Rental housing in London is disappearing: new laws are reshaping the market

The number of rental properties available in London fell by 21.7% over two years — before the Labour Party came to power. At the same time, listings for homes for sale rose by 17.6%, MSN reports, citing analysis by Savills. The market is under pressure from new rental regulations, rising mortgage rates, and reduced tax relief.

Investors are leaving the UK rental market

The supply of rental housing in the United Kingdom has fallen by 17% over two years, while the number of homes listed for sale has increased by 10%. The share of landlords among sellers rose from 9% in 2018 to nearly 15% in the first quarter of 2026, according to Hamptons. In the South East, rental supply fell by 20.6%, while the sales market expanded by 14.8%. In the apartment segment — where the share of buy-to-let investors is particularly high — sales listings increased by 30.9%.

Landlord Leah, who managed more than 100 properties in London since the 1990s, has sold 80 homes over the past two years and plans to dispose of the remaining 20. She told The Telegraph that the new rules make the market too risky for property owners: “We will sell even at a loss just to get out of renting.”

Investors are also becoming less active in deals: the share of buy-to-let purchases fell to 10.9% in 2025 — the lowest level since 2012. Only 6% of sold rental properties later returned to the rental market. Every third landlord is considering exiting the sector, according to a Rightmove survey.

Reasons for changes in the UK property market

Tenants’ rights law

Analysts link the trend to the introduction of the Renters’ Rights Act. The legislation came into force on 1 May 2026 and introduces major changes to the private rental sector. It bans evictions without stated reasons under Section 21, a mechanism landlords in the UK had used for decades. At the same time, it makes it easier for tenants to challenge rent increases.

Landlords will now be able to raise rents only once a year through the official Section 13 notice procedure. Tenants will have the right to appeal rent increases to the First-tier Tribunal.

In addition, the law introduces 15 new types of penalties for landlords, ranging from £7,000 (€8,105) to £40,000 (€46,316) for repeated violations. Sanctions also apply to attempts to let property under fixed-term contracts or to charge rent above the advertised price.

Rising rates and tax pressure

Landlords were already under pressure before the reforms. Since May 2020, the average rate on a two-year fixed buy-to-let mortgage has more than doubled — from 2.51% to 5.37%, according to Moneyfacts. For an investor with a £150,000 (€173,685) mortgage, this means additional annual costs of £4,284 (€4,959).

The situation has been further aggravated by the gradual reduction of tax relief for buy-to-let mortgages since 2017. Property owners can no longer fully deduct mortgage payments as expenses when calculating tax. As a result, some landlords are now required to pay tax even when making a loss.

Risks for the UK property market

Savills head of residential research Lucian Cook expects that more landlords will leave the sector in the coming months, although the market is likely close to its peak level of outflow. In his view, the sell-off of rental housing will continue to support rent growth while limiting house price increases.

Danny Pinder, policy director at the British Property Federation, warned that concerns over the reform are shared not only by small landlords but also by large institutional investors in build-to-rent projects. The main issue, he said, is that the UK tribunal system is not prepared for a sharp rise in rent-related complaints.

Five property chambers already operate with limited capacity. Over the past three years, only 21% of cases were resolved within 10 weeks. On average, each chamber handled fewer than 1,000 cases per year. The new law could significantly increase this burden. A Goodlord survey found that a quarter of tenants plan to challenge any rent increase.

The UK Ministry of Housing, Communities and Local Government stated that the private rental sector has doubled since the early 2000s and that the new law aims to provide stronger protection and more effective mechanisms for challenging unfair rent increases. The ministry also announced plans to strengthen the court system by hiring up to 1,000 judges and tribunal staff across courts and tribunals this year.

Conclusion

Analysts at International Investment note that the UK rental market is entering a prolonged period of restructuring, where two opposing forces are strengthening simultaneously: the state is expanding regulation and tenant protection, while private landlords are reducing their presence in the sector.

As a result, the market is contracting unevenly. On one side, tenants gain stronger rights and protections; on the other, investor interest is declining and some landlords are exiting a business that is becoming less predictable and more costly.

The key risk is shifting toward a housing supply shortage. The fewer rental properties remain on the market, the greater the pressure on prices — making it harder to achieve the stated goal of the reforms: a market that is both fairer and more accessible. At the same time, uncertainty may also weigh on new housing development, as large investors find it harder to forecast long-term rental returns.

FAQ: London rental market and UK reforms

What is happening to the London rental market?
Rental supply in London has fallen by around a fifth over two years. At the same time, more properties are being listed for sale as landlords exit the rental sector.

Why are landlords selling properties?
The main reasons include rising mortgage rates, reduced tax relief, and new rental regulations. For some owners, renting has become less predictable and less profitable.

What is Section 21 and why does its abolition matter?
Section 21 was a UK procedure that allowed landlords to evict tenants without giving a reason. Its abolition removes this tool and makes eviction procedures more formal and time-consuming.

What does Section 13 change?
Section 13 is the official mechanism for increasing rent. Landlords will now be able to raise rents only once a year through this process, while tenants can challenge increases at a tribunal.

Why do experts expect rents to rise?
A reduction in rental supply combined with steady demand typically leads to higher prices. Additional pressure comes from landlords leaving the market, which further tightens supply.

What is buy-to-let?
It is a model where property is purchased specifically to be rented out. Its popularity has declined as returns fall and risks and costs increase.

Who is most affected by the changes?
Both tenants and small landlords are affected: tenants face rising rents, while landlords face higher costs, taxes, and regulatory pressure.