Landlords increase tenant risk screening amid rising costs
Rising operating and compliance costs are driving landlords to seek lower-risk tenants and tighten selection criteria, according to Handelsbanken’s 2026 Property Investor Report. This shift is influencing rents, tenant profiles and portfolio decisions.
Landlords are responding to increased expenses by raising rents and becoming more selective about who they rent to. Handelsbanken’s annual Property Investor Report reveals that 41% of property investors have adjusted their tenant profiles to prioritise lower-risk tenants. Additionally, 59% say they are tightening tenant selection criteria in response to the Renters’ Rights Act, while 44% are considering earlier rent increases.
The report highlights that the most commonly reported cost increases over the past year relate to maintenance and repairs (45%), insurance (41%) and energy efficiency upgrades (40%). These costs are fundamental to maintaining properties that are safe, compliant with regulations, insurable and suitable for long-term occupation.
Landlord responses to rising costs and regulatory changes
Higher operating costs are not only affecting rent levels but also influencing landlords’ broader portfolio strategies. The report finds that 20% of professional property investors have sold properties due to increased costs, while 19% have taken properties off the rental market. Moreover, 46% have delayed upgrades or improvement works, which risks further deterioration of already aging housing stock.
Despite these pressures, the report does not indicate a widespread exit of professional investors from the rental market. Instead, 84% of respondents plan to expand their portfolios over the next 12 months, a significant increase from 54% in the previous year’s survey. Confidence in portfolio value growth remains high, with 93% expecting an increase and 38% anticipating substantial rises.
Among those planning to grow their portfolios, 70% cite buying opportunities or valuations as key drivers, 58% point to strong rental demand, and 33% mention financing availability. A spokesperson for Handelsbanken summarised the situation by noting that while many investors remain confident in the market’s value, the increased costs are making landlords more selective about tenant risk, arrears exposure and tenancy stability.
Context of tenant risk prioritisation and sector impact
The trend towards prioritising lower-risk tenants reflects landlords’ need to manage financial exposure amid rising costs and tighter regulations. The Renters’ Rights Act, which strengthens tenant protections, is prompting landlords to scrutinise tenant suitability more closely to minimise potential arrears and tenancy disputes.
This shift may affect the rental market experience, with tenants facing higher rents and more stringent referencing processes. Competition for good-quality homes could intensify, particularly for tenants with less robust credit histories or less stable income sources.
Landlords’ decisions to delay property upgrades also raise concerns about the long-term quality and safety of rental housing. Energy efficiency improvements are a key regulatory focus, and postponing these could have implications for compliance with future standards and tenant wellbeing.
Practical implications for landlords and letting agents
For landlords managing small to medium portfolios, the report’s findings underscore the importance of reviewing tenant referencing procedures and risk assessment criteria. Letting agents may need to adapt their screening processes to align with landlords’ increasing demand for lower-risk tenants, potentially incorporating more detailed financial checks or alternative data sources.
Raising rents earlier than planned is a strategy some landlords are considering to offset cost pressures, but this must be balanced against market conditions and tenant affordability. Landlords should ensure that any rent increases comply with tenancy agreements and legal requirements, including notice periods and consultation where applicable.
Delays in property maintenance and upgrades can create compliance risks, particularly regarding safety standards and energy efficiency regulations. Landlords should prioritise critical repairs and plan for necessary improvements to avoid penalties or enforcement action.
Areas of uncertainty and what to monitor
While the report provides clear evidence of landlords’ shifting priorities, the full impact of the Renters’ Rights Act on tenant selection and rent levels remains to be seen. Changes in enforcement practices or further regulatory updates could influence how landlords apply tenant risk criteria.
The balance between maintaining property standards and controlling costs will continue to challenge landlords. Monitoring government guidance on compliance obligations, especially relating to energy efficiency and safety, is essential to avoid unexpected liabilities.
Letting agents should watch for evolving best practices in tenant referencing, including the use of bank data or alternative credit information, which some landlords are increasingly interested in to reduce risk exposure.
Key considerations for landlords going forward
- Review and update tenant referencing and risk assessment processes to reflect tighter selection criteria and regulatory changes.
- Plan rent reviews carefully, ensuring compliance with tenancy terms and legal notice requirements.
- Prioritise essential maintenance and compliance-related upgrades to maintain property standards and avoid enforcement risks.
- Stay informed about developments in tenant protection legislation and guidance from regulatory bodies.
- Consider the potential impact of increased tenant selectivity on demand and occupancy rates within your portfolio.
Supporting landlords through compliance and portfolio management
The Landlord Association (TLA) offers members access to a range of compliance resources and practical information to help manage tenant referencing and property standards effectively. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is designed to assist landlords and letting agents in organising portfolios, managing rental documents, and recording key compliance actions.
ORBIT’s features relevant to tenant risk management include tools for maintaining tenant records, monitoring referencing outcomes, and tracking property maintenance and safety checks. These capabilities support landlords in meeting regulatory requirements and documenting their compliance efforts.
Exploring TLA membership provides access to up-to-date guidance on tenancy law changes, rent setting, and safety obligations, helping landlords prepare for evolving market conditions and regulatory demands.
Learn more about ORBIT BETA access and review TLA’s landlord membership options to enhance your portfolio management and compliance processes.
Looking ahead, landlords and agents should anticipate continued pressure from rising costs and regulatory changes, making thorough tenant screening and proactive property management increasingly important to maintain sustainable rental businesses.
Sources: Letting Agent Today
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