The combination of the Renters' Rights Bill and the ongoing housing crisis is creating significant challenges for landlords, tenants, and the rental sector as a whole. As some landlords decide to exit the sector, there are still many that remain who are finding new opportunities to maintain a profitable rental business.
In a recent survey by Goodlord (2024), 58% of letting agents reported a decrease in the number of available properties, with 37.4% describing the reduction as “significant.” This limited supply means tenants are competing for fewer properties, pushing up rent prices and allowing landlords to capitalise on these rising rates.
As Elliot Leigh are social housing providers, we take a closer look at how private rental market pressures are impacting the social housing sector – and how landlords can remain profitable by considering affordable housing solutions like Guaranteed Rent.
Higher Rents from Strong Tenant Demand and Tight Supply
Recent data from the Office for National Statistics (ONS) shows that net migration has increased by over 685,000 people in the past year alone. With only 232,470 new homes built during the same period, housing supply hasn’t kept up with this influx, contributing to higher demand for existing rentals.
A combination of high demand and low supply has led to intense competition among renters, driving rents upward and putting pressure on tenants, especially those with lower or fixed incomes. These rent hikes are increasingly unsustainable for many households, who are now turning to social housing as an alternative.
Social housing rents are typically set at below-market levels to provide more affordable options for individuals and families facing financial hardship. However, as more people seek social housing, the sector faces a strain of its own, unable to meet the heightened demand for affordable rentals.
How the Surge in Social Housing Demand Is Impacting the Sector
The social housing sector, which was already stretched thin before the recent surge in demand, is now under significant pressure. The shortage of affordable homes means longer waiting lists and more people in temporary housing situations, particularly as tenants seek relief from rising private rents.
According to recent studies, an estimated 1.2 million people in the UK are currently waiting for social housing, a number that continues to grow with the rising cost of private rents.
For those eligible for social housing, waiting times are often long, and temporary housing solutions are limited. Many councils are facing challenges in funding new affordable housing developments or acquiring existing properties to convert into social housing. In effect, the increased pressure on social housing is creating a bottleneck, leaving many households struggling to find stable, affordable housing options.
How Landlords Can Remain Profitable
According to Goodlord, a large proportion of tenants expect to remain in the private rented sector (PRS) for the foreseeable future. In fact, 21% of tenants believe they are “very unlikely” to buy a home within the next five years, and an additional 12.8% feel they are “somewhat unlikely” to make a purchase. This reinforces long-term demand for rental properties, positioning landlords well for sustained income through tenant loyalty.
As homeownership remains out of reach for many, rental demand looks set to stay strong, meaning landlords who remain in the private rental market are clearly positioned to benefit from high demand and reduced competition from those exiting the market.
However, the affordability challenges faced by many renters – including those now turning to social housing – underscore a need for balance between profitability and social responsibility. Many in the sector are advocating for solutions that encourage landlords to offer affordable rental rates without sacrificing profitability.
The Benefits of Partnering with Affordable Housing Initiatives
As private sector landlords consider their place in a changing market, these challenges and opportunities highlight the potential to collaborate with government initiatives, local councils, or businesses that support affordable housing. For example, some landlords are exploring partnerships with us here at Elliot Leigh Guaranteed Rents to provide temporary housing for social housing applicants on waiting lists.
Such strategies can offer landlords greater security, reduce turnover, and appeal to tenants who may otherwise consider social housing if they could not afford private rentals. By providing affordable rental options, landlords can contribute to easing the housing crisis while maintaining steady, reliable income streams.
As the UK faces the reality of a deepening housing crisis, opportunities for innovative solutions are emerging for landlords willing to balance profitability with the growing demand for affordable rentals. For landlords who can adapt to this evolving landscape, there is a unique opportunity to play a role in both addressing the demand for affordable housing and securing long-term, stable tenancies.
Source: Goodlord State of the Lettings Industry Report 2024
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