The private rented sector (PRS) has been uncharacteristically turbulent over the past few years. We think the next five years will be a more normal, predictable rental market, with rents increasing at a rate between inflation and income growth. Any significant disruption to supply caused by the Renters’ Rights Act and other regulation of the market is the key risk to this outlook.

Rents in the mainstream market are usually boring. Rental growth at a macro-level is very closely linked to income growth, regardless of almost anything else happening in the housing market or wider economy. At a local level, supply and demand dynamics can make more of a short-term impact. But from year to year, at a national level, you can be fairly sure that rental growth will be pretty much the same as household income growth.

That makes what has happened since the Covid-19 pandemic quite extraordinary. At their peak, rents grew by over 12% in the twelve months to August 2022. Incomes have also increased at above trend levels over the last few years, but not enough to explain this growth in rents.

The average renter spent 32.4% of their gross household income on rent in Q3 2025, up from 30.4% five years earlier, according to Homelet. That doesn’t sound like much, but our analysis shows that this was the largest worsening in rental affordability since at least 2006 and probably since the early 1990s.

Over the last twelve months, however, affordability has been improving. Income growth has remained relatively high, but it is the dramatic slowdown in rental growth that has made the difference. From 12% annual growth during the year to August 2022, annual rental growth in the UK had slowed to just 2.5% three years later.

What caused this extraordinary period in the private rental market? And what does that mean for the next five years?

Surely supply constraints are to blame?

The last decade has been a challenging one for the supply of additional homes to rent. The RICS survey shows a clear majority of surveyors reporting lower numbers of landlord instructions to let homes since 2017.

Tax changes from 2016 onwards have acted to reduce the profitability of being a landlord. Higher interest rates over the last three years have also been a significant deterrent for those reliant on mortgage debt. Buy-to-let (BTL) has therefore become a less attractive investment option.

The Renters' Rights Act is a further problem for many landlords. The abolition of Section 21 ‘no fault evictions’ alongside the right for tenants to challenge annual rent increases are two measures that have been particularly unpopular with some landlords. There is also an expectation that more stringent energy-efficiency standards will be required and that homes will need to conform to the Decent Homes Standard, alongside higher costs for maintenance and repairs. Some have sold their homes in anticipation of the Act being implemented, with the risk that others will follow if the changes prove unduly disruptive to landlords’ cash flow.

But these supply problems were present before rents surged in 2022. As rental growth has slowed over the last year, the lack of supply has actually worsened, both according to the RICS survey and our analysis of BTL sales evident in listings data.

Build to Rent (BTR) is often cited as the solution, with more institutional landlords filling the supply gap. But although this sector has grown, it is still too small in scale to have a real impact on supply. There have been an average of 15,000 BTR completions per year since 2020, into a tenure housing 4.9 million households.

So, although the supply picture is bleak, it does not explain the extraordinary behaviour of rents over the last five years and so is not necessarily a guide to what will happen over the next five.

Demand changes appear to have had a bigger impact

While supply slowly declines, the RICS survey shows much bigger swings in demand. Between June 2021 and June 2023, the largest majority of surveyors on record reported increased tenant demand. This coincided with the peak period of rental growth.

What drove this surge in demand? Initially, it appeared to be the result of pent-up demand, with tenants who had remained dormant during lockdowns suddenly all wanting new tenancies at the same time. But this cannot explain two years of heightened demand.

An additional driver of excess demand was the high level of net migration. Over the last five years, we estimate that net migration amounted to around 600,000 more new households than would have been expected¹ had net migration continued in line with the level seen over the previous 15 years. The majority would have moved into the PRS, a tenure that houses just under five million households.

80% of these excess households arrived in 2022 and 2023, when the RICS reported the highest levels of demand and rental growth was at record levels. So this surge in demand was equivalent to around 10% of households in the PRS over a two-year period.

Back to normal

Migration numbers have now eased, and the RICS survey has been reporting demand levels back in line with the more normal market conditions of the 2010s. First time buyer numbers have also been elevated during 2025, increasing the flow of households out of the PRS (read more about that here). So the exceptional surge in demand has passed, and we should expect rental growth to fall gradually back in line with income growth.

Reversion to the long-term trend has already started, with the average rent having fallen from 33.4% of income at the end of 2023 to 32.4% in Q3 2025, according to Homelet. We expect this reversion to gradually continue over the next five years, with rents increasing at a rate between CPI inflation and household income growth.

The clear risk to this outlook is another surge in net migration or supply shock of similar scale, both of which would drive higher rental growth. To date, the outflow of landlords from the PRS has been gradual and relatively small-scale. As the Renters’ Rights Act reforms come into force, it will be critical that being a landlord remains profitable and an attractive investment in order to prevent a supply-side shock on the scale of the demand-side one that has made being a renter so challenging over the last few years.

_{¹ Based on comparison of net migration in 2020–2024 to the average for the preceding 15 years, and assuming a rental household size of 2.3 people, in line with the English Housing Survey.}

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Understanding the Renters’ Rights Act

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