The 80% slump in net activity is bigger than at the height of the financial crisis, with investment tumbling to £5bn in 2017, from £25bn just two years earlier, according to the report.
The fall comes after changes, including the 3% stamp duty surcharge and the removal of mortgage interest tax relief, eroded the benefits of investment in the sector.
Landlords have been deterred from expanding their portfolios and others have exited the market altogether, IMLA said.
And there is a risk that rents could be pushed up and supply limited by the dwindling investment.
The trade body has now called for a period of policy consolidation to assess the impact of recent changes before any further action is taken.
Between 2000 and 2017, UK landlords ploughed £289bn into buy-to-let, adding 1.8m properties to the rental market.
Landlords provide a ‘vital service’
Kate Davies, executive director at IMLA said: “The raft of regulatory and tax changes that have hit the buy-to-let market in the last year have far-reaching effects that are still yet to be fully realised.
“We know that the majority of people regard owner-occupation as the tenure of choice, but for many this is not an immediate option.
“We also know that those who would in the past have rented from their local authority or Housing Association now need to rent privately.
“Various interventions by government have apparently been aimed at encouraging more first-time buyers and making investment in buy-to-let less attractive to existing and potential landlords.
“But the PRS plays a vital role in our housing supply and it’s essential that a sensible balance is struck, if tenants are not to be disadvantaged by shrinking stock and higher rents.
“We urge the government to reassess the impact of the recent far-reaching regulatory changes to buy-to-let investment and allow a period of policy consolidation.
“Our nation’s PRS investors provide a vital service that’s key to millions of UK tenants.
“We need to support and protect a sector that does so much for so many.”