The Renters’ Rights Act may be having the opposite effect to what was intended, according to estate agency Knight Frank.
The legislation, introduced in May, has added pressure to the rental market as some landlords have chosen to sell rather than deal with tighter margins, additional regulations and increased administration.
Rental Supply Falls
The shortage of rental properties is particularly noticeable across prime areas of London. Rightmove data shows that new rental listings across prime central and prime outer London were 14% below the five-year average during the first six months of this year.
The Renters’ Rights Act introduced tighter rules around rent increases and collection, changes to the possession process and protections designed to prevent landlords from quickly re-letting properties after recovering them for sale.
Landlords are also facing the prospect of tougher energy efficiency requirements, with rental properties expected to meet an EPC C standard from 2030.
Knight Frank says another change is affecting how landlords price their properties. With landlords unable to accept offers above the advertised rent, some are setting higher asking prices from the start.
Mel Constantinou, head of lettings for south-west London and the Home Counties at Knight Frank, said landlords are becoming more confident when setting rents because there is no longer the same competitive bidding process.
However, whether tenants accept higher rents will depend largely on the level of supply in their local market.
London Rents Continue to Rise
Knight Frank figures show that average rents in prime outer London increased by 3.2% in the year to July, following a 1.2% rise over the previous three months.
Rents in the area are now 36% higher than before the pandemic, with the last annual fall recorded around five years ago during Covid-19.
The impact of the new rules can also be seen in areas popular with international students, including King’s Cross.
Jon Reynolds, head of lettings for north, city and east London at Knight Frank, said international students previously often paid a full year’s rent upfront, which landlords valued because it provided greater financial security.
Mixed Impact at the Top End
The picture is different in prime central London, where the supply of higher-value rental properties has increased.
Rightmove data shows that new London rental listings priced above £1,000 a week were 19% above the five-year average in the first half of the year.
However, demand and rental growth remain weaker at the very top end of the market. Average rents for properties below £1,500 a week increased by 1.9% over the year to July, while rents above £1,500 remained unchanged.
Knight Frank’s figures suggest that while the Renters’ Rights Act was designed to provide greater protection for tenants, its impact on landlords and rental supply could also contribute to higher asking rents in parts of the market.
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