TENANTS could be facing higher rents during 2026, Nationwide has warned, as new taxes unveiled in the Budget could further constrain the supply of new properties that are available to let.
Mortgage brokers and property lawyers have said landlords are at breaking point and that tenants will ultimately foot the bill of reduced supply as greater competition for the properties that remain leads to higher rents.
In its November house price index published this morning, Robert Gardner, Nationwide Chief Economist, said: “The increase in taxes on income from properties may dampen the supply of new rental properties coming onto the market.
“Rental supply has been constrained for some time, with the potential for this to maintain upward pressure on rental growth, which has been running at all-time highs in recent years.”
In the Budget, it was revealed that, from April 2027, there will be a 2% increase to the basic, higher and additional rates of property income tax, increasing them to 22%, 42% and 47% respectively.
Fiscal and monetary storm
Experts said the latest assault on landlords will result in even more leaving the sector or upping rents further to remain viable.
Chris Barry, Director at London-based Thomas Legal, a nationwide conveyancing firm, said: “It’s easy to forget that the rental market makes up around a third of overall housing stock. And yet the country’s landlords have been weathering a fiscal and monetary storm for a decade now.
“Reliefs have been removed, stamp duty increased by an additional 2% on any new buy-to-let purchases and now additional taxes on dividend income are incoming. Coupled with the introduction of the Renters Rights Act, the benefits of being a landlord, versus the risk, have made it an increasingly unattractive proposition, especially when you can get a fair rate in a long-term savings account right now.
“But when you continuously pummel landlords, tenants will also feel the pain. Many landlords simply do not have the financial wriggle room to keep on taking the hit and hiking rents is the only option left. That or leave the sector altogether.
“In which case, as the Nationwide suggests, the outcome is more upwards pressure on rents and more pressure on the people who can often least afford it.”
Landlords to cry out Mayday
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said Nationwide was right to single out the rental supply issue in its latest review of the property market.
He said: “The Nationwide is almost certainly on the money with regard to the future trajectory of rents. Rents will continue to rise into 2026, primarily due to landlords passing on the increased costs they now face.
“Landlords face financial strain from persistently high mortgage rates, ongoing tax disadvantages and the compliance burden of the Renters’ Rights Act, which comes into force on May 1 next year. That will indeed be the day many landlords cry out Mayday.
“This act ends ‘no-fault’ evictions, boosting tenant security, but these rising operating costs are expected to be absorbed by tenants through rent hikes.
“Landlord sentiment is low, leading to some selling properties, which further shrinks the supply and pressures rents upward. Tenants will undoubtedly bear a lot of the pain.”
Corporates set to dominate
Michelle Lawson, Director at Fareham-based Lawson Financial, said the relentless onslaught on landlords is causing severe damage to the private rented sector.
She added: “The latest Budget income tax increase by another 2% is crippling. Landlords are not rich, nor are they a charity. In reality, most use this as a retirement plan.
“Coupled with the upcoming demands of the disastrous Renters Rights Act, some smaller landlords will have no choice but to exit or to pass on the costs to tenants, some of whom are the most vulnerable in our society, in the form of higher rents.”
She also warned about the rise of corporate landlords: “We are seeing landlords with larger portfolios expanding and diversifying as they have the resources to do so. The corporate giants are starting to dominate the sector, which creates a very dangerous playing field.”
That’s a view shared by Harps Garcha, Director at London-based Brooklyns Financial commented:
“With the Renters Reform Act already placing many landlords on red alert ahead of its introduction in 2026, the additional 2% property income has made them brace for impact.
“Landlords unable to move their properties into limited companies now face shrinking margins or even losses, pushing some to sell up and step away from investing altogether. We have had multiple own goals in the rental market by this government and previous governments.
“Combined, all these measures risk reducing rental supply and worsening conditions for tenants rather than improving them, leaving the market increasingly dominated by large corporate landlords able to operate at scale.”
Straw that broke the camel’s back
Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, said: “The Budget’s 2% property tax hike is the straw breaking the camel’s back. Small landlords are selling up because the numbers no longer work. When they exit, rental supply shrinks and rents climb.
“Add the Renters Rights Act’s compliance burden, and you can see why many are cashing out. The cruel irony? Tenants who need stable, affordable housing will pay the price through relentless rent increases or fewer properties available to rent.”
Photo by Aarón Blanco Tejedor on Unsplash
