The rental market faces mounting pressures as rent arrears shoot up by a staggering 56% from Q1 2023 and by 23% over the last 12 months, reaching an average of £2,237, according to new data from alternative deposit company Reposit.

Landlords have been facing sustained cost pressures for some time.”

Ben Grech, CEO of Reposit (pictured), says: “Landlords have been facing sustained cost pressures for some time, and as rents have continued to rise, their exposure to tenant arrears has increased. The average cash deposit now stands at £1,261, which is £976 less than the average arrears value, highlighting the inadequacy of traditional deposit schemes.”

The sharp rise, Grech adds, reflects broader economic pressures, with ONS data from March 2025 showing that two-thirds of adults (66%) reported increased living costs. Meanwhile, figures from the deposit scheme (TDS) reveal that rent arrears caused one in five lettings disputes last year – an 80% year-on-year increase.

Worse to come

And the situation is set to get worse, with the Renters’ Rights Bill expected to become law in the summer. It will bring an end to Section 21 ‘no-fault’ evictions, and its replacement, Section 8 Notices, will extend the arrears threshold from two months to three months. There are also likely to be substantial court delays, which will make it even harder for landlords to recover properties from non-paying tenants.

These challenges appear to be driving landlords from the market, as many decide that increasing rent arrears and tougher property recovery rules mean investing in the sector is not worth the risk.

Data from TwentyEA shows rental housing supply fell to a record low of just 284,000 across the UK at the end of Q1 2025 – down 18% from last year and 23% below pre-pandemic levels, and this dwindling supply is pushing average monthly rents to record highs.