A new analysis of the private rental sector suggests it was reducing in size for some years before the pandemic.
Nationwide’s specialist buy to let lender the Mortgage Works says the share of households in the sector in England edged down for the third year in a row in 2020, to 18.7 per cent from 19.3 per cent in 2019 and 20.3 per cent in 2017.
The number of households in the PRS fell to 4.4m last year from 4.7m in 2017.
The Mortgage Works says this represented a significant shift after almost two decades of robust growth.
The proportion of English households in the private rental sector rose from 10 to 20 per cent between 2000 and 2017. The absolute number of households in the PRS more than doubled, from 2m to 4.4m over that period - more than twice the rise in the number of owner occupiers.
Robert Gardner, chief economist at Nationwide, says: “The shift reflects a combination of factors. Increased regulation, political uncertainty and tax changes (including the introduction of higher stamp duty rates on the purchase of additional properties from 2016 and a phased reduction to the tax deductibility of landlord expenses from 2017) dampened investor demand in the PRS.
“There was a 12 per cent reduction in the number of rental properties owned outright between 2017 and 2020 and, while the number owned with a mortgage continued to increase, the rate of growth slowed from eight per cent in 2014/15 to two per cent per year over the 2017-2020 period.”
In terms of Coronavirus - during which the market has seen seismic shifts in tenant demand with London and city centre properties out of favour - Gardner says lockdown surveys by his firm showed that the pandemic had prompted 29 per cent to move or consider moving home.
He adds: “ONS data suggests that annual rental growth in the private rental sector in most parts of England outside of London remained broadly stable last year, at around 1.8 per cent.
“Rental growth in the capital was weaker than in the rest of England, as has been the case since 2017, though that was after a prolonged period of outperformance.
“Taking a longer-term perspective, outside of London, rental growth was subdued for a prolonged period, running below the rate of inflation for much of the past 15 years.
“Nevertheless, this doesn’t necessarily mean that affordability has improved significantly for many, since incomes also fell in real terms for a number of years after the financial crisis.
“Indeed, survey data suggests that UK households continue to spend more on housing costs than many other developed economies including those in the private rental sector.
“For example, Eurostat data indicates that 38 per cent of households in the UK private rented sector spent over 40 per cent of their disposable income on housing costs in 2019, compared to an average of 28 per cent of households across the EU and 18 per cent in Germany and France.”