A combination of new legislation, rising operating costs and growing criticism of landlords is putting increasing pressure on the private rented sector, with more landlords considering whether to leave the market.
The latest Landlord Eye research found that 26% of landlords have already sold, or are currently selling, at least one property because of the Renters’ Rights Act. A further 19% are considering selling as a result of the legislation.
The situation appears particularly uncertain for landlords with just one property. More than 60% of single-property landlords surveyed said they were no longer confident they would still be landlords by the end of next year.
Landlord Confidence Continues to Fall
The research, based on a survey carried out between May and June, also found a significant decline in confidence across the private rented sector.
Confidence among landlords in England was close to its lowest recorded level, while Wales recorded its weakest result since the research began.
Rising costs were the most frequently mentioned concern, accounting for 40% of responses. Government policy followed at 33%, showing the extent to which financial pressures and regulatory changes are influencing landlords’ decisions.
Local licensing requirements are another growing issue. Around 76% of respondents said they were experiencing an increasing administrative burden because of local licensing schemes.
Renters’ Rights Act Adds to Uncertainty
The findings come as landlords adjust to the Renters’ Rights Act, with further stages of the legislation still expected to be introduced.
For landlords already facing higher running costs and additional regulation, the prospect of further changes is adding to uncertainty about the future of their businesses.
Energy efficiency requirements could create another significant expense. Proposed changes to the Minimum Energy Efficiency Standards (MEES) could require landlords to spend more on improving their properties to meet future requirements.
While individual landlords may be able to adapt to these changes, the wider concern is what could happen if large numbers decide that selling is the better option.
Rental Supply Could Come Under Further Pressure
The private rented sector is already facing a shortage of available properties, while demand from tenants remains high.
More than five households are reportedly competing for each available rental property, while more than one million households are on the waiting list for social housing.
A continued reduction in the number of private landlords could therefore put further pressure on tenants by reducing the supply of homes available to rent.
This is particularly significant at a time when rising house prices are keeping more people in rented accommodation for longer, increasing the importance of a stable supply of private rental properties.
Calls for Government Support
With the Autumn Budget approaching, the research has prompted calls for the government to recognise the role private landlords play in providing housing.
The organisation behind the research is calling on Andy Burnham and Chancellor John Healey to consider policies that would make it more attractive for landlords to remain in the sector.
It has proposed changes to taxation designed to encourage investment and support growth within the private rented sector.
The argument is that a more supportive tax environment could help restore confidence while encouraging existing landlords to retain their properties and potentially invest in additional homes.
Landlords Face Important Decisions
The latest figures suggest that landlords are facing a combination of pressures rather than a single issue.
Higher costs, increasing regulation, licensing requirements, energy efficiency rules and changes brought about by the Renters’ Rights Act are all contributing to uncertainty.
For landlords considering whether to sell, the coming months could therefore be important. Government policy and the Autumn Budget may influence whether some investors decide to remain in the market or reduce their portfolios.
If a significant number do leave, the consequences could extend beyond landlords themselves, with fewer rental properties potentially adding further pressure to tenants already struggling to find affordable homes.
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