A leading rental market analyst has issued a stark warning that Labour’s proposed reform legislation is creating significant anxiety within the lettings sector, with many landlords increasingly concerned about the potential threats to their investments. According to the analyst, elements of the reforms, particularly those outlined in the upcoming Renters Rights Bill, are casting a shadow over the future of the rental market, making it difficult for landlords to feel secure about their financial prospects.

Doug Shephard, director of the Home website—a platform known for its respected monthly market analyses in both the lettings and sales sectors—suggests that the new government’s Renters Rights Bill could be the final straw for many landlords. He believes that if the proposed measures are implemented, they may push some landlords to reconsider their involvement in the market, further complicating an already challenging environment for property investors.

Shepherd highlights the potential impact of Labour-led Metro Mayors, who could be used to pilot various forms of rent controls, as well as the broader implications of the upcoming Renters Rights Bill. The bill aims to introduce more stringent eviction restrictions, stronger rights for tenants seeking redress, and increased permissions for pets in rental properties. These proposals are stirring anxiety among landlords, who are concerned about their ability to manage costs and maintain profitability.

In his latest monthly report, Shepherd elaborates, stating, “The growing pressure from activists for rent controls and the push to eliminate contractual tenure are casting significant doubt over the future of both the sales and rental markets. A number of landlords are already choosing to exit the market, driven by fears that they won’t be able to set rents at a level that covers their expenses or that they will be compelled to comply with expensive licensing schemes. The uncertainty around these potential changes is leading many to reconsider their investments.” 

He also notes that the current environment, where landlords feel under siege by possible regulatory shifts, could result in a further decline in the number of rental properties available. This could have a knock-on effect, potentially driving up rents for tenants and reducing the overall supply of affordable housing. Shepherd warns that if these reforms are implemented without careful consideration of their impact on landlords, the rental market could face significant disruption.

He is deeply concerned that these developments will only exacerbate the long-term challenges facing the lettings sector, where a persistent imbalance between demand and supply is creating significant pressure. He highlights a stark comparison: in August 2019, there were 96,000 rental properties available across Britain. Fast forward to August 2024, and that number has plummeted to just 66,000, reflecting a dramatic 31% decline.

This shrinking supply has inevitably led to rising rents, with tenants feeling the financial strain. However, the overall picture of rental growth is not uniform across the country. Home notes that while rents have generally been increasing, the national growth rate is being tempered by a particularly weak performance in London’s rental market. The website reports that the annualized national growth figure for asking rents currently stands at a modest 1.1%, indicating that the broader market is not experiencing the same level of rent hikes seen in more pressured regions. 

This uneven growth, coupled with the fear of future legislative changes, is likely to keep landlords on edge, potentially leading to even fewer properties available for rent in the future. The analyst warns that unless these issues are addressed, the lettings market may continue to struggle with supply shortages, further driving up rents and making it increasingly difficult for tenants to find affordable housing.

Wales continues to lead in regional growth, showing a 14.5% increase year-on-year, followed by the South West at 11.7%. Yorkshire and the North East also report strong double-digit annual growth. In contrast, Greater London has seen a year-on-year decline in rents by 1.2%, with Bexley and Haringey experiencing the steepest drops at 16.6% and 9.4%, respectively. The East and West Midlands have also recorded rental declines of 2.8% and 0.8%.

On the sales front, asking prices across England and Wales rose by 0.2% last month, marking the seventh consecutive monthly increase. Compared to August 2023, prices are up by 1.2%, with gains observed in Wales, Scotland, and most English regions, except for the North West and South East, where prices remained steady. The number of unsold properties in England and Wales has risen to a 10-year high for August, with nearly 6,000 additional properties added to agents’ portfolios, bringing the total to 494,837.

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