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Increased regulation and higher overheads placing ‘untenable pressure’ on many private landlords

UK rental guarantor service Housing Hand has shared its insights into the latest shifts in the UK rental sector. As the largest rental guarantor service in the UK, the company works with private landlords, Build to Rent (BtR) operators, purpose built student accommodation (PBSA) providers, universities, letting agencies and tenants. From this unique perspective of the rental market, the organisation has observed a number of growing trends.

“We’re seeing a deepening of the division in the rental market between smaller, private landlords and the larger, institutional players at the moment. Individual landlords are facing tough decisions around whether to stay in the sector, with increased regulation and higher overheads pushing many towards selling up. At the same time, the market is becoming more competitive, driven by ambitious advances from the BtR and PBSA sectors. For many individual landlords, the pressure is making their situation untenable.”

Terry Mason, Group Operations Director, Housing Hand

Landlords were already feeling the bite of increased policy interference resulting in reduced profitability back in 2019, when numbers hit a seven-year low, at a total of 2.66 million UK landlords. Figures produced by HMRC in 2021 put the figure at 2.65 million, with numbers having dwindled a little further.

According to Capital Economics, that situation could worsen dramatically over the coming decade. Managing Economist Andrew Evans has pointed to “a series of policy changes” as having the potential to trigger a fall in supply of over half a million rental properties over the next ten years. Not good news when the company forecasts that the private rented sector needs to increase its supply of homes by 227,000 per year to meet growing demand from renters.

One of the policy changes that has the potential to drive landlords away from the rental sector is the change in Energy Performance Certificate (EPC) regulations. All new tenancies from 2025 (and all existing tenancies from 2028) will require landlords to achieve an EPC rating of C or above before they can rent a property out. Great news for the environment, but not so much for the rental sector. According to a survey by The Mortgage Works, 52% of landlords impacted by the EPC regulations have thought about selling some or all of their properties. Inability to complete the work and inability to finance it were their main concerns.