New research from SpareRoom warns 1.5m landlords could be set to quit the rental market ahead of the introduction of the Renters’ Rights Bill.

The survey results shows that a significant number of landlords could potentially sell their properties or exit the private rented sector in response to Labour’s Renters’ Rights Bill indicate potential upheaval in the rental market. Here’s a breakdown of the key points:

1. Impact of the Renters’ Rights Bill

The primary factor driving landlords to consider exiting the market is the Renters’ Rights Bill, particularly the proposed ban on section 21 ‘no-fault’ evictions. This measure, aimed at giving tenants more security, has made many landlords feel less confident in their ability to manage rental properties. The concern is that without the ability to evict tenants without cause, landlords feel more vulnerable to problematic tenants and may lack the flexibility they need. This has led to a high percentage of landlords considering selling up.

• 88% of landlords in the survey expressed concerns over the increased regulation, and three-quarters cited the loss of section 21 evictions as a key reason for wanting to exit the sector.
• 70% of landlords said they were leaving because of reduced profitability, which could be a consequence of rising costs, tighter regulations, and rent control measures.

2. Potential Consequences for Renters

If a significant number of landlords do indeed sell their properties, it could exacerbate the housing supply crisis and drive rents even higher. As fewer properties are available for rent, the competition for rental homes would increase, potentially leading to higher prices. This is already a concern, as rental prices in some parts of the country have reached record highs.

• With 1.5 million landlords potentially exiting, tenants could face an even more limited market, which would raise the stakes for renters, particularly those already struggling to afford rent or who face difficulties in securing deposits.

3. A Changing Landscape

Despite the worries about a mass exodus of landlords, some experts, like Tim Bannister from Rightmove, suggest that a changing of the guard might be more likely. Landlords who sell might offer opportunities for first-time buyers, or the properties could be bought by other landlords who are more willing to comply with the new regulations. This could provide a temporary shift in rental market dynamics, but whether it leads to long-term improvements or disruptions is uncertain.

• Some properties might end up as social housing if they are sold to housing associations, which could ease some pressure in the rental market, though as pointed out by Lord Richard Best, capital gains tax could discourage many landlords from opting to sell to social landlords.

4. Landlord Experiences

Landlords like Patricia Ogunfeibo share a more personal perspective. She has owned rental properties for decades and feels that the increasing red tape and diminishing profitability are pushing her to sell. While she acknowledges the need for reforms, she feels that the proposed changes don’t address the deeper issues of the private rented sector and could ultimately harm tenants.

• Ogunfeibo suggests that financial viability and personal risk are major factors driving landlords out of the market. Many landlords feel as though they are being criminalised, particularly given the risk of legal repercussions and changes in property management regulations.

• Additionally, many landlords are emotionally attached to their properties, having invested their savings and efforts into making them desirable homes. The new regulations could diminish their incentive to continue in the business.

5. Proposals for Addressing the Issue

The idea of offering capital gains tax exemptions for landlords who sell their properties to social housing providers could be an effective way to counterbalance the reduction in rental stock. This would potentially provide a boost to social housing supply, which is urgently needed. Lord Best’s suggestion could help mitigate some of the negative impacts of landlords exiting by encouraging them to sell to housing associations, which could in turn reduce the pressure on the housing benefit system.

• However, many landlords remain skeptical about such initiatives, feeling that property sales to councils or housing associations might not align with the types of properties they own or the actual need within local authorities.

Conclusion

While the Renters’ Rights Bill aims to offer stronger protections to tenants, its potential unintended consequences could be a reduction in rental supply and increasing pressure on the rental market. The exit of landlords could worsen the affordability crisis and exacerbate the challenges already faced by renters. To address this, the government may need to consider more supportive measures for landlords, such as financial incentives for those who remain in the market or sell to social housing providers, to ensure that the balance of power in the housing market doesn’t shift too far and leave renters vulnerable.