In a post-Renter’s Rights Act world, there’s been plenty of speculation over what the long-term outcomes will be for renters. But the better question to ask might be how the act changes the rental market as a whole. The immediate benefits for the country’s renters are there to see in the legislation, but the jury’s out on whether, in five year’s time for example, the picture will be so rosy.
Fundamentally, it comes down to a question over housing stock - if there’s not enough to go around on the rental market then the benefits of the Act will be undone by the pressure on prices. We’re still in a period where we need to closely assess how the Act changes the market, and the group to look at - perhaps unexpectedly - are the landlords with larger portfolios.
With many smaller landlords either selling off their properties or planning to - choosing to forego the extra legislative burdens which come hand-in-hand with the Act, alarm bells should be ringing. While some of these properties will go to other landlords, keeping them within the rental ecosystem, many others will not. That’s an immediate loss of a considerable number of properties which were previously being rented out.
The widely held assumption in the industry is that the slack will be picked up by professional landlords - those with larger portfolios and more appetite to expand. This would suit a narrative which has been bubbling in the industry for some time - the shift to professionalisation and the end of the small landlord. Indeed, the number of buy-to-let corporations has soared in recent years. However with all the recent changes in legislation, this narrative may need to be questioned.
For one, we’re certainly not seeing any current voracious appetite for expansion among professional landlords. The general feeling appears to be that large landlords are waiting to assess exactly how their portfolios are being affected by the Renter’s Rights Act, and looking to consolidate their current portfolios.
Instead of looking to expand, we’re seeing large-portfolio landlords assessing the structure of their portfolios, how the finances are holding up, and thinking about how to carve a path to growth under the new rules and with a more challenging economy. The restructuring of portfolios allows landlords to reposition themselves to potentially push for expansion when the shape of the legislative landscape and wider market are clearer.
A problem faced by many landlords at the moment is fragmented borrowing, where multiple loans across different properties, often involving different lenders, renewal dates and criteria sets are seriously limiting flexibility. Having multiple rate positions can be a serious disadvantage and make profit calculations tricky.
With the rental market’s need to maintain a healthy stock of properties, it’s important that - following this period of consolidation - buy-to-let landlords are positioned to expand. Given that it is a critical time, they need to be aware of the options available to them. Multi property portfolio propositions for example offer an option for landlords to consolidate their existing financial arrangements across a number of properties into one monthly payment, giving greater clarity to their portfolio position.
Consolidating loans, and releasing equity for investment are what’s needed to keep the rental market going, but ultimately, navigating this new buy-to-let landscape requires a delicate balancing act from large-portfolio landlords. They need to secure the financial clarity and resilience needed to weather this new regulatory era, while at the same time pushing to grow - if they don’t then the country’s rental market will be in trouble.
