part of the reforms – with 43% believing it would have a negative impact on the sector, and 22% believing it would have a positive impact. Conversely, 42% of letting agents and 41% of industry suppliers believe that it would have a positive impact.

Despite government promises to push back the new rules around Minimum Energy Efficiency Standards, 78% of letting agents believe the current plans for EPC requirements will have a negative impact on the private rented sector.

Two-thirds of landlords said that half of their properties or fewer meet current requirements. When ask about their plans to make their property or properties compliant, they responded with:

+ 20% landlords said they are already working to improve the EPC ratings

+ 20% landlords said they will consider improving the EPC ratings in 2026 or later

+ 19% landlords said they will improve the EPC ratings in 2024 or 2025

+ 23% landlords said they will sell the property/properties

+ 20% were not sure

Overall, agents are feeling optimistic about their ability to handle upcoming regulatory changes. 74% of agents said that they felt confident to cope with future legislation changes. In contrast, only 44% of landlords felt the same.

Over the last 12 months, the average rental price for a home in England has risen by 10%. In August 2023, prices hit an average of £1,347 per calendar month (pcm) per property, up from £1,227pcm in August 2022.

Although 71% of tenants agreed their income was secure, only 30% said paying their rent was not an issue. In fact, 39% of tenants said their biggest worry was paying the rent.

Just under a fifth – 19% – of tenants surveyed said they were likely to buy a property in the next 12 months. In contrast, 63% of tenants said they wanted to get on the housing ladder, but couldn’t afford the deposit.

The financial pressures on tenants do not yet appear to have driven a major shift in arrears. Some 59% of letting agents and 65% of landlords reported no changes in the rate of arrears over the last 12 months.

However, landlords appear to be taking measures to secure rental incomes through guarantors. 60% of landlords said they would ask for a guarantor if the tenant was on a salary that could affect the affordability of a property. A huge 16% of landlords said they now required a tenant to provide a guarantor, regardless of salary.

A third – 33% – of tenants said they have been asked to provide a guarantor in their most recent tenancy agreement.

William Reeve, CEO at Goodlord, said: “This is our biggest report to date, both in terms of respondent size and the scope of topics covered. We’ve all felt the pressures facing the rental market over the last 12 months, but today’s report offers tangible evidence around what’s actually happening on the ground.

“We can see which forces are giving landlords pause for thought, where anxieties for tenants are coalescing, and how agents are preparing for change. The private rental sector is a vital part of our economy; we hope this report provides valuable insight to all of its stakeholders and encourages decision makers to take the steps which will boost confidence in the market, particularly for landlords.”

Tom Goodman, MD at Vouch, commented: “Although it’s understandable to see rising concern from agents and landlords about the changes to come, it’s more important than ever to see the positive in this shifting landscape. Upcoming legislation is a real opportunity for letting agents to demonstrate their value to landlords and tenants, meaning clued-up letting agents will continue to thrive.”

More pain for tenants as rents set to sky-rocket as house prices stabilise