A shortage of homes to let has forced rent levels higher and further increased the squeeze on cash-strapped consumers, according to figures today. Some 42% reported that tenants are struggling to pay rents, in line with the previous quarter, with about the same proportion haggling with landlords.

The problem is being caused by a shortage of homes in the UK, which is exacerbated as potential new buyers who struggle to obtain mortgages are being forced into rented accommodation. The report found that 74% of Arla members said there were more prospective tenants than properties available in the second quarter of 2011. This compares to just 10% two years ago.

The situation is even more drastic in central London, where 82% of agents said there was an undersupply of property, up from 8% two years ago. The competition for accommodation is driving up rents, with one agent in west London reporting increases of 12% and sometimes more.

Arla operations manager Ian Potter said: "As many parties are reporting, there is a clear shortage of homes to buy in the UK. "Faced with this, many people are turning to rental homes as a more flexible option than buying.

"Yet our research highlights that the dearth of properties is just as real in the private rented sector and is showing no signs of improvement." He called on the Government to look seriously at ways of incentivising investment in the private rented sector to increase the number of properties.