Research from estate agency Chestertons provides some early insight into how landlords and tenants are adapting to the Renters’ Rights Act.
Before it was introduced, landlords could advertise a property at one rent but accept a higher offer if prospective tenants competed against one another in a ‘bidding war’. In areas where demand was particularly strong, offering above the asking rent was very common.
Since 1 May, landlords and letting agents have been required to advertise a clear asking rent and are prohibited from inviting or accepting offers above that figure.
Landlords respond by raising rents
As a consequence, Chestertons has recorded a 36% year-on-year increase in the number of landlords raising their asking rents following the introduction of the Act.
Katinka Hill, Head of Lettings at Chestertons, says:
“Landlords have reacted to the Act by increasing the initial marketing price of their properties, to give themselves some leeway as they now cannot accept over the asking rent.”
The agency is not alone in reporting changes in landlord behaviour. Property consultancy Allsop’s recent landlord survey found that more than 70% of respondents said they expected to raise rents to offset the higher compliance costs associated with the Renters’ Rights Act.
Tenants given greater certainty
Prior to the Renters’ Rights Act, tenants in highly competitive markets could lose a property to someone willing to offer more than the advertised rent. The new rules remove the need to compete in bidding wars, giving tenants greater certainty and reducing the amount of time wasted on failed applications.
Chestertons found the ratio of portal enquiries to tenant applications rose from 1.61 to 1.99 after the Act came into force, showing prospective tenants are now taking their time to compare properties before deciding where to apply.
Katinka Hill says: “Prospective tenants are ‘shopping around’ more, taking more time to compare properties and make informed decisions, resulting in a more considered search process.”
And that certainty over the cost of renting extends beyond the ending of bidding wars. The Act has also standardised the way most rent increases are made. Beforehand, the process for increasing rents depended on the tenancy agreement and whether the tenancy was fixed term or periodic. With all assured tenancies now becoming periodic, landlords must use the statutory Section 13 process to increase the rent. In most cases, rents can only be increased once every 12 months, landlords must give at least two months’ notice, and tenants have the right to challenge an increase through the First-tier Tribunal if they believe it exceeds the market rent.
Supply remains the bigger challenge
One aspect the Renters’ Rights Act has not changed is the ongoing imbalance between supply and demand.
Katinka Hill says: “Overall, we’re seeing a market that is settling into the new legislation, with demand continuing to outweigh supply across many parts of London, especially as we are mid-summer. As confidence in the new framework grows, we expect both landlords and tenants to become even more comfortable navigating the changing landscape.”
On a national level, Zoopla’s latest Rental Market Report shows the number of homes available to rent remains around 25% below pre-pandemic levels. As a result, three-quarters of rental markets are still recording rent increases that are above the average.
And there may be more to come…
The changes in behaviour highlighted by Chestertons’ report relate to just one part of the reforms introduced by the Renters’ Rights Act. The Act also introduced changes to contract lengths, notice periods, evictions and pets. As those reforms bed in, landlords and tenants are likely to adapt in other ways. What form that takes remains to be seen.
