Prime rents rise amid Renters Rights Act impact on landlords

Prime rents rise amid Renters Rights Act impact on landlords

Prime Central London rents increased 1.9% year-on-year, while outer London saw a 2.9% rise, as the Renters Rights Act influences landlord behaviour and rental supply across markets.

Prime rents in London have recorded notable growth over the past year, with Prime Central London (PCL) outperforming other areas. According to Savills, PCL rents grew by 1.9% year-on-year, marking the strongest quarterly rental increase in two years. Outer London rents saw an even larger rise of 2.9% over the same period. This growth comes amid ongoing uncertainty and adjustment following the introduction of the Renters Rights Act (RRA), which remains a significant concern for landlords and letting agents.

The Renters Rights Act, which imposes new regulatory requirements and thresholds affecting landlords, has led to increased caution within the private rented sector. Almost half of the agents surveyed by Savills identified the legislation as a key challenge, alongside rising taxation on property investment income and higher mortgage costs. The RRA’s impact has been uneven across rental markets, with properties charging annual rents below the £100,000 threshold defined by the Act experiencing the strongest rental growth.

Rental supply tightening and market response to the Renters Rights Act

Reduced rental stock, especially in lower rental value bands, has intensified competition among tenants, supporting rent increases despite affordability constraints. Jessica Tomlinson, a research analyst at Savills, noted that landlord caution continues to limit rental supply, particularly where the pressure is most acute. This constrained supply is a direct consequence of regulatory changes, as some landlords reassess their positions and exit the market or reconsider their investment strategies.

While the RRA has made some landlords more cautious, it has not yet been possible to fully assess its long-term effects on the rental market. Tomlinson highlighted that the future trajectory of prime rents depends heavily on whether landlords choose to leave the sector or capitalise on current buying opportunities. The strengthening of yields in prime central London, now at their highest since 2009, may incentivise some landlords to remain active despite the regulatory environment.

In regional prime markets outside London, rental growth has slowed to 0.3% over the latest quarter but remains 1.5% higher year-on-year. Cities such as Birmingham, Edinburgh, and Manchester have shown resilience, particularly in the smaller property segments where demand remains steady. However, the overall pace of rental growth is subdued compared to the post-pandemic surge, with affordability increasingly acting as a ceiling on rent increases.

Context of rental market trends and regulatory changes

The Renters Rights Act represents a significant shift in the regulatory framework governing the private rented sector. By introducing new protections for tenants and thresholds affecting landlord obligations, the Act has altered landlord risk calculations and operational approaches. This has coincided with other pressures, including increased taxation and mortgage costs, creating a complex environment for property investors.

The reduction in available rental stock, particularly in lower rent brackets, reflects landlords’ cautious stance amid these changes. This has led to heightened competition among tenants, which in turn supports rental growth despite broader affordability challenges. The stronger yields in prime central London suggest that, for some landlords, the investment case remains attractive, even as others may consider selling or repositioning their portfolios.

These trends underscore the balancing act landlords face between regulatory compliance, market conditions, and tenant affordability. The evolving legislative landscape requires landlords and agents to adapt their strategies and remain vigilant to ongoing policy developments.

Practical implications for landlords and letting agents

For landlords managing properties affected by the Renters Rights Act, the current environment demands careful portfolio review and strategic planning. The increased regulatory burden and associated costs mean that landlords must assess the viability of their investments, particularly in the lower rental value bands where supply is tightening.

Letting agents may find opportunities to advise landlords on compliance and market positioning, as well as to attract new business from landlords seeking professional support amid uncertainty. The cautious landlord behaviour and constrained supply could also lead to more competitive lettings processes, requiring agents to maintain strong tenant relationships and effective marketing strategies.

Landlords should also monitor yield trends and consider the potential benefits of holding properties in prime locations, where returns are currently more favourable. However, they must balance this with the risk of void periods and tenant affordability limits, which can restrict rent increases.

Uncertainties and what landlords should watch

The full impact of the Renters Rights Act remains unclear, particularly regarding how many landlords will exit the sector or adjust their portfolios in response. Future amendments to the legislation or changes in enforcement practices could further influence market dynamics. Landlords should keep abreast of government guidance and regulatory updates to ensure ongoing compliance and to anticipate shifts in market conditions.

Additionally, the interplay between affordability constraints and rental growth will continue to shape landlord and tenant behaviour. Economic factors such as inflation, wage growth, and interest rates will also affect rental demand and pricing power. The sector’s response to these variables will be critical in determining rental market stability and growth prospects over the coming years.

What landlords should consider now

• Review rental portfolios to identify properties most affected by the Renters Rights Act and assess financial viability under new regulations.
• Stay informed about legislative developments and official guidance concerning the RRA and related landlord obligations.
• Engage with letting agents who understand the regulatory environment and can provide tailored advice to optimise rental income and compliance.
• Consider yield trends and market conditions when deciding whether to hold, sell, or acquire properties, especially in prime locations.
• Monitor tenant affordability limits to set realistic rents and reduce the risk of void periods.
• Prepare for potential changes in landlord licensing, safety obligations, and possession procedures linked to evolving tenancy law.

Supporting landlords through regulatory changes with TLA

The Landlord Association (TLA) offers members access to practical compliance resources and tools to help manage the challenges posed by the Renters Rights Act. Through TLA’s BETA testing of ORBIT, a new property management and compliance platform, landlords and letting agents can organise portfolios, maintain rental documentation, and record key actions related to tenancy management and regulatory compliance.

ORBIT’s developing features include tools for managing rental documents and records, tracking repairs and inspections, and accessing up-to-date compliance information relevant to the RRA and other legislative changes. While still in BETA, ORBIT aims to support landlords in staying organised and prepared as the regulatory landscape evolves.

Exploring TLA membership provides landlords with access to expert guidance, compliance updates, and resources tailored to the private rented sector. This support can be valuable in navigating the practical implications of the Renters Rights Act and maintaining effective property management practices.

Landlords interested in enhancing their compliance and portfolio management capabilities can learn more about ORBIT BETA access and TLA’s member compliance support.

Looking ahead, landlords will need to balance regulatory compliance with market realities, making informed decisions to sustain their investments amid ongoing changes. Staying engaged with industry developments and leveraging available resources will be essential.

Sources: Letting Agent Today