BLOGS

The biggest shake-up in a generation

On 1 May 2026, England's private rented sector enters uncharted territory. The Renters' Rights Act 2025—which received Royal Assent in October 2025—abolishes Section 21 "no-fault" evictions, ends fixed-term assured shorthold tenancies, and introduces rolling periodic contracts for all 4.4 million privately rented households.

For landlords, this represents the most significant regulatory reset since the Housing Act 1988. They can no longer simply serve two months' notice to regain possession; instead, they must demonstrate specific grounds under a reformed Section 8 process—whether rent arrears exceeding three months, antisocial behaviour, or an intention to sell or move in (subject to 12-month protected periods and four-month notice requirements).

The Act also restricts rent increases to once annually via Section 13 notices, bans rental bidding above advertised prices, caps rent in advance at one month, and requires landlords to consider pet requests reasonably. Phase 2, expected in late 2026, will mandate registration on a new Private Rented Sector Database and membership of a PRS Landlord Ombudsman. Fines for breaches range from £7,000 to £40,000.

What the yield data reveals

REalyse data paints a picture of a sector where margins are tightening, though not collapsing. Across England's nine regions, average gross yields range from 4.7% in London to 7.6% in the North East. The national average sits at approximately 5.9%—healthy by historical standards, but increasingly squeezed by mortgage costs that have risen sharply since 2022.

London tells a particularly mixed story. Flats in the capital yield around 4.7% on an average monthly asking rent of £2,599, while terraced and semi-detached houses—often the preserve of family landlords—sit at yields below 5%. Year-on-year rent growth for London flats is just 2.3%, with terraced properties actually recording negative growth of -3.3%.

Outside the capital, the picture varies considerably:

• North East England delivers the strongest gross yields at 7.4–7.6% for flats and terraced houses, with rent growth of 6.2% and 3.5% respectively—the only region seeing material rent inflation

• South West and South East England are experiencing rent deflation, with asking rents down 3.6% and 2.7% year-on-year

• East of England shows flat or negative growth across property types, with detached homes down 1.8%

These figures suggest a market in transition: regional yields remain attractive for well-capitalised investors, but the days of double-digit rent growth that characterised 2022–2024 have ended.

Supply constraints versus the landlord exit

The narrative of a "landlord exodus" has dominated headlines, yet the data reveals a more nuanced story. Research from Goodlord shows that 72% of landlords are currently in a holding pattern—neither buying nor selling. However, a significant minority (24%) are actively selling or planning to sell some or all of their portfolio. Only 4% are actively expanding.

More concerning is the long-term outlook: just 44% of current landlords expect to remain in the sector by 2031, while 35% explicitly plan to exit and 21% remain undecided. Pepper Money forecasts that approximately 220,000 households could be withdrawn from the PRS before the end of 2026, with single-property landlords twice as likely to sell as portfolio holders.

REalyse supply data shows quarterly rental listing volumes in England fluctuating between 190,000 and 222,000 over the past year—broadly stable but masking significant regional variation. London dominates with over 50,000 listings per quarter, while regions like the North East contribute fewer than 9,000.

The structural implication is clear: amateur landlords are exiting, and professional operators—including limited company structures and institutional build-to-rent investors—are consolidating. Limited-company buy-to-let purchases reached 43% of all BTL mortgages in 2025, a record share that signals a fundamental shift in how rental housing is owned and managed.

Can landlords adapt to periodic tenancies?

The transition to periodic tenancies represents both a philosophical and operational challenge. Under the old regime, fixed-term contracts provided landlords with predictable income periods and natural break points. The new system offers tenants unlimited tenure—they can stay indefinitely, leaving only with two months' notice, while landlords must demonstrate legally valid grounds to recover possession.

For professional landlords with strong documentation systems, this need not be catastrophic. The reformed Section 8 grounds remain robust: serious rent arrears, antisocial behaviour, intention to sell (new Ground 1A), and landlord occupation (Ground 1) all provide legitimate recovery routes. But the evidential burden is higher, court processes remain slow, and procedural errors can invalidate possession claims entirely.

The financial maths is shifting. Average days on market for rental properties across England sits at approximately 41 days—reflecting continued tenant demand—but landlords must now factor in longer tenancy durations, restricted rent increases, and enhanced compliance costs. The Decent Homes Standard extension to private rentals (expected 2035–2037) and Awaab's Law requirements around damp and mould will add further capital expenditure demands.

Foundation Home Loans' Q1 2026 Landlord Trends report offers some counterbalance: 84% of landlords report profitable lettings, 61% plan rent increases averaging 5.7%, and average portfolio size has increased to 7.3 properties. This suggests that landlords who remain are professionalising and positioning for long-term returns rather than short-term speculation.

Outlook: consolidation, not collapse

The Renters' Rights Act will not destroy England's private rented sector, but it will reshape it profoundly. The sector is consolidating around larger, better-capitalised operators who can absorb compliance costs, evidence possession grounds professionally, and achieve economies of scale.

For tenants, the reforms promise greater security—no more fear of Section 21 notices mid-tenancy—but may not deliver lower rents. With supply constrained by landlord exits and demand remaining structurally high (particularly in London and major cities), upward rent pressure looks set to persist. REalyse data showing average asking rents of £2,761 in London and £921 in the North East underscores the affordability gulf that regulation alone cannot bridge.

For investors, the message is nuanced. Regional markets with yields above 6% remain attractive, particularly in the North West, Yorkshire, and East Midlands where tenant demand is robust and entry prices accessible. London requires greater scrutiny: sub-5% yields and flat-to-negative rent growth make the capital a tougher proposition without significant capital appreciation assumptions.

The amateur landlord era is ending. What emerges in its place—a professionalised, compliance-first sector dominated by portfolio investors and institutional operators—may ultimately deliver better housing standards. Whether it delivers enough rental homes at prices tenants can afford remains the policy challenge of this decade.