The introduction of the Renters’ Rights Act (RRA) was intended to strengthen protections for tenants and rebalance the relationship between landlords and renters. However, there are growing concerns that the reforms may also be contributing to a reduction in rental supply.

The legislation, which came into force last month, introduced wide-ranging changes to the private rented sector, including reforms to rent increases, repossession rules and tenant rights. While the measures were designed to improve security for renters, some landlords have responded by exiting the sector altogether.

Evidence of that trend is emerging in parts of London, where reduced supply is coinciding with rising rents. According to market data, average rents in prime outer London increased by 3.2% in the year to May, while monthly growth of 0.5% was the strongest recorded since September 2023.

Prime central London recorded more modest annual rental growth of 1%, reflecting a comparatively greater supply of rental properties in higher-value markets.

Data from Rightmove shows that the number of new rental listings across prime central and prime outer London in May was 13% below the five-year average and 11% lower than the same month last year.

At the same time, tenant demand continues to outstrip supply. According to Knight Frank, there were six prospective tenants for every new rental property coming to market in May, the highest ratio since September 2022.

The figures add to concerns that while the Renters’ Rights Act may improve protections for tenants who remain in the sector, a reduction in the number of available rental homes could place further upward pressure on rents and intensify competition for accommodation.

“As a result of the RRA, more landlords have sold up, which has pushed supply lower and rents higher in many areas of London, where renting is more prevalent than the rest of the UK,” said Knight Frank’s Tom Bill.

The RRA is the latest in a series of obstacles facing landlords in recent years, which have included higher rates of stamp duty and the ending of tax breaks. A future requirement for an EPC C rating for rental properties may be a further deterrent.

Lats week Paragon said new mortgage lending to buy-to-let investors fell 4.7% to £774m in the six months to March, attributing the fall to wider economic concerns following November’s Budget rather than singling out the RRA.

However, it cited growing financial pressure on landlords and said the RRA is “likely to increase costs for all landlords, which will inevitably generate pressures on tenants’ rental levels over time”.

Paragon’s statement followed a RICS survey report in April showing a net balance of +14% of respondents reporting an increase in tenant demand, while the figure for landlord instructions (supply) was -17%. The ONS also reported that UK rental value growth ticked higher last month.

Anthony Payne, CEO of data platform LonRes, told Knight Frank’s latest episode of Housing Unpacked that rental supply has been squeezed as fewer investor landlords see London as a place they currently want to invest, adding to the supply-demand imbalance in the capital, which will likely push rental prices up further moving forward.