Few recent pieces of housing legislation match the impact of the Renters’ Rights Act 2025, much of which comes into force on 1 May 2026. Abolishing Section 21 (“no‑fault” evictions), replacing assured shorthold tenancies with assured periodic tenancies, restricting rent increases, and strengthening tenant protections, the Act aims to deliver greater fairness and security of long‑term occupation for England’s 11 million private renters. However, behind this ambition lie significant implications for landlords and potentially, the lenders who finance them.
Tenancy Management
The abolition of fixed‑term tenancies represents one of the most consequential shifts for lenders. All tenancies will become periodic, giving tenants greater freedom to leave at any point with just two months’ notice. While the intention is to provide tenants with greater certainty over long‑term occupation, the increased flexibility may have the opposite effect for some landlords. It could result in higher tenant turnover and increased void periods, particularly in properties that are noisy, hard to let, or otherwise “challenged,” where tenants can now exit at the first sign of dissatisfaction rather than waiting for a fixed term to end.
Markets with strong seasonal demand may see longer void periods as tenants are no longer required to commit to fixed‑term agreements. Early disruption could also emerge in the build‑to‑rent sector if multiple tenants currently bound by multi‑year agreements choose to terminate earlier than would previously have been possible. This could temporarily inflate supply in some areas, placing downward pressure on rents across the wider market.
For lenders, the possibility of more frequent tenant turnover and longer void periods translates into a higher risk of mortgage repayment challenges, especially for landlords already facing rising costs and often marginal profitability.
Advertising & Tenancy Formation
The Act bans rent bidding, caps rent at the advertised price, and prevents restrictions against tenants such as those with children, pets, or those receiving benefits. While aligned with fairness goals, these changes reduce landlords’ flexibility and choice.
More significantly, tenants will have an enhanced ability to challenge not only annual increases but also initial rents. Rent can only be raised once per year, requires two months’ notice, and can be appealed to the First‑tier Tribunal with little incentive for tenants not to do so. Appeals pause rent increases until the tribunal outcome, and increases cannot be backdated.
For lenders relying on current achievable rent in affordability calculations, the ability for tenants to challenge the initial rent even after the tenancy is agreed introduces uncertainty. Prolonged appeal processes could delay rent adjustments, depress landlords’ yields, and reduce their ability to service mortgage repayments, particularly during a period of rising operating costs.
No‑Fault Evictions Abolished
Landlords already face long delays in securing possession for rent arrears. With Section 21 abolished from May 2026, they must rely solely on Section 8 grounds to obtain possession. This process may be slower and requires proving specific grounds. If concerns over extended court delays materialise, rent arrears could compound before possession is achieved, putting further pressure on landlords’ financial positions.
The current geopolitical and economic landscape, including rising living costs, may strain tenants’ finances, increasing the likelihood of rent arrears and, in turn, heightening the risk of landlord defaults and increased mortgage arrears for buy‑to‑let lenders.
Lenders relying on Section 8 grounds to obtain vacant possession following possession proceedings will also face longer notice requirements. For example, intentions to sell or move back in will now require four months’ notice. Tenants will also be able to request up to six weeks’ delay after a possession order is granted. This means that lenders could face extended possession timelines potentially exceeding six months. Prolonged possession periods increase holding costs and the risk of property deterioration, raising the potential for loss on loans.
Tougher Governance Requirements
Phase 2 of the Act is expected later this year. It introduces stronger oversight of the Private Rented Sector (PRS), including an ombudsman and a national landlord database. While intended to raise standards, these measures increase administrative and financial burdens on landlords. This may be particularly challenging for smaller or highly leveraged landlords already operating on tight margins and may be the tipping point that encourages some to exit the sector altogether.
In addition to heightened oversight and higher operating costs, non‑compliant landlords may face penalties or expensive rectification work, further pressuring net rental income. For lenders, this again raises the risk of increased arrears, and some may conclude that introducing new compliance checks is prudent, adding cost and complexity to underwriting and monitoring processes.
The intent to professionalise the sector is clear and Lenders may see a widening gap between well‑capitalised, compliant landlords and those less able or willing to adapt.
Supply Contraction Meets Higher Requirements
Alongside the Act, landlords face additional regulatory pressures, including minimum EPC C ratings by 2030, the application of the Decent Homes Standard (expected by 2035), and future extensions of Awaab’s Law into the private rental sector.
These add further cost at a time when interest rates remain structurally higher than in the previous decade. For many smaller or accidental landlords, the financial model may no longer be viable.
If landlord exits accelerate, the question becomes who fills the gap. Institutional landlords, build‑to‑rent operators, or registered providers may expand but not necessarily fast enough to offset a near‑term supply reduction. In the meantime, reduced availability of rental property could limit tenant choice and put further upward pressure on rents.
Implications for the Mortgage Industry
The Renters’ Rights Act represents a major shift in tenancy legislation, rebalancing landlord and tenant power with significant knock‑on consequences for the mortgage industry. The Act is transforming the PRS into a more regulated, more tenant‑centric, and more compliance‑heavy environment. For lenders, this is a material change, and to navigate it successfully they will need to consider:
- Reassessing underwriting models to reflect potential possession delays
- Stress testing rental income assumptions, recognising the likelihood of increased appeals
- Segmenting landlord customers by resilience and professionalism
- Preparing for increased arrears and supporting landlords earlier
- Assessing property suitability in a world of periodic‑only tenancies
This is not the end of the landlord market, but the beginning of a new landscape where regulation, risk, and yields may look very different from the era that preceded it.
