"The new rules are likely to lead to a higher proportion of rental properties being controlled by corporate, professional landlords. The sticking point here is that, although professional landlords are not so likely to treat tenants unfairly and their portfolios are often of higher quality, the rents they charge are typically higher."
- Mark Holloway - Foot Antsey LLP
With the Renter's Rights Bill expected to come into force later this year or early in 2026, all eyes are on what we can expect ahead and whether the claim laid out in the Government's guide to the Bill – that the Bill will improve the current system for both private renters and for landlords – will materialise.
For tenants, the Bill could improve the quality of rental properties available to them, allow them to stay in properties for longer, and generally give them greater security and stability when renting. However, though the new rules of the Bill specifically target rogue landlords providing unsuitable properties and treating tenants unfairly, sometimes trapping them in these sub-standard properties, they will also apply to all other landlords and properties.
The Bill may be a poisoned chalice for some landlords, with the negative consequences of the Bill likely to outweigh any benefits.
Encouraging landlords to be more selective
The Bill includes a ban on upfront rental payments and abolishes 'no fault' evictions, which may encourage landlords to be more selective about the tenants they choose. The Bill prevents landlords from accepting as well as demanding any more than a single months' rent in advance.
Whilst it may not be fair for landlords to demand upfront rent payments, in some cases, this has been a way for tenants with poor credit histories or who may not be able to provide a guarantor to be competitive. Any knock-on effect of this selectiveness is likely to felt most strongly by the most vulnerable renters.
Increased rents
Some of the changes in the Bill will add costs for landlords due to increased administration and/or may lead to a decrease in total rental income across a portfolio, such as:
· The requirements for landlords and rental properties to be registered in a new database. This is beneficial from an information and transparency perspective but will inevitably involve a compliance cost
· The new right for tenants to contest rent increases by applying to the First Tier Tribunal. Where a tenant does make a challenge, the increased rent will only apply from the date of determination of the new rent, rather than the date originally proposed by the landlord
· Tribunals will no longer be able to determine a rent above the level of increase suggested by the landlord, which reverses the current position and may encourage tenants to contest increases
· All residential tenancies will be periodic tenancies, removing the ability for landlords to stipulate a minimum fixed term. This makes the landlord's income less certain and may increase vacancy periods
Measures which either reduce total rental income or add to the cost burden for landlords are most likely to be passed on to tenants by way of higher rents. Whilst the new measures may help to end unfair practices by unscrupulous landlords, they give tenants a much stronger incentive to apply to the tribunal to contest a rent increase which would delay the date from which it applies.
The Government has promised reform of the tribunal system, but this could seriously delay the application of rent increases.
Creation of a two-tier market
The cumulative effect of the various measures being introduced may lead to greater numbers of smaller and private landlords exiting the market, which could reduce the number of rental properties available and, in turn, lead to higher rents.
An unintended consequence of the Bill may be that private landlords struggle to provide rental properties at affordable rents, thus creating a new friction to navigate with prospective tenants. Larger, professional landlords and landlords of high-end luxury properties which carry higher rents may be more able to manage the cost burden of the new rules – vacancy periods in individual tenancies and or delays in being able to regain possession from problematic tenants will have a lesser impact on larger landlords who can balance these risks across a larger portfolio size.
As such, the new rules are likely to lead to a higher proportion of rental properties being controlled by corporate, professional landlords. The sticking point here is that, although professional landlords are not so likely to treat tenants unfairly and their portfolios are often of higher quality, the rents they charge are typically higher.
The Bill could subsequently make the current shortage of affordable rental properties more acute – particularly in the short term and unless the supply of new properties accelerates at a rate sufficient to mitigate rent inflation.
Rather than telescoping down on the core issues of the rental sector and giving clarity on where practical and effective solutions can be implemented, the Bill could instead create a kaleidoscope effect: where one resolution comes into view, another problem emerges. The Bill may lead to further division within the sector, rather than the establishment of an environment that favours the full spectrum of landlords and tenants.
