Rental supply falls for the first time in three years, according to the latest Zoopla Rental Market Report, reigniting pressure on UK rents.
Nationally, the pool of homes for rent is now 3% lower than a year ago, with August showing a 6% dip compared with the same month last year.
Tenant interest is climbing; enquiries per listing have risen to 5.3, the highest level in almost two years.
Higher mortgage rates are keeping many would-be first-time buyers in the private rented sector longer, while subdued landlord investment limits the flow of new stock.
The squeeze lifted annual rent growth to 2.6% in July, up from 1.6% in February, and pushed the average monthly rent to £1,340.
Zoopla projects annual rent increases of 4%–5% by the end of 2026 if current trends continue.
Supply trends reverse
The decline began in May, ending a three-year recovery that had helped temper rent inflation.
Yorkshire and the Humber saw a 12% fall in available homes, while London’s inventory also slipped, though the exact figure was smaller. By contrast, Wales recorded a 7% rise in stock, accompanying the sharpest slowdown in rent growth.
Regional picture
Rents are climbing fastest where inventory has contracted most. In the capital, annual rent growth reached 2.9%, versus 1.7% a year earlier.
Mortgage pressure is evident: a prospective London buyer now needs an extra £35,500 for a deposit, compared with a national average increase of £18,200.
Inner-city London shows the starkest imbalance, with demand up and stock down 13%, driving rent growth of between 3% and 4% in those districts.
More affordable locales are seeing pronounced increases. Areas with average rents below £750 posted a 5.4% rise, more than double the national rate. Dumfries recorded an 11.3% jump, while Carlisle saw rents climb 8.8%.
The market remains tight.
Richard Donnell, executive director at Zoopla, said, “The rental market is starting to tighten again after three years in which the supply of homes for rent has steadily improved and rental growth slowed easing the pressure on renters. Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent. Higher mortgage rates are not just impacting the sales market, they are keeping more would-be first-time buyers in rented homes for longer, reducing available supply just as the seasonal upturn in demand gets into full swing.
This is pushing rents higher again, mainly in regions where the availability of homes for rent has declined the most, although affordability remains an important constraint on how far rents can rise. The upward pressure on rents is greatest in London, where higher mortgage rates have had the biggest impact on home buyers, and in more affordable rental markets where renters have greater capacity to absorb increases.
Low levels of new investment by landlords and renters renting for longer mean we expect UK rents to increase by 4–5 per cent by the end of the year. Growing the number of homes for rent through increased investment is the most sustainable route to boosting choice for renters and ensuring stability in rent levels over the long run.”
Nathan Emerson, CEO of Propertymark, added, “The latest Zoopla data reinforces the importance of increasing the supply of good-quality homes for rent. As availability falls, competition increases and affordability pressures grow for tenants. Higher mortgage costs are also keeping some would-be buyers renting for longer, while landlords continue to face significant borrowing, operating and regulatory costs that can make investment more challenging. A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term. Increasing supply must remain a priority if we are to give tenants greater choice, improve affordability and create a more stable rental market.”
Policy and market factors
Analysts point to the broader regulatory environment as a factor that extends beyond the Renters’ Rights Act. Similar patterns of shrinking rental inventories and climbing rents are evident in Scotland, where the decline in available homes mirrors the upward pressure observed elsewhere in the United Kingdom. This suggests that the legislative changes in England are not the sole driver of the current market strain.
Comments from industry leaders highlight the fiscal pressures confronting landlords. Greg Tsuman, managing director for lettings at Martyn Gerrard, described a typical London investment: a £600,000 property financed at 75 per cent, generating a £2,500 monthly rent.
After accounting for mortgage interest, operating costs and a Section 24 tax bill, the net profit before tax drops to roughly £9,000, with an effective tax rate that can reach 80 per cent. Such margins leave little room for rent increases without compromising affordability.
These financial realities intersect with broader housing policy challenges. Nearly one-fifth of English households rely on the private rented sector, yet the government’s ambition to deliver
