The lettings market has seen significant change in the last 50 years or so, with improved legislation that has led to higher quality housing and greater protection for both landlords and renters.
And the regulation continues, with several more changes set to give even more security to those looking to rent. Below, we look at some of the key trends to have influenced the lettings market and how they might continue to evolve and impact you as a landlord in the future.
One of the most significant impacts on the lettings market has been the introduction of increased regulation, with more than 170 pieces of legislation that apply to landlords today.
One of the most significant historically is The Rent Act 1977, which saw the introduction of protected tenancy in the form of long-term security of tenure and new rules of succession. It also introduced the concept of fair rent.
The Housing Act 1988 brought further change, especially for landlords wanting to evict non-paying tenants. It also saw the introduction of Section 21, allowing landlords to serve no-fault eviction notices on tenants and the introduction of the Assured Shorthold Tenancy.
Conversely, the Renters’ (Reform) Bill, which had its first Commons reading in May, will see the abolishment of Section 21 and no-fault evictions, give greater rights to tenants – such as the right to keep pets – and aims to improve the quality of rental properties. The current reviews of the Decent Homes Standard, initially established in 2000, as well as the Homes (Fitness for Human Habitation) Act 2018, should also see the quality improve in the future, while the climate crisis and the drive to net zero and energy efficiencies are also driving change.
Increased demand and rising prices
The flexibility offered by renting, as well as the affordability issues for those who can’t afford to get on the housing ladder, means that the rental market has grown hugely. In 2023, 4.6 million households privately rent a property and the residential rental market has tripled in the last 20 years alone.
This has led to a surge in prices. To put it in context, in the 1970s the average home cost £5,000. As of June 2023, the HomeLet Rental Index shows the average monthly rental price in the UK was more than a fifth of the 1970s house purchase figure at £1,229 per calendar month, a 1.3% increase on the previous month and a 10.4% rise year-on-year.
Letting as a limited company
The total number of companies set up to hold buy-to-let property has doubled since 2017 and now stands at more than 300,000, according to 2022 data from Hamptons & Companies House. This has been driven by new buy-to-let purchases being made using a company structure and by landlords moving properties from personal to company names in a bid to offset rising mortgage interest against their tax bill and increase their profits.
More uncertainty for landlords
The cost-of-living crisis, rising mortgage rates and changing legislation are all putting renewed pressure on landlords, especially when tenants are struggling to pay their rent. A 2022 survey by HomeLet showed that more than three in four renters said they felt cost-of-living increases would have a moderate to significant impact on their ability to pay their rent and one in four had this as their top concern for 2023. Landlords meanwhile cited this as their top concern.
With the UK government still struggling to control inflation, the rise in mortgage rates impacting the ability to buy, and the greater burden of legislation, we have already seen landlords exit the market, which in turn has an impact on the number of rental properties available. The rental market is evolving fast and there’s likely to be much greater change to come yet. But there also remains huge opportunity.