Can landlords help plug the gap?
Forecasts from property consultancy Savills suggest that just 840,000 homes are likely to be completed over the next five years, well short of the government’s own target. The sector, already hampered by sluggish planning approvals and muted buyer demand, now faces uncertainty over future funding, with ministers unwilling to rule out cuts to the housing budget.
In the face of this slowdown, attention is turning to Britain’s landlords — a group that has endured years of regulatory pressure and tax hikes, yet appears to be showing signs of resilience.
A Sector Restructured
The past decade has not been kind to buy-to-let investors. A phasing out of mortgage interest tax relief, rising interest rates, and incoming energy efficiency standards have made small-scale ownership increasingly unviable.
Many so-called “accidental landlords” — those who let out former homes — have exited the market altogether. According to analytics firm TwentyCi, rental listings fell by 18 per cent in the year to March, with the total number of properties available to let hitting a record low of 284,000. But while the exodus of smaller players has shrunk supply, it has also shifted the make-up of the market.
Richard Donnell, of property portal Zoopla, told The Telegraph: “The number of landlords with one or two properties has fallen, as the smaller landlords have been more likely to leave… This has caused the sector to undergo a major restructuring in recent years.”
Today, those with five or more properties make up just 17 per cent of landlords but now provide nearly half of all rental homes. And crucially, these larger operators are better equipped to navigate the regulatory and financial headwinds ahead.
“Wealthier landlords can deal with higher levels of regulation – they can spread risk with some tenants who do not perform across a wide number of properties,” says Lucian Cook, of estate agent Savills.
It’s a shift that has professionalised a sector once characterised by part-time investors. Many are now operating through limited companies, attracted by more favourable tax treatment. According to Hamptons, a record 61,000 such companies were created in 2024 for buy-to-let purposes, up from 50,000 the year before.
A New Role in Housing Supply?
With housebuilders cutting back and planning consents at their lowest level since 2012, some argue that institutional and large-scale landlords may be the ones to fill the housing shortfall — not through new development, but by adapting and intensifying use of existing stock.
The government’s “stretching” housebuilding target, as officials now describe it, appears increasingly out of reach. Neil Jefferson, chief executive of the Home Builders Federation, told The Times: “All indicators for housing supply continue to stagnate or go backwards.” Planning permissions fell to just 39,170 in the first quarter of this year.
Dan Hill, of Savills, argues that demand-side support, such as a revived Help to Buy scheme, may be necessary to kick-start activity. But even then, “building volumes will be constrained by the speed at which the housebuilding sector can expand its supply chains and labour force.”
That leaves the rental market, however imperfect, as the pressure valve. Rents are rising — by 4.5 per cent year-on-year, according to Rightmove — and yields are recovering in many cities. In Manchester, gross rental yields have climbed to nearly 7 per cent.
“The undersupply of private rented stock has been entrenched,” says Cook. “The landlords who have remained in the sector have benefited from some rental growth along the way.”
Not Quite a Silver Bullet
Yet while the reshaped rental sector appears more stable than it did five years ago, there are limits to its ability to shoulder the burden. The number of landlords entering the market has continued to fall — down to just 10 per cent of purchases this year, compared to 16 per cent in 2015.
Aneisha Beveridge, of Hamptons, notes: “The hurdles to invest in buy-to-let are much higher; you have to know what you’re doing now more than ever before.”
Moreover, while some tenants may eventually become buyers — helped by loosening mortgage stress tests — the same pressures that deter landlords also weigh on first-time buyers. Higher taxes and borrowing costs, along with constrained housing supply, are keeping many renters in place.
In this context, landlords may not be the white knights the housing market is looking for, but they may be the ones best placed to hold the fort. With large-scale developers faltering and public spending tight, a professionalised and resilient rental sector could offer at least a partial buffer — if not a full solution — to Britain’s deepening housing woes.
