A significant number of landlords who are planning to exit the market in the next two years have cited rising tax burdens and increasing administrative red tape as the primary reasons behind their decision. These findings have emerged from a detailed report conducted by The Deposit Protection Service (DPS).
The DPS, a trusted body overseeing the protection of tenants’ deposits, surveyed over 1,200 landlords, gathering their views on the current state of the private rented sector (PRS). The survey delved into the reasons why many landlords are choosing to leave the market, and the results were compiled and analysed in their comprehensive report titled The Private Rented Sector Review.
This report sheds light on the challenges landlords are facing, particularly in terms of financial pressures and regulatory changes, which are driving them to reconsider their positions in the sector. Many landlords expressed concerns over escalating costs and complex regulations, which, they feel, make property management increasingly difficult and less profitable.
As these factors continue to affect landlords’ decision-making, the report highlights the growing concerns within the PRS, suggesting that many landlords are now reconsidering their long-term investments due to the external pressures of tax and regulatory environments.
According to the latest findings in the report, 47% of landlords who participated in the survey indicated that they were considering selling some or all of their property portfolio. This figure represents a slight decline from 49% in May, suggesting that while some landlords may still be uncertain about their future in the sector, the level of concern is not drastically changing.
Despite the minor decrease, the report reveals that an overwhelming 89% of respondents felt that changes or proposed changes to legislation and regulations directly influenced their decision to sell. This marks a 4% increase from the 85% observed in May. The growing percentage highlights the increasing pressure landlords are facing due to the rising volume of legislative and regulatory shifts, such as stricter tenant protections, rent controls, and tax policies that have made property investment less attractive for some.
The report underscores the impact these regulatory changes have on landlord sentiment. The uncertainty around what further changes may be implemented in the near future only adds to the challenge of navigating the private rented sector (PRS). As the pressure builds, it seems that more landlords are being pushed to the brink, resulting in the growing trend of divestment. This trend raises concerns about potential shortages in the rental market, which could exacerbate the ongoing affordability issues for tenants.
When landlords were asked to identify the key legislative or regulatory changes that influenced their decision to sell, the responses were telling. The proposed reforms to Section 21 evictions emerged as the most significant factor. A staggering 94% of respondents highlighted this as a key influence on their decision to sell, marking a 5% increase from May 2024, when the figure stood at 89%.
Additionally, the Renters Rights Bill — previously known as the Renters’ (Reform) Bill — was another major factor. 91% of landlords said that these reforms had a direct impact on their decision to exit the market. This figure has risen by 6 percentage points since May 2024, when 85% of respondents cited the Bill as a contributing factor, and it represents a notable 10% increase since August 2023, when only 81% expressed concern about its impact.
Capital gains tax changes also played a role in shaping landlords’ decisions. Again, 91% of respondents indicated that the tax reforms had influenced their intention to sell, marking an 8% increase from May 2024, when 83% cited this as a reason. These changes, along with other regulatory adjustments, appear to be driving a growing number of landlords to reconsider their positions in the market. With these reforms continuing to reshape the landscape, many landlords feel uncertain about the future and are opting to sell while they can.
When landlords were asked about the key legislative or regulatory changes that influenced their decision to sell their properties, the responses were particularly revealing. The proposed reforms to Section 21 evictions were identified as the most significant factor. An overwhelming 94% of respondents cited these reforms as a major influence, reflecting a 5% increase since May 2024, when 89% of landlords had expressed similar concerns.
In addition to the Section 21 reforms, the Renters Rights Bill — formerly known as the Renters’ (Reform) Bill — was another key issue. A substantial 91% of landlords acknowledged that the proposed changes within this Bill played a role in their decision to exit the market. This figure represents a 6 percentage-point rise since May 2024, when 85% of respondents viewed the Bill as a contributing factor, and a notable 10% increase compared to August 2023, when only 81% of landlords expressed concerns about its potential effects.
Changes to capital gains tax also had a significant influence on landlords’ decisions. Once again, 91% of respondents noted that these tax reforms contributed to their decision to sell, marking an 8% increase from the 83% who cited it as a reason in May 2024. These changes, along with other legislative shifts, are clearly driving a growing number of landlords to rethink their positions in the property market. With these reforms continuing to reshape the sector, many landlords are opting to sell while they still have the opportunity, unsure of what the future holds for their investments.
Around 30% of landlords who have indicated plans to sell their properties have mentioned concerns about declining property values as a contributing factor. This marks a 9% increase since May 2024, when only 21% of landlords cited property value concerns. However, this figure is still lower than the 40% who expressed similar concerns in August 2023, suggesting that the issue of declining property values is fluctuating as a factor influencing landlords’ decisions to exit the market.
The research also revealed that nearly a quarter (24%) of landlords plan to sell all of their properties in the next two years. This represents a 4% increase since May 2024, when 20% of landlords intended to sell their entire portfolio, and a 2% rise since August 2023, when 22% had similar intentions. In contrast, 23% of landlords said they were planning to sell only some of their properties, which reflects a decline of 6% from May 2024, when 29% of landlords had planned to sell part of their portfolios.
In terms of property ownership, almost two-thirds (61%) of respondents stated that they had specifically purchased their properties to be used as rental homes. On the other hand, 30% of landlords had either inherited their properties or originally bought them as their main residence. This distinction highlights the different motivations behind property ownership among landlords, with some seeing it as an investment strategy, while others may have come to let out properties due to changes in their personal circumstances.
The study also highlighted the size of landlords’ portfolios, with 57% of respondents owning one or two rental properties, while 38% owned between three and ten properties. These figures offer insight into the composition of the rental market and suggest that a significant proportion of landlords operate relatively small portfolios, which could be more vulnerable to changes in the market or regulatory environment.
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