The introduction of the Renters’ Rights Act is prompting a noticeable shift in the private rented sector (PRS), with many ‘hobby landlords’ choosing to exit the market. This legislative change, combined with other financial pressures, is also leading to stricter tenant vetting and potentially reduced access to rental homes for vulnerable tenants.

Changing Landlord Behaviour

Louisa Sedgwick, managing director of mortgages at Paragon Bank, has observed a clear change in landlord practices ahead of the Renters’ Rights Act coming into force on 1 May. Speaking on a podcast hosted by Tom Bill, head of UK residential research at Knight Frank, she highlighted that landlords are now conducting more rigorous due diligence on prospective tenants.

One significant change is the removal of the option for tenants to pay rent in advance, which previously could have helped those with poor credit histories or those reliant on universal credit to secure a property. Ms Sedgwick warned, “We’ll see more vulnerable tenants not being able to secure properties as a result of the Renters’ Rights Act.”

Exodus of Hobby Landlords

Ms Sedgwick also pointed to a trend of hobby landlords leaving the PRS, driven by a combination of tax changes and increased stamp duty costs. She explained that many landlords are reassessing their involvement, stating, “It just becomes harder, and I think this is kind of the point where landlords say, unless I’m going to do this either as a full-time role or certainly concentrate and focus time and effort on making sure that I can make this a viable business, then I’m actually going to move out of the sector.”

This shift suggests a move towards a more professionalised landlord base, with fewer part-time or casual investors remaining in the market.

Impact on Rental Stock and Market Conditions

Tom Bill noted that the decline in available rental stock is intensifying competition among tenants, particularly in parts of London. He added, “Landlords who remain are operating in a market where yields have adjusted alongside weaker sales prices.” This tightening supply may exacerbate challenges for tenants, especially those deemed higher risk under the new regulations.

Legislative Context and Future Challenges

Ms Sedgwick revealed her involvement in discussions with government and industry bodies during the legislative process. She reflected on the political context, saying, “My feeling was that this was in the Labour Party manifesto, and as such, they were going to implement it. So, regardless of whether or not they understood and were listening, I think that they’d reached the point where there was just no going back on this particular change in legislation.”

Looking ahead, further regulatory demands are expected with the Minimum Energy Efficiency Standard (MEES) requirements, which aim for an EPC C rating on rental properties by 2030. Ms Sedgwick warned that this will be a more demanding challenge, stating, “I don’t believe we’ve got the infrastructure to support it,” and highlighted the scale of the task: “We’re talking 1,800 properties per day that will need to be upgraded by October 2030.”

Shifting Sector Structure

The sector is evolving towards larger, professionally managed developments. Ms Sedgwick noted the trend towards apartment blocks with amenities such as concierges and gyms, often developed by insurance and investment companies. She concluded, “It is going to be a community of landlords that do this as part of their everyday roles as opposed to doing this just as a hobby or off the side of the desk.”

What this means for landlords

Landlords should prepare for increased regulatory scrutiny and operational demands, particularly in tenant vetting and property standards. The departure of hobby landlords may reduce competition but also signals a more professionalised market requiring greater time and resource commitment. Those remaining in the sector will need to adapt to tighter affordability checks and the upcoming energy efficiency requirements, potentially reshaping investment strategies and property management approaches.

Source: Based on reporting from Property118

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