Landlord losses rise sharply amid Renters’ Rights Act impact

Landlord losses rise sharply amid Renters’ Rights Act impact

Losses crystallised by UK landlords disposing of residential property investments surged by 32% last tax year to £1.15 billion, with experts suggesting actual losses may be significantly higher.

Reported data from HMRC analysed by Bowmore Wealth Group reveals a steep increase in losses made by buy-to-let (BTL) investors, reflecting the combined pressures of stagnant property prices, rising mortgage costs, and recent legislative changes. The Renters’ Rights Act, which restricts landlords’ ability to remove tenants and increase rents, is seen as a contributing factor prompting some landlords to sell at a loss.

Analysis of landlord losses and market conditions

According to Bowmore Wealth Group’s assessment of HMRC figures, the value of losses realised by landlords through the sale of residential investment properties jumped from £870 million to £1.15 billion in the last tax year. This 32% increase highlights the financial strain experienced by many BTL landlords.

David Floyd, head of private clients at Bowmore Financial Planning, attributes this rise to a combination of stagnant or falling house prices and increased costs. The Lloyds House Price Index for September 2026 showed that, while UK-wide prices were flat over the previous 12 months, London experienced a 2.2% decline. When adjusted for inflation, property values have effectively decreased in real terms.

Rising mortgage interest rates have exacerbated pressures on landlords’ net yields, which were already compressed by administrative and maintenance costs. The introduction of the Renters’ Rights Act has added further challenges by making tenant eviction and rent increases more difficult, increasing the perceived risk and complexity of property investment.

Context: The Renters’ Rights Act and its effects on landlords

The Renters’ Rights Act, which came into force recently, has altered the balance of power between landlords and tenants. By tightening restrictions on eviction and rent rises, the Act aims to provide tenants with greater security but has also increased landlords’ operational risks and administrative burdens.

For landlords, this means longer processes to regain possession of properties from tenants who default on rent, alongside limitations on how and when rents can be adjusted. These changes have led some investors to reconsider the viability of their portfolios, especially in markets where property values are stagnant or falling.

Floyd notes that many BTL investors are now comparing the returns from property with other asset classes such as global equities and UK government bonds, which have become more attractive due to higher yields and lower administrative demands.

Practical implications for landlords and letting agents

For landlords managing small to medium portfolios, the increase in realised losses signals the need for careful portfolio review. Properties in markets with declining values, particularly flats in London, may be less viable investments under current conditions. The combined impact of higher borrowing costs, reduced rental growth potential, and new tenancy regulations requires a reassessment of investment strategies.

Letting agents should be aware of the increased likelihood of landlords choosing to sell at a loss and may need to advise clients accordingly. The administrative complexities introduced by the Renters’ Rights Act also mean agents must ensure compliance with new eviction and rent increase procedures to avoid legal pitfalls.

Landlords should monitor local market trends closely and consider whether holding or disposing of certain properties aligns with their financial goals. Where losses are crystallised, tax implications should be carefully managed, and professional advice sought to optimise outcomes.

Uncertainties and areas to watch

While the reported losses are significant, Bowmore Wealth Group suggests that paper losses—those unrealised but existing on portfolios—may be substantially higher, as the data only covers properties actually sold. This indicates potential further market adjustments ahead.

The full long-term impact of the Renters’ Rights Act remains to be seen, particularly how it will affect landlord behaviour, tenant stability, and rental market dynamics. Changes in government policy, interest rates, or housing demand could alter the trajectory of landlord losses and investment returns.

Landlords and agents should stay informed about evolving regulations and market data, as well as any government responses to the challenges faced by the private rented sector. Keeping abreast of these developments will be essential for strategic decision-making.

What landlords should consider now

• Review portfolio performance with a focus on properties in markets with stagnant or falling values.
• Assess the impact of the Renters’ Rights Act on tenancy management and eviction processes.
• Evaluate mortgage costs and potential refinancing options to mitigate rising interest expenses.
• Seek professional advice on tax implications of realised losses and potential capital gains strategies.
• Ensure compliance with new tenancy laws to avoid legal risks and penalties.

Supporting landlords through regulatory changes with TLA

The Landlord Association (TLA) offers members access to tailored compliance resources and practical guidance to manage evolving tenancy regulations such as the Renters’ Rights Act. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is designed to help landlords and letting agents organise portfolios, maintain records, and monitor regulatory developments efficiently.

Through ORBIT, members can record key actions such as inspections, repairs, and communications, ensuring evidence of compliance is readily available. TLA membership also provides access to up-to-date information on tenancy law changes, helping landlords prepare for new obligations and understand the implications of crystallising losses in their portfolios.

Exploring TLA membership and ORBIT BETA access can support landlords in navigating the administrative and legal complexities introduced by recent reforms, while maintaining effective property management practices.

Looking ahead, landlords will need to remain vigilant about market conditions and legislative updates to protect their investments and adapt strategies accordingly.

Sources: Landlord Today