"These legislative changes follow a series of fiscal and regulatory shifts that have cumulatively squeezed landlord returns and altered the economics of buy-to-let investing"
- Paul Adams - Pepper Money
An estimated 220,000 households are expected to leave England’s private rented sector by the end of 2026, according to research from Pepper Money, highlighting a sharp rise in private rental sector exits as landlords respond to regulatory and cost pressures.
The specialist lender’s analysis suggests this equates to around 5% of total private rented stock, signalling a material shift in supply dynamics across the market.
The research indicates that more than 65,000 households are projected to exit specifically due to the incoming Renters’ Rights Act, with smaller landlords proving particularly sensitive to the changes.
Those owning a single property are twice as likely to sell compared with landlords holding multiple assets, underlining how portfolio size is increasingly shaping decisions around private rental sector exits.
Private rental sector exits concentrated among smaller landlords
Paul Adams, sales director at Pepper Money, said: “Our research highlights how the combination of changing legislation and rising operating costs is prompting many landlords to review their portfolios. As a result, an estimated 220,000 households are projected to leave the private rented sector by the end of 2026, including more than 65,000 linked to the upcoming legislative changes.”
He added: “Whilst we welcome the additional protections for tenants introduced through the Renters’ Rights Act, and the continued focus on improving standards across the private rental sector, it’s important to recognise the potential unintended consequences for supply and pricing at a time when the sector is already under pressure."
"These legislative changes follow a series of fiscal and regulatory shifts that have cumulatively squeezed landlord returns and altered the economics of buy-to-let investing.”
Adams also pointed to weak replenishment in the sector, saying, “With just 5% of landlords buying a new rental property in the last year, and new starts in build-to-rent remaining subdued, it’s unlikely this exiting stock will be replenished at the same rate, meaning we could see a dip in rental dwellings this year.”
The data shows the private rental sector exits trend is also reshaping the structure of the landlord base, with smaller landlords leaving at a faster rate while larger operators remain more resilient due to scale and capacity to absorb additional costs.
Regional pressure adds to private rental sector exits trend
The South East is expected to see the largest volume of departures, with more than 46,000 households leaving the PRS before the end of the year, accounting for over a fifth of total exits. Around 15% of landlords in the region plan to sell, reinforcing the scale of private rental sector exits in higher-value markets.
The North East, meanwhile, shows the highest proportion of landlords intending to exit, with around 21% planning to sell in 2026. However, due to the smaller size of the regional market, this represents just 8% of total UK exits, highlighting how private rental sector exits vary significantly in impact depending on local housing stock.
Pepper Money’s analysis also points to broader supply constraints. The private rented sector has grown from 3.1 million households in 2008-09 to 4.7 million in 2024-25, now accounting for 19% of households in England, but availability remains tight. A separate Rightmove Rental Trends Tracker shows rental supply is still around 33% lower than a decade ago, despite recent improvements.
Regional rent levels further illustrate pressure points, with the South East averaging around £1,893 per month, the North East at £946, and London at £2,716, suggesting affordability and yield dynamics are influencing private rental sector exits decisions across different markets.
Policy changes driving private rental sector exits
From May 2026, the Renters’ Rights Act will remove Section 21 ‘no-fault’ evictions and shift all assured shorthold tenancies to periodic agreements. Rent increases will be limited to once a year, with tenants gaining the ability to challenge rises they consider unfair. These changes form a key driver behind the projected rise in private rental sector exits.
Further reforms include a planned Private Rented Sector Database from late 2026 and updated energy efficiency requirements expected by 2030, adding longer-term regulatory pressure on landlords assessing portfolio viability.
Adams said the data suggests a gradual professionalisation of the sector, with larger landlords better positioned to absorb regulatory change while smaller operators reassess their exposure to the market.
