No room at the letting agent: UK is running out of homes to rent

New housing problem looms as landlords fail to meet rising demand in private sector

Britain may soon not have enough rental properties available to satisfy demand, a survey has suggested, in further evidence of a growing crisis in the housing sector.

With a record number of new tenancies signed last year, the private rental sector (PRS) was "nearing capacity", the Association of Residential Letting Agents (Arla) said.

In a survey of some 6,000 members of Arla – the regulatory body for letting agents in the UK – 74 per cent of respondents said demand outstripped supply in the private rental sector, the highest level since records began.

The increase was most acute in London and the South-east, the survey said, adding that some tenants were now staying in properties for 19 months – a record – as they were wary of finding a new property in a highly competitive market.

Tim Hyatt, president of Arla, said: "The UK cannot rely on the rental sector to support the housing market in perpetuity. The reality is that there is a finite amount of rental property and unless both housing supply and mortgage availability improves, then renters will find that their options in the market are reduced."

The rental data is the latest gloomy prediction for the beleaguered housing market, which is facing a converging nightmare scenario. Forecasters have warned huge deposits, soaring house prices and tougher mortgage criteria are causing a decline in home ownership, putting unsustainable pressure on the demand and price of rental homes.

And with new house building at a post-war low – with just 134,000 new homes built in the UK in 2010 according to Government figures – the housing charity Shelter last week said stagnant incomes had forced families with children to cut down on buying food to pay for rocketing rent increases.

In England, the proportion of people living in owner occupied homes will fall from a peak of 72.5 per cent in 2001 to 63.8 per cent in 2021, a National Housing Federation's (NHF) forecast said in August – the lowest level since the mid-1980s. Despite this, the average house price will rise by 21.3 per cent over the next five years from £214,647 in 2011 to £260,304 in 2016, according to Oxford Economics, which was commissioned to produce the NHF forecasts.

The extra strain on the rental market will cause average private sector rents to increase by 19.8 per cent over the next five years, the NHF said.

Research from Shelter showed that families faced "unaffordable private rents" in 55 per cent of local authorities in England. In most areas, typical rents from private landlords were more than a third of the average take-home pay.

The charity, which has called on the Government to link private rents with average earnings, said, from 1997 to 2007, rents increased at one-and-a-half times the rate of incomes. That left 38 per cent of families with children, who were renting privately, to cut down on buying food to pay their rent, it said.

Campbell Robb, Shelter's chief executive, said: "We have become depressingly familiar with first time buyers being priced out of the housing market, but the impact of unaffordable rents is more dramatic. With no cheaper alternative, ordinary people are forced to cut their spending on essentials like food and heating, or uproot and move away from jobs, schools and families."