Government urged to halt PRS reforms amidst rising rents

Landlords in the private rented sector (PRS) are in desperate need of an amnesty from further government intervention to prevent them from exiting the market.

That was the key takeaway from the inaugural Landlord Trends workshop hosted by Pegasus Insight, featuring contributions from Hometrack/Zoopla and the National Residential Landlords Association.

Attendees representing more than 20 organisations active in the PRS heard that landlords leaving is shrinking supply and driving up rents.

Workshop data revealed a PRS already transforming due to a burdensome tax system and increasingly complex rules.

Changing needs of buy to let investors

Pegasus director, Bethan Cooke, said: “The findings of this research can help lenders plan ahead as they look to cater for the changing needs of buy to let investors in a pressured and professionalising market.

“But mortgage lenders can only do so much. These findings present a stark warning to government.

“It must find ways to nurture the PRS and encourage more investment in the sector if we are to avoid severely deepening the UK’s housing crisis.”

She added: “As a start point, the government should promise policy stability in order to boost landlord confidence.

“It seems too late to turn back the clock on the Renters’ Rights Bill, but the government should commit to no more legislative changes and no further tax increases for landlords.”

Landlords would stop investing

Ms Cooke continued: “Research we carried out before the last Budget revealed that 39% of landlords would stop investing and 19% exit the market if CGT on the sale of second properties were increased.

“Rachel Reeves made the right decision in not hiking CGT in October 2024.

“She must not be tempted to squeeze landlords further in future.”

Most landlords expect a negative impact

Attendees also heard that single-property landlords, who make-up 78% of the PRS in 2010, now account for only 45% in 2024.

Currently, 50% of PRS properties are owned by just 20% of landlords.

The anticipated Renters’ Rights Bill is expected to accelerate this consolidation, raising concerns among landlords of all sizes.

Pegasus says that 81% of landlords expect the Bill to have a negative impact on the PRS – with the abolition of Section 21 ‘no-fault’ evictions as their biggest worry.

Concerns about potential Capital Gains Tax (CGT) changes are even greater, affecting 85% of landlords.

RRB influencing landlord behaviour

Research shows that the Renters’ Rights Bill is already influencing landlord behaviour.

After the bill becomes law, 81% of landlords say they will be more selective about tenants after its introduction.

Also, 62% plan to increase rents, and 23% will reduce maintenance spending.

Few landlords plan to expand

Just 5% of landlords plan to expand their portfolios this year, a record low and a decline from 18% in Q1 2022.

Those purchasing properties intend to buy an average of 1.9, while those selling plan to divest 2.9.

This falling investment appetite is alarming, Pegasus says, considering the projected formation of around 150,000 new PRS households annually until 2036.

Currently, only 45,000 dwellings are added to the sector each year.

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