Are private landlords leaving the property market?

by | May 17, 2023 | Articles, Partners, Property

The Renter’s Reform Bill, currently being discussed in Parliament, is the latest motivation behind what’s being referred to as a ‘Private Landlord Exodus’. 

Changes to policies regulating letting domestic property, rising interest rates and wider economic conditions have all contributed to changing the profitability – and popularity – of privately investing in Buy-To-Let properties.

Are we truly seeing private landlords leaving the market, or is it a case of a vocal minority making threats they don’t intend to follow through with? If this is the end of the private landlord, what is the ultimate cause?

Are private landlords leaving the sector? 

Britain’s private rental sector is expansive, with one-sixth of the population living in accommodation rented from a private landlord. Industry analysts are speculating that we have hit ‘peak landlord’, and that we should expect an overall decline in the number of investors in the sector over the next five years.

Speaking on his predictions, Jonathan Rolande of the National Association of Property Buyers stated ‘It is being forecast that around 100,000 [landlords] will quit the market every year between now and 2028. But  I fear this may well be an underestimate. A larger number will be long gone by then.’

Indeed, research by consultancy firm BVA-BDRC showed that 33% of private landlords plan to cut the number of properties they rent in 2023, the highest level they have recorded. While this doesn’t represent a firm commitment to exit the market, it’s indicative of a wider concerning trend.

A private landlord exodus could see hundreds of thousands of properties removed from an already strained rental market. 2022 saw rental evictions increase by 98% over the previous year, largely due to rising mortgage rates pushing landlords to sell their properties.

Iwona Hovenko, a real estate analyst at Bloomberg Intelligence, expects that the combination of ‘high taxation, interest rates and the steep costs to bring their properties to at least EPC band C in the next few years’, will force landlords to sell their properties to renter-owners, further decreasing the availability of rental housing.


The end of Section 21  

The end of Section 21, allowing for ‘no fault’ evictions, is a particular concern for private landlords. Originally proposed in the 2022 white paper ‘A Fairer Rental Sector’, the change has become a cornerstone of the ‘Renter’s Reform Bill’. While these changes will only apply to new tenancies for the first 12 months, many landlords are expected to take this as an opportunity to sell their properties now before it becomes more difficult to do so.

In their ‘ State of the Lettings Industry Survey’ in 2022, Goodlord found that 29% of agents and 54% of landlords cited the scrapping of Section 21 as a reason that landlords might choose to sell their properties. A similar poll carried out by Mortgages for Business found 33% of landlords considered changes to Section 21 to be a major concern.


The Renter’s Reform Bill

The end of Section 21 is not the only concern for landlords included in the ‘Renter’s Reform Bill’ however. In a survey conducted by the National Residential Landlord’s Association (NRLA), 70% of Landlords responded that the end of Section 21 alone would not be enough to push them to sell their properties. Other factors that would influence their decision included the changes made to Section 8, which dictates how to evict tenants for a breach of contract. 

Landlords who do not sell their properties may opt to switch from offering long-term tenancies to short-term rentals. This is in part due to the end of fixed-term tenancies, again a part of the Renter’s Reform Bill. For landlords specialising in annual lets, such as those renting private accommodation to students, the tight turnaround required to prepare properties between tenancies may become impossible, pushing them to another rental niche or out of the market entirely.


Rising interest rates

The Bank of England has now raised interest rates by a further 0.25% to 4.5%. While bad news for anyone with outstanding debt, BTL landlords with newer mortgages in particular are seeing the viability of their entire business challenged. Younger investors who have maximised their borrowing recently are far more likely to incur losses from rising interest rates than more established investors who have not released equity.

Nathan Emerson, chief Executive for Property Mark surmised the situation. ‘For those on tracker mortgages, like many landlords in the buy-to-let market, this means another rise in outgoings. In the rental sector, a rise in the cost of supplying a home will put further pressure on rents and may see some investors forced to exit the market altogether, further worsening the extreme supply and demand imbalance seen already.’


Will we see an end to Private Landlords?

While the situation may not be quite that extreme, we’re certainly seeing the market grow increasingly hostile to private BTL landlords. The ‘Renter’s Reform Bill’ is one of a number of policies seeking to regulate the private lettings market.

Landlords are already preparing to upgrade all their properties to a minimum EPC grade of C by 2028, recently extended from the original deadline of 2025. New policies are also expected to be added to the ‘Renter’s Reform Bill’ in future, including a ban on refusing to rent based on tenants having children or being in receipt of benefits.

Overall, the attitude seems to be one of anger and hopes of negotiation rather than complete despair. While many private landlords have threatened to leave the market, the majority seem to be waiting for a last-minute change to proposed policies or another form of incentive before making a commitment.

Even in uncertain financial times, the appeal of property as an investment is hard to overstate. Rental demand is still high, and so it remains to be seen if newer landlords can find a workable equilibrium between their expenditure and rents that will allow them to stay in the market. Meanwhile, the sentiment is certainly growing among private landlords that they are being targeted specifically by policymakers in the name of rental reform.

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