Experienced landlords set to displace amateur property owners as key players in the rental market
The private rental market in the UK is witnessing a significant shift, with small-scale private landlords gradually being replaced by professional landlords. This transformation is primarily driven by increased regulation, rising costs, and greater risks faced by smaller landlords.
Recent legislative changes, such as the Renters' Rights Bill, have imposed stricter landlord obligations, higher compliance costs, and new standards for property upkeep. These factors are causing many smaller landlords to sell their properties or exit the sector, leading to a consolidation where professional landlords with larger portfolios and more resources become dominant.
The Renters' Rights Bill introduces more tenant protections and regulatory oversight, including the establishment of a national landlord register, stricter complaint procedures, and penalties up to £7,000 for non-compliance with property standards. Compliance costs and the risk of civil penalties disproportionately affect small landlords.
The abolition of Section 21 "no-fault" evictions has reduced landlords' ability to regain possession flexibly, increasing perceived risks for smaller landlords and encouraging some to leave the market or sell properties.
Official data shows a rise in landlords selling properties, causing disruption for renters and reflecting small landlords' growing unwillingness or inability to continue. Early surveys suggest two-thirds of landlords are planning to reduce their portfolios, largely citing increased costs, regulation, and liabilities. This results in shrinking supply and higher rents but also favours larger, professional landlords better equipped to manage complexity.
The rental market is facing growing demand and severe supply constraints. The overall supply of new homes for rent has been static at around 5.5m since 2016. Grainger, a leading property company, expects the exodus of small-scale landlords from the sector to reduce the number of properties available, forcing rent upwards and potentially worsening the rental crisis in the next decade.
It is worth noting that half of private landlords own only one property, representing a third of all tenancies. Another 38 per cent own between two and four properties. The exodus of small-scale landlords from the sector is expected to contribute to the rental crisis.
Private landlords are also facing challenges from lower tax relief, higher mortgages, and tighter regulation. Property expert Jamie Williams suggests that the 'golden age of buy-to-let' for hobbyist investors is over, and a more corporate, strategic approach to property investment is emerging.
In conclusion, the intensified regulatory environment, cost pressures, and increased risk of homelessness linked to landlord sell-offs are driving a shift from small, individual landlords to professional landlords in the UK private rental sector. This transformation is likely to continue in the coming years, reshaping the landscape of the rental market in the UK.
- As a result of the Renters' Rights Bill, professional landlords with larger portfolios and more resources may find opportunities in the UK private rental sector, as rising compliance costs, increased regulation, and new standards for property upkeep force smaller landlords to sell their properties.
- Due to the abolition of Section 21 "no-fault" evictions and the growing perception of risk among small landlords, some are choosing to leave the market, leading to a consolidation where larger, more strategic investors with a corporate approach to property investment take their place.
- With increased regulation, lower tax relief, higher mortgages, and shrinking supply due to smaller landlords selling properties, a more corporate, strategic approach to property investment is becoming favored in the UK private rental sector, signaling a transition from individual hobbyist investors to professional businesses involved in real-estate.
