The RRA’s ‘unintended consequences’ for landlords and tenants

Landlords watching the unfolding impact of the Renters’ Rights Act, now have another reason to look closely at London, where falling supply is already being linked to higher rents.

Tom Bill, the head of UK research at Knight Frank, says the reforms should act as ‘a cautionary tale for policymakers’ because economic policy can create consequences ministers did not intend.

He argues that the Act was brought in to shift the balance of power towards tenants, covering rent-setting, repossession, restrictions on selling and pets.

However, Mr Bill says the risk is that ministers have gone too far after landlords became ‘a useful target for politicians in recent years due to the unscrupulous actions of a small minority’.

More landlords have sold

Mr Bill said: “There were no votes in also stating that a small minority of tenants were problematic.”

Knight Frank says more landlords have sold up since the Act’s introduction, cutting supply and adding pressure to rents in many parts of London.

The property consultancy says that average rents in prime outer London rose by 3.2% in the year to May.

That’s the strongest annual increase since June 2024, when rents were still easing back from pandemic-era highs.

Month-on-month growth in prime outer London reached 0.5%, the highest figure since September 2023.

Rents go up

Prime central London saw a smaller annual rise of 1%, with supply less constrained in higher-value markets.

The firm says that’s down to owners letting homes while the sales market remains weak.

Rightmove data highlighted by Knight Frank shows new rent listings in prime central and prime outer London were 13% below the five-year average in May.

They are also 11% lower than the same month last year.

Tenant demand rises

Knight Frank says there were six new prospective tenants for every new rent property coming onto the market last month, the highest ratio since September 2022.

The Act follows a series of changes affecting landlords, including higher stamp duty rates and the ending of tax breaks.

Mr Bill says a future requirement for homes to reach EPC C could become another deterrent for buy to let investors.

He points to political pressure around tax as another issue for landlords.

Don’t squeeze landlord margins

Mr Bill says politicians wanting to increase CGT would squeeze landlords’ margins further and put rents up.

He also notes that HMRC believes a 10-percentage point increase in CGT would cost the exchequer £6 billion over three years, according to a recent Bloomberg report.

Mr Bill says other areas of the economy are also being drawn into political arguments as Labour figures jostle for position.

He cites calls for supermarkets to cap food prices and accusations of petrol retailers ‘price gouging’ during energy price spikes as examples of policies shaped by vote-winning pressure rather than economic argument.