Prime rents rise amid Renters Rights Act impact on London market

Prime rents rise amid Renters Rights Act impact on London market

Prime Central London rents have increased by 1.9% year-on-year, with outer London rents up 2.9%, as landlords adjust to the Renters Rights Act and its effects on rental supply and tenant demand.

Prime Central London (PCL) has recorded its strongest rental growth in two years, driven by a combination of regulatory changes and market dynamics. According to Savills, the Renters Rights Act (RRA) remains the foremost concern for landlords, with nearly half of agents surveyed identifying it as a key issue affecting their portfolios. The act’s introduction has notably influenced landlord behaviour, especially in rental segments below the £100,000 annual rent threshold, where regulatory exposure is greatest.

Landlords in these lower rental bands have become more cautious, leading to a reduction in available rental stock and heightened competition among tenants. This constrained supply is supporting rental growth, although affordability limits continue to temper the pace of increases. Jessica Tomlinson, research analyst at Savills, notes that while it is premature to fully assess the RRA’s long-term effects, it has already caused some landlords to reconsider their participation in the sector.

Details on rental growth and landlord concerns

Prime Central London’s rental market has shown resilience, with yields reaching their highest levels since 2009. Outer London markets have seen even stronger annual rent growth, at 2.9%, reflecting a broader trend of rising rents in commuter belt areas. Regional cities such as Birmingham, Edinburgh, and Manchester are also experiencing positive rental growth, particularly for smaller properties where tenant demand remains robust.

Despite these gains, the overall pace of rental growth is slower than the post-pandemic surge. Affordability constraints are increasingly acting as a ceiling, with many tenants reaching the limits of sustainable rent payments. Landlords are responding by adopting more pragmatic pricing strategies, often prioritising securing suitable tenants over pushing for higher rents that risk void periods.

Alongside the RRA, increased taxation on property investment income and rising mortgage costs rank as significant concerns for landlords. The RRA’s regulatory changes have reduced landlords’ flexibility, but with short-term letting options less viable and yields strengthening, many landlords are incentivised to remain in the rental market rather than exit or wait for better sales conditions.

Context of the Renters Rights Act and market adjustments

The Renters Rights Act introduced comprehensive reforms aimed at enhancing tenant protections and regulating landlord practices. Key provisions include restrictions on rent increases, enhanced eviction protocols, and greater transparency in tenancy agreements. The act’s £100,000 annual rent threshold targets higher-value rental properties, but its ripple effects are felt across the market.

Since the RRA’s commencement, landlords have had to navigate new compliance requirements and altered risk profiles. Many have become more cautious about letting properties, particularly in lower rental bands where margins are tighter and regulatory burdens higher. This caution has contributed to a tightening of supply, which in turn supports rental price growth despite broader economic pressures.

At the same time, the act has shifted the balance of power somewhat towards tenants, who are increasingly discerning and aware of their rights. This has altered landlord-tenant dynamics, with landlords needing to be more attentive to compliance and tenant satisfaction to avoid disputes and vacancies.

Practical implications for landlords and agents

For landlords managing portfolios in London and similar markets, the RRA demands careful review of tenancy agreements, rent-setting practices, and compliance documentation. Landlords should assess whether their properties fall within the RRA threshold and understand how the act’s provisions affect their rights and responsibilities.

Letting agents must also adjust their advice and management practices to align with the new regulatory environment. This includes advising landlords on realistic rent levels given tenant affordability constraints and the increased scrutiny on rent increases and eviction processes.

Landlords should monitor market trends closely, balancing the potential for rental growth against the risk of tenant affordability limits and regulatory penalties. Maintaining clear communication with tenants and ensuring all legal requirements are met will be critical to sustaining occupancy and income.

Uncertainties and future considerations

The full impact of the Renters Rights Act remains to be seen, particularly over the medium to long term. It is uncertain how many landlords will exit the market due to increased regulation and costs, or conversely, how many will invest further to capitalise on current buying opportunities and strengthening yields.

Changes in government policy, market conditions, and tenant behaviour will continue to influence rental dynamics. Landlords should stay informed about any amendments to the RRA or related legislation and be prepared to adapt their strategies accordingly.

What landlords should consider now

• Review all tenancy agreements for compliance with the Renters Rights Act provisions.
• Assess rental pricing strategies in light of tenant affordability and market competition.
• Monitor local market conditions, especially in London’s prime and outer zones, to identify opportunities and risks.
• Maintain thorough records of rent reviews, tenant communications, and compliance activities.
• Consult with letting agents or legal advisors to ensure ongoing adherence to evolving regulations.

Supporting landlords with compliance and management

The Landlord Association (TLA) offers members access to tailored compliance resources and practical information to help manage the challenges posed by the Renters Rights Act. Through TLA’s BETA testing platform ORBIT, landlords and letting agents can organise property records, produce and retain tenancy documentation, and track key compliance actions efficiently. ORBIT’s developing AI assistant supports property management tasks, helping members stay on top of regulatory changes and evidence retention.

Exploring TLA membership provides landlords with ongoing support to navigate the regulatory landscape, maintain compliance, and optimise portfolio management amid the evolving rental market conditions.

Looking ahead, landlords who proactively adapt to the Renters Rights Act and market signals will be better positioned to sustain rental income and tenant relationships as the sector continues to evolve.

Sources: Landlord Today