Britain needs more landlords. Here's why.

New research by Capital Economics finds that the current shortage of rental properties is going to get much worse without changes in government policy.

The analysis is based on the government's target of 340,000 new homes annually by the middle of this decade.

Capital Economics found that if other tenures (owner occupation, social housing) continues to grow at recent rates, the private rental sector would need to fill a gap of 227,000 new homes every year.

Further, if the other tenures increased by 10% each year, there would be an annual shortfall of 105,000. 10% is well above the current rates of growth.

In contrast, government figures show that the number of privately rented homes fell by 260,000 in the last five years.

The number of 18 to 24 year-olds in the population will increase by 860,000 between now and 2030. A high proportion of these will enter the rental market. At the same time, the average age of first time buyers has increased from 29 to 31 over the last five years, so fewer renters are exiting the market. The result is a growing supply/demand imbalance.​

The private rented sector, which is predominantly supported by private individual investors, has a key role to play in addressing housing need in the UK. 

However, the stock of homes for private rent has fallen in recent years, driven partly by a series of policy changes. Without further changes, that supply could fall by over half a million more over the next decade. 

Even with increased provision of affordable housing and higher rates of owner occupation, both of which are important, our research shows that significant additional investment is needed by landlords in the private rented sector.

​Andrew Evans, Managing Economist, Capital Economics