Second home stamp duty means 2m houses ‘missing’ from rental market
More than 2m rental homes are missing from the market because of the second home tax imposed a decade ago, new research has found.
Nearly ten per cent fewer homes are available to rent than was projected in 2016, when the stamp duty surcharge on second homes pushed millions of houses out of the reach of renters “almost overnight,” estate agency Hamptons said.
Rents have soared since 2016 – with price growth reaching a high point of nine per cent in November 2024, compared to 3.4 per cent in the same month eight years before – and analysts at Hamptons said the second home tax added one per cent to annual price inflation.
In April 2016, a three per cent surcharge was applied to the stamp duty paid by people buying additional homes in England – and this rate was hiked to five per cent at 2024’s Autumn Budget.
The equivalent rate is charged at five per cent in Wales and eight per cent in Scotland.
The tax on second homes has had a “profound” effect on the number of homes available for private rent, Hamptons said, with 2.2m fewer homes available now than if the sector had continued to expand at the pre-2016 rate.
Fewer homes means higher rents
Hamptons said the tax was intended to stop investors from buying so many homes but this has ended up shrinking the rental market.
The number of households in Great Britain renting privately has grown from 9.9 per cent in 2003 to 18 per cent in 2025, but would have soared to 25.6 per cent had the surcharge not been introduced, the estate agency’s research shows.
Similarly, the share of English homes bought by a landlord has declined from 14.7 per cent in 2012 to 10.5 per cent this year.
London is the English region most affected by the surcharge, with the proportion of homes in the capital bought by an investor falling by 7.9 per cent between the year preceding the tax’s introduction and 2026.
But the surcharge has offered a boost for first-time buyers, who are now 17 per cent less likely to be competing with an investor when bidding for a house in London.
Around three quarters of the 2.2m homes missing from the rental market are now lived in by owner-occupiers, Hamptons said.
The remaining 800,000 homes that would be on the rental market if not for the surcharge, according to Hamptons, have not been built – as construction faces high tax burdens and low developer confidence.
The comparative scarcity of rental homes means those who can’t afford to buy are left exposed to higher rents, which have also been pushed up by the growing taxes and regulatory pressures on landlords, according Aneisha Beveridge, head of research at Hamptons.
She said: “Almost overnight, the market tilted away from investors, meaning far fewer homes have been added to the rented sector and more have found their way into owner-occupation over the last decade.
“Prior to 2016, housebuilders often had waiting lists of investors, sometimes years before they even put a spade in the ground.
“Their partial withdrawal has reduced viability and slowed the pace of housebuilding, particularly in the new-build apartment sector, where sales are now taking longer and often completing at lower prices.”