UK rental market: are landlords or tenants better off right now?

A challenging landscape for landlords and tenants

At first glance, the UK rental market seems to favour landlords strongly. Demand is outstripping supply, and competition is leading some tenants to offer well over market rate to secure their homes.

Yet, with rising interest rates translating to higher mortgage payments, many landlords are looking to sell up and avoid the growing risk of tenant arrears caused by the cost-of-living crisis.

Right now, which group is better off? It’s trickier than it may seem.

The squeeze on tenants: rising rents and dwindling supply

The decreasing number of rental properties in the UK is putting pressure on tenants across the country.

In cities such as London, already notorious for a savagely competitive rental market, the number of available properties is shrinking.

In 2024, Trust for London reported that as many as 45,000 properties in the private rental sector were sold between 2021 and 2023 and not replaced with new stock. Overall, it claimed that since the pandemic, there has been a 41% reduction in the number of homes available to rent in London.

Tenants are also paying more in rent, with an average increase of 2% to 3% in 2025. Although this rate of growth has slowed compared to previous years, average rents are now 36% higher than in 2020, according to Zoopla.

With no alternative to unaffordable properties, many renters are struggling with rising costs.

The 2024/25 English Housing Survey revealed that 5% of private renters and 14% of social renters fell into arrears during the last year.

The pressure of rent is particularly apparent in the capital. According to the Office for National Statistics (ONS), average rents in London reached 42% of average earnings in 2024, compared to 36% in England, and 25% in Wales and Northern Ireland. 

Mounting costs and tax pressures for landlords

While landlords are in an inherently more privileged position, the picture isn’t necessarily rosy for them.

Rising interest rates have pushed up the cost of mortgages, both on rental properties and their own homes, leaving them with higher bills that many cannot afford to absorb.  

If tenants fall into arrears due to higher rent, most landlords will struggle to pay multiple mortgages from their own pockets.

Landlords also face paying more tax on their profits. Following a change of rules that was phased in between 2017 and 2020, landlords can no longer deduct mortgage expenses from their rental income to reduce their income tax bill.

Now, landlords can only claim a 20% tax credit, which represents a substantial tax hike for those who pay the higher or additional rate of tax. A reduction to the capital gains tax (CGT) allowance also means landlords will face a bigger tax bill when they sell their property, too.

And taxes will increase further due to changes announced in the 2025 Autumn Budget. From April 2027, there will be 2% increase in the tax rate on rental profits.

Landlords who are basic rate taxpayers will pay 22%, while higher and additional rate taxpayers will pay 42% and 47% income tax.

With rising costs, growing numbers are considering selling their properties and investing the funds elsewhere to reduce costs and minimise risk.

Why rental properties are important

Landlords often face sharp criticism in the news, but responsible private landlords are an essential component of our economy.

Even though owning a property outright is the ultimate goal for 80% of people, renting is often the only option for many people.

Private landlords are essential to ensure the supply of rental homes can keep up with rising demand, particularly as the number of social rent homes has shrunk by more than 250,000 in England alone since 2014.

The challenge for landlords 

Property has long been viewed as a savvy long-term investment prospect, drawing many people to the buy-to-let market. 

Learn more: The best areas for buy-to-let in the UK

Lots of landlords see their property as a way to save for retirement, perceiving property to be lower risk than pensions. However, the image of an ultra-wealthy property tycoon doesn’t represent the average landlord.

While some landlords may be privileged, many come from more humble backgrounds. They may be renting out their home while providing live-in care to a family member or choose to rent out a relative’s home following their death.

Many landlords also purchased when prices were far lower and may be unable to make the same investments today. 

Landlords aren’t necessarily wealthy enough to brush off rent arrears or absorb interest rate hikes.

The government’s England Private Landlord Survey 2024 found that 45% of landlords own one rental property, with 38% owning between two and four. Just 17% of landlords own more than five properties.  

However, many people invest in property using a buy-to-let mortgage with the sole intention of renting it out. Their tenants’ rent generally only covers the cost of the mortgage.

Recent interest rate hikes have added hundreds of pounds to their monthly repayments, leaving landlords no choice but to pass on the increase or sell.  

Another risk for landlords is that some tenants will neglect their properties and fail to pay rent by choice rather than because of genuine hardship. This can leave landlords with a huge bill for rent arrears and repairs.

The impact of the Renters' Rights Bill

Landlords also face stricter regulations in the future. The Renters' Rights Bill was passed in October 2025 and will increase costs and regulations for landlords from next year. 

The changes come in three phases:

• Phase 1 (May 2026): Introduces more rights for tenants, including a ban on no-fault evictions, an end to fixed-term tenancies and tighter rules on rent increases.

• Phase 2 (end of 2026): Launches a new rental database and a new Ombudsman, funded by landlords.

• Phase 3 (data to be announced): Introduces more demanding standards and regulations for rental properties.

Are UK landlords selling their properties?

Recent research from the Deposit Protection Service has found that as many as 47% of landlords are contemplating selling their properties, with almost 90% of those blaming tax and legislative changes for their decisions.

In early 2025, property experts TwentyEA revealed that 15.6% of homes for sale were previously rented, up from 9.8% in 2024.

However, despite widespread nervousness among landlords, there are still some looking to capitalise on high levels of demand and expand or start their property portfolios.

In August 2025, Landbay reported that 52% of landlords were still considering further investment in property, which was being fuelled primarily by increasing tenant demand.

What’s squeezing the UK rental market?

There are not enough rental houses to meet demand, and this pushes up rental prices.

Soaring demand for properties is driven by a range of factors, including population growth and the rise in single-person households. At the same time, many landlords are selling up, and there are fewer rental properties on the market.

For example, costs in the London borough of Ealing have soared 52% in just five years, between 2019 and 2024. The area has become more popular since the Elizabeth Line was completed, with faster transport links.

Even though landlords are supposed to only raise rents fairly and generally in line with inflation, high demand means some wealthy renters are volunteering to pay over the asking price to secure the best rentals.

So, are landlords or tenants better off right now?

Ultimately, tenants seem to be worse off right now.

Even if landlords end up with tenants in arrears and ultimately have to sell their property due to rising mortgage payments, it’s extremely unlikely they’ll lose their home.

Legal hassle and losing an investment may be frustrating and financially devastating, but that doesn’t come close to the situation for some renters.  

For tenants, the stakes are so much higher. Many people are stuck in unaffordable or substandard housing, which is, in the worst cases, damaging their health.

Lots are being forced out of their childhood neighbourhoods and away from their jobs due to high rents.

A small portion are even facing homelessness and debt collectors as their bills spiral out of control.  

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