The outlook for the private rental market is “unusually uncertain” after nearly two decades of growth, according to a new report.
It suggests the future is clouded by “economic uncertainty” and housing preferences shifting during lockdown.
Nationwide’s chief economist said: “The outlook is unusually uncertain in the wake of Covid-19.”
The review was carried out by Mortgage Works, the buy-to-let arm of Nationwide.
“As well as the enormous uncertainty surrounding the near-term path for the economy, there is also scope for the pandemic to have profound effects on the pattern of economic activity and housing demand in the years ahead,” said chief economist Robert Gardner.
Analysis of official figures in the Rental Market Review found the proportion of households renting privately in England edged down for the third year in a row in 2020. It fell to 18.7%, from 19.3% the year before.
It cited several reasons for the shift, which started before the pandemic hit. They include increased regulation and tax changes putting off investors.
There was a 12% drop in the number of rental properties owned outright between 2017 and 2020, it said.
The review suggested that low interest rates were likely to boost demand from investors, but the sector may be vulnerable to shifting tastes during the pandemic.
The number of first-time buyers has increased on the back of schemes such as Help to Buy and wider availability of higher loan-to-value mortgages to help those with smaller deposits.
And with many tenants and home-owners stuck inside during lockdown, people reconsidered their housing needs.
The review found private renters were the most likely to be moving, or consider moving house, during the pandemic at 40% of 3,000 people surveyed at the end of April.
Those in London were most likely to consider relocating, it said, with tenants looking for more green space or bigger properties.
If demand permanently shifts away from flats or terraced houses in larger towns or cities, where most private rented properties are found, landlords could lose out in a “race for space”, it warned.
Chris Norris, policy director for the National Residential Landlords Association, said that coming out of the pandemic, a more flexible renting system is needed.
“As we emerge from the lockdown an agile and flexible rental sector is more important than ever as tenants seek to move and many people become more reluctant to make major purchases until future employment prospects become clearer.”
He urged the government to consider a financial package to pay off rent debts built up as a result of the pandemic as part of this.
A Resolution Foundation report published in March found that almost half a million families had fallen behind on rent because of Covid.
A ban on landlords in England evicting tenants, introduced during the pandemic, has been extended several times and is currently due to expire at the end of May.
Ministers have suggested there will be no more extensions and that from June the government would introduce a “new approach”.
A spokesperson for the Ministry of Housing pointed out that longer notice periods of six months are also still in place.
They said that a £352bn package of support during the pandemic “has prevented a widespread build-up of rent arrears by ensuring private renters can continue paying their rent and is supporting landlords too.”