An estimated 220,000 households are expected to leave the private rental sector (PRS) in England by the end of the year, Pepper Money has revealed.

This figure represents an estimated 5% of the country’s private rental stock, which the specialist lender said highlights a "significant shift" in the sector.

Pepper Money found that this trend is most pronounced among smaller landlords, with those owning a single property twice as likely to exit the market compared with landlords holding two or more properties.

The data showed that the upcoming Renters’ Rights Act, which comes into effect next month, emerged as a major trigger, influencing landlords to withdraw over 65,000 households from the PRS in England by the end of the year.

The legislation’s changes to tenancy agreements, notice procedures and property management obligations is prompting landlords to reconsider their portfolios across the country.

The exits are primarily focused to London (13.4%) and the South East (13.4%), with the South West (12.3%) and the East Midlands (11%) also accounting for a higher proportion of estimated exits from the PRS.

Sales director at Pepper Money, Paul Adams, said the research highlights how the "combination of changing legislation and rising operating costs" is prompting many landlords to review their portfolios.

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 PRS, 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.

"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 also points to a shift in the make-up of the sector. Smaller landlords, particularly those with just one property, are significantly more likely to leave the market as they reassess their portfolios. Larger landlords who are better equipped to absorb additional costs and regulatory requirements are choosing to remain, contributing to a gradual professionalisation of the PRS."

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