Landlords in the UK are facing increasing challenges as new legislation and rising costs put pressure on rental income and property management. The introduction of the Renters’ Rights Act on 1 May is expected to tighten margins for landlords, while broader economic factors are influencing both rental and house price trends.

Rents expected to increase amid growing risks

Property consultancy Knight Frank has issued a warning that landlords should anticipate tighter profit margins due to heightened risks in regaining possession and setting rental levels. The firm’s latest forecasts indicate that rents will continue to rise, driven by increased costs and regulatory changes.

Tom Bill, head of UK residential research at Knight Frank, stated: “The direction of travel is clear in terms of upward pressure on rents. This additional risk needs to be priced in, particularly where supply is constrained.” The implication is that landlords will need to factor in these risks when determining rental prices, especially in markets with limited property availability.

As a result of the new rules, some landlords may exit the sector, further tightening the supply of rental homes. Knight Frank now projects rental growth of 3.5% in both central and outer London this year, an increase from current rates of 1.2% and 2.8% respectively.

Impact of borrowing costs and demand shifts

In addition to regulatory pressures, rising borrowing costs are influencing the housing market. Higher mortgage rates are pushing some potential buyers towards the rental market, increasing demand for lettings. At the same time, geopolitical uncertainty, particularly related to the conflict in the Middle East, is causing some investors to adopt a cautious stance.

There is also a noted temporary return of households to London from the Middle East, which adds to rental demand. Meanwhile, landlords face additional challenges from forthcoming energy efficiency requirements, with properties needing to achieve an EPC rating of C by 2030.

Louisa Sedgwick of Paragon Bank commented on these changes, saying: “This particular change in legislation I think is going to be bigger and potentially more demanding [than the Renters’ Rights Act] because I don’t believe we’ve got the infrastructure to support it.” This highlights concerns about the practicalities of meeting new standards within the sector.

House price outlook and market sentiment

Knight Frank’s recent report also revises house price growth expectations downward in the short term. The firm forecasts 1.5% growth for 2026, followed by 3% in 2027 and 4% in 2028, reflecting a more cautious near-term outlook.

Rising borrowing costs, influenced by the Middle East conflict, have affected market sentiment and activity. Swap rates have increased, with the five-year rate now around 4%, compared to just under 3.5% before the conflict began.

However, longer-term forecasts have been revised upwards, partly based on the assumption of a change in government by 2029. Knight Frank anticipates that a new government would implement lower taxes and tighter spending, supporting house price growth of more than 5% annually in both mainstream and prime markets by 2030.

What this means for landlords

Landlords should prepare for a landscape of rising rental prices driven by increased risks and costs associated with new legislation and market conditions. The potential reduction in rental property supply, as some landlords exit the sector, will further support upward pressure on rents.

Additionally, landlords must consider the financial implications of meeting energy efficiency standards and the impact of higher borrowing costs on their investment strategies. Staying informed and adapting to these evolving factors will be essential for managing portfolios effectively in the coming years.

Source: Based on reporting from Property118

TLA Training Academy

The Landlord Association has launched its new Training Academy for UK landlords, providing structured guidance, compliance education, and practical knowledge to support landlords at every stage. Members can now complete the programme and become TLA Certified Landlords at no additional cost as part of their membership.

Landlords can explore the Academy here: https://landlordassociation.org.uk/tla-academy/

Those looking to join and access the full training and certification can register here: https://landlordassociation.org.uk/landlord-association-membership-uk/

TLA update

The Landlord Association is currently onboarding new service providers into its Trusted Partner Hub, a new initiative designed to support landlords, tenants, letting agents, and property managers with vetted, high-quality services. As one of the fastest growing landlord associations in the UK, TLA offers partners direct access to an engaged and active member base at the point of need. Service providers across legal, maintenance, insurance, finance, mortgages, tenant screening, and property services can register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/