Rent arrears rise sharply following Renters Rights Act changes

Rent arrears rise sharply following Renters Rights Act changes

Rent arrears in the UK private rented sector have increased significantly since the Renters Rights Act came into effect, with nearly one in five tenancies in arrears by the third quarter of 2026, according to recent data.

New figures from Reposit reveal rent arrears climbed from 12% to 18% year-on-year in Q3 2026, marking the highest rate in three years. This rise coincides with the abolition of Section 21 in England and other regulatory changes introduced by the Renters Rights Act.

Rising arrears amid regulatory and economic pressures

The Reposit data shows an average arrears rate of 18% across the first three quarters of 2026, up from 15% in the same periods of 2024 and 2025. Despite this, the average value of arrears has remained relatively stable at around £1,837, a marginal increase of £13 year-on-year.

Rental price growth has slowed compared to previous years but continues to put financial strain on tenants. The Office for National Statistics reports average monthly private rents rose by 3.8% to £1,406 in the year to September 2026. This increase adds £52 to monthly rent costs compared to the prior year, while wage growth remains below inflation.

Wages in the private sector grew by 3% in the three months to August 2026, trailing inflation which stood at 3.5% in September. This squeeze on household budgets contributes to the rising arrears problem.

Ministry of Justice data also indicates a 6% year-on-year increase in landlord possession claims in England and Wales during Q2 2026, reflecting ongoing challenges in recovering properties.

Impact of the Renters Rights Act on landlords and letting agents

The Renters Rights Act, which came into force in May 2026, abolished Section 21 ‘no-fault’ evictions in England, fundamentally changing landlords’ ability to regain possession. This legislative shift has increased the financial risks associated with tenant arrears, as landlords face more hurdles to evict non-paying tenants.

Ben Grech, CEO of Reposit, highlights that average cash deposits now cover less than the typical arrears amount, with deposits averaging £1,258 against arrears averaging £1,837. This gap increases landlords’ exposure to unpaid rent.

Grech notes that landlords are becoming more risk averse due to these legal changes, combined with high interest rates and inflation. Letting agents are also seeking ways to reduce compliance risks, while tenants look to minimise upfront costs.

Contextualising the data within the evolving rental market

The rise in rent arrears is a significant development in the private rented sector, which has been adapting to a wave of regulatory reforms aimed at enhancing tenant protections. The abolition of Section 21 removes a straightforward mechanism for landlords to regain possession, shifting the balance of power towards tenants but also complicating arrears management.

While rental growth has moderated, it remains above wage increases, contributing to affordability pressures. This economic context, combined with tighter eviction rules, creates a challenging environment for landlords managing rent arrears.

Letting agents and landlords must now navigate these changes carefully, balancing compliance with the Renters Rights Act and managing financial risks associated with arrears and longer possession processes.

Practical implications for landlords and letting agents

For landlords, the increased arrears rate means a higher likelihood of rent not being paid on time, with fewer options to swiftly recover possession. This may lead to longer periods of lost income and increased legal costs.

Letting agents should review their arrears management procedures and tenant vetting processes, considering additional protections such as rent guarantee products or alternative deposit schemes like those offered by Reposit. Effective communication with tenants and early intervention in arrears cases will be more critical than ever.

Landlords may also need to reassess their risk appetite and portfolio strategies, potentially favouring properties in areas with stronger rental demand or tenants with more secure income streams.

Uncertainties and areas to monitor going forward

It remains unclear how the full impact of the Renters Rights Act will evolve over the longer term, especially as courts and tribunals adapt to the new possession procedures. The balance between tenant protections and landlord rights continues to be a contentious policy area, with potential for further legislative adjustments.

Economic factors such as inflation, wage growth, and interest rates will also influence rent arrears trends. Landlords and agents should stay informed about government guidance and any forthcoming regulatory changes that may affect possession rights or rent collection.

Key considerations for landlords now

• Review tenancy agreements and ensure compliance with the Renters Rights Act and any local licensing requirements.
• Enhance rent arrears monitoring and early intervention strategies to minimise financial losses.
• Consider alternative deposit schemes and rent protection products to mitigate risk.
• Maintain clear records of all communications and actions related to arrears and possession proceedings.
• Stay updated on legal developments and seek professional advice where necessary.

Supporting landlords through regulatory changes

The Landlord Association (TLA) provides members with access to practical compliance resources and guidance tailored to the evolving regulatory environment, including the Renters Rights Act. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, offers tools to organise property portfolios, manage tenancy documentation, and record key compliance actions such as rent arrears and possession proceedings.

ORBIT’s features aim to support landlords and letting agents in maintaining thorough records and reducing compliance risks amidst ongoing legislative changes. Membership also grants access to up-to-date information and expert insights to help navigate the complexities of rent arrears management and regulatory obligations.

Explore TLA membership and learn more about ORBIT BETA access to enhance your property management approach in this challenging market.

Looking ahead, landlords and agents will need to adapt their strategies and operations to the new tenancy landscape shaped by the Renters Rights Act and economic pressures, with a focus on risk management and compliance.

Sources: Letting Agent Today