Looking back on 2025 will make most landlords and property investors wince as they remember wave of both new taxes and red tape in the UK all of which have engulfed the private rented sector.
In England in particular, this was to be expected. While Labour struggles to make headway on many fronts, one of the easiest ‘wins’ has been landlord bashing which goes down well with its membership but also both younger and poorer voters.
For eons the minority of landlords who flout laws and treat their tenants poorly have given the wider community a bad name and while the previous Conservative government demurred from regulating landlords more harshly, Labour has got stuck in with gusto. Landlords are unscrupulous and tenants their innocent victims, right? This playbook has enabled Labour to unleash an extraordinary set of reforms on the sector all of which, even the most steadfast fence-sitter would surmise, are intended to force out bad landlords but at the cost of making life more difficult and expensive for good ones. It is the ‘catch-all’ approach so much loved of Government – rather than spend money on tracking down the bad actors, instead all players must pay to be regulated regardless of whether they are compliant or not.
The Renters’ Rights Act and sweeping reforms
2025 has seen this, and then some. The Renters’ Rights Act will see several juggernauts of new regulation, enforced with draconian new local authority powers and bolstered by eye-watering new fines for non-compliance all of which will slam into landlords’ lives on May 1st next year. For example, evicting troublesome tenants, particularly given the glacially-slow courts system, will be even more difficult once Section 21 ‘no fault’ evictions are abolished.
Fundamental changes to tenancies and letting practices
Tenancies are to become open-ended not annual, rent rises more bureaucratic and regulated, and landlords will not longer have the final say on who they rent their homes to – for example not being able to give a blanket ‘no’ to tenants on benefits, pets or those with children. Landlords will also be prevented from demanding rent in advance or accepting or suggesting higher bids from competing tenants.
New oversight, databases and penalties
And then there’s also a new Ombudsman to deal with if tenants complain officially, and a new database which will enable tenants to check out a prospective landlord and see their track record before signing a rental contract for a home. Fines for non-compliance with these rules will be high – for example up to £7,000 for failing to join the new database, and £40,000 for those who continue to ignore the rules. Similar fines are also to be implemented in May where rental bidding, discrimination, poor housing standards, failure to fix mould and damp are introduced, plus a doubling of Rent Repayment Orders from 12 months’ rent to 24.
Increased tax pressure on landlords
Labour has also been keen to tax landlords this year. The Chancellor swerved a mooted increase in National Insurance but instead added an additional 2% income tax for landlords who are personal (rather than corporate) taxpayers.
Why landlords stay invested despite the pressure
If you’re wondering how a Government that purports to represent the people can land so many blows on a community of some 1.25 million (the number of private landlords in the UK) then I’m afraid the stark truth is that few of them have anywhere else to go with their nest eggs, and successive Governments have known this.
The gross rental yield on a UK property this year has hovered between 6.5% and 7% and to achieve that this year outside of the property market, investors will have had to put their money into much riskier and equally illiquid investments including volatile single stocks, corporate bonds; only Exchange-traded funds (or ETFs) consistently deliver similar returns to the privately rented housing market. Property has a double benefit, naturally – offering both income and long-term capital growth, which very few other investments can match.
Looking ahead to 2026
So is there any good news for landlords as 2026 looms? One is that the current Government’s failure to deliver its promised 300,000 homes a year means there will be ever more tenants chasing a static number of homes, by the way I don’t believe the much-claimed ‘landlord exodus’ is really happening – just that fewer new landlords are joining the sector’s ranks to replace those who do leave or die. Yes, being a landlord next year is going to require a far more active approach to managing tenancies, tenants and properties if they want to remain compliant, but the rewards of sticking with it will – unless the construction of first time buyer homes really takes off next year and tenant demand softens as many get on to the property ladder – continue to be reaped.
