BLOGS

A sector under pressure from two directions at once

The UK private rented sector is being squeezed from both ends. On one side, tenant demand keeps climbing, with London asking rents averaging around £2,290 a month and many boroughs still recording rising enquiries per listing. On the other, the Renters' Rights Act 2025 — which received Royal Assent on 27 October 2025 and brings its main reforms into force on 1 May 2026 — is rewriting the rules on evictions, rent reviews and tenancy structure.

For build-to-rent (BTR) operators and private landlords alike, these two forces are colliding at exactly the moment portfolio decisions for 2026 and beyond are being locked in. The abolition of Section 21 "no-fault" evictions, the end of fixed-term tenancies, and new annual rent-review restrictions mean the economics of holding rental property are shifting, even as the top-line demand story remains strong.

REalyse's rental listings and yield data across London boroughs shows a market where demand has stayed resilient through a period of rising build costs, higher mortgage rates for landlords, and now, incoming regulatory change. Understanding where that demand is concentrated — and how legislation is likely to interact with it — is central to how investors and agents should be positioning portfolios now.

Tenant demand and the London rent picture

London rents have been on a sustained upward path, with average asking rents around the £2,290 mark reflecting continued demand outstripping available supply in many inner boroughs. REalyse data across active rent listings shows days-on-market compressing in the most sought-after postcode districts, a signal of exactly the kind of competitive letting environment that has, in the past, fuelled informal rent bidding between prospective tenants.

That bidding practice is one of the specific behaviours the Renters' Rights Act targets. From 1 May 2026, landlords and agents will be barred from accepting offers above the advertised rent, and properties must be marketed at a fixed asking price. In a market where REalyse comparables show achieved rents in top London postcodes have at times run meaningfully above the original asking figure, this is a structural change to how pricing power gets exercised — not just a compliance footnote.

The knock-on effect flagged by several lettings specialists is that asking rents themselves may simply be set higher from the outset to account for the loss of in-tenancy bidding upside. Combined with the Act's new rule limiting rent increases to once every 12 months via a statutory Section 13 process — and removing contractual rent-review clauses entirely — landlords will need to think more carefully about where they set the initial ask, since it becomes harder to adjust mid-tenancy.

For portfolio landlords and BTR operators using comparables to underwrite new lettings, this points to a more front-loaded pricing strategy: setting rents closer to the ceiling of the local market range at the point of marketing, rather than relying on incremental increases or bidding uplift later in the tenancy cycle.

Portfolio restructuring: why institutional BTR may gain ground

One of the more consistent observations across the legal and advisory commentary on the Act is that its compliance burden — new possession grounds, mandatory information disclosures, the incoming Private Rented Sector Database, and eventually a national landlord ombudsman from late 2026 — falls disproportionately hard on smaller, less professionalised landlords.

Institutional BTR operators, by contrast, are generally better placed to absorb this. They already run centralised compliance functions, in-house lettings teams and standardised tenancy documentation, which reduces the marginal cost of adapting to new grounds for possession (such as Ground 1A for landlord sale, or Ground 6A for redevelopment) and new notice periods.

REalyse's planning pipeline data, which tracks BTR-flagged schemes and unit counts by planning stage, gives a useful lens on how this dynamic could play out at a market level. Areas with strong existing BTR pipeline and consented unit volumes are the ones best positioned to capture demand that could shift away from smaller private landlords choosing to exit the sector rather than absorb new compliance and possession-risk overheads — a pattern several industry commentators have already flagged as a continuation of a multi-year trend of buy-to-let landlords reducing exposure amid tighter tax treatment and regulation.

For investors assessing where to deploy BTR capital, cross-referencing planning pipeline volumes against rental demand indicators — average days on market, yield levels, and rent growth by postcode district — offers a way to identify areas where institutional supply is still thin relative to demonstrated tenant demand. London boroughs with high asking rents but comparatively low BTR unit pipeline may represent the more attractive medium-term opportunities, assuming planning consents can keep pace.

Yields, void risk and underwriting in a periodic-tenancy world

The end of fixed terms means every tenancy becomes a rolling periodic arrangement from 1 May 2026, giving tenants the ability to leave with two months' notice at any point. For landlords used to underwriting income against a fixed 12-month term, this introduces a new variable into void-period assumptions.

REalyse's yield data — calculated on a gross basis and filtered to exclude outlier and auction-driven listings — already shows meaningful variation in achieved yields by property type and postcode district across London and other major UK cities. Layering in a higher expectation of void risk under periodic tenancies suggests underwriting models may need a modest buffer built in, particularly for smaller studio and one-bedroom stock, where tenant turnover has historically been higher.

At the same time, landlords retain new possession grounds for sale (Ground 1A, subject to a 12-month protected period at the start of a tenancy and four months' notice) and redevelopment (Ground 6A). For BTR operators running larger schemes with phased refurbishment or repositioning plans, these grounds provide a clearer, if slower, legal pathway than existed previously — but the extended notice periods mean scheme timelines will need to build in more buffer than under the outgoing Section 21 regime.

Comparables-driven analysis — benchmarking a subject scheme's target rents, yields and absorption rate against nearby recently-let stock — becomes more valuable in this environment, not less, since the cost of misjudging demand or pricing is now harder to correct through discretionary rent reviews mid-tenancy.

Outlook: demand holds, but the market rewards professionalisation

The Renters' Rights Act does not cap rents, and it does not reduce tenant demand — if anything, London's rental market heading into the Act's commencement looks as tight as it has in recent years. What it does is raise the operational bar for anyone letting residential property in England, favouring landlords and operators with the scale, documentation and data infrastructure to comply efficiently.

For institutional investors and BTR developers, this is arguably a tailwind: a period where smaller, less professionalised competitors may exit or consolidate, while demand remains robust. For private landlords choosing to stay in the market, the priority is clear — audit tenancy documentation now, understand the new possession grounds, and use local market data to set rents that hold up under a once-a-year review cycle.

Whichever side of the market you sit on, decisions taken over the coming months on pricing strategy, portfolio composition and development pipeline will be shaped as much by data on local demand and yield as by the legislation itself.