In the News – Renters’ Reform, Rising Costs and Investor Retreat

With the imminent introduction of the Renter’s Rights Act (RRA) (1 May 2026). England’s private rented sector (PRS) is on the cusp of its most significant structural change in decades. 

As well as domestically, these major changes will have a big impact on international investors, in UK and London property - in particular, from Hong Kong and mainland China investors. 

According to the South China Post, Hong Kong-based investors own around 19 per cent of all foreign-owned homes in London, while mainland Chinese investors account for around 12 per cent. 

It is estimated (JLL) that some 200,000 homes in England and Wales are registered to owners with an overseas address. Hongkongers hold 14 per cent, making them the largest group of foreign investors.

With the Renters’ Rights Act due in May, and the proposed radical changes to the long-leasehold regulations (leasehold reform in England & Wales), three recent news reports highlight the sheer scale and complexity of what lies ahead for the private rented sector.

Taken together, these three reports map-out the direction and the potential consequences: on the one hand there is an advantageous change for those landlords who own leasehold property. But on the other, greater tenant protection, rising costs, and through changing landlord behaviour, and a scarcity of rental property are in prospect. They all signal growing unease among investors, both domestic and foreign.

A fundamental shift in English tenancy law

What is emerging is not one single issue, it’s a systemic shift that has the potential to put both landlords and tenants under pressure from multiple angles.

At the heart of the reforms, brought about by the RRA, is the abolition of Section 21 “no-fault” evictions. This was long a cornerstone of landlord assurance; the knowledge they could always recover their property with minimal trouble and expense. Now however, as highlighted by the Financial Times article, the change effectively ends the assured shorthold tenancy model that has defined the private rented sector in England since 1988.

Instead, in comes a system of periodic tenancies, where landlords must rely on amended statutory grounds under Section 8 of the Housing Act 1988 to regain possession – an adversarial approach that almost always involves a court hearing 

The government’s objective is straightforward: provide tenants with greater security, safety and stability and reduce homelessness and temporary housing. In practice, it fundamentally changes the risk profile for landlords involved in residential letting.

When there’s trouble, landlords must in future demonstrate (provide solid evidence for) specific grounds, to obtain possession. Rent arrears, anti-social behaviour (often difficult to prove) and other breaches of the tenancy agreement must be justified.  These are limited to selling, personal occupation, or breach of contract. 

The process introduces delay, an evidential burden, huge expense (any eviction action will likely cost a minimum of £3,000) and an uncertain outcome.

For many small-scale landlords, this prospect is no longer worth the hassle or potential risk. It is a shift from a mandatory re-possession system to a discretionary one where the decision is outside the landlord’s control. 

The prospect is also giving foreign investors serious pause for thought. 

Security for tenants

The reforms will undoubtedly strengthen tenant protections. The risk of sudden eviction will be reduced, and rightly so – though Section 21 was never a quick process - tenancies will become more stable by default. But housing markets cannot be separated from economic reality.

As the Financial Times article points out, increasing tenant security may come at the expense of supply. When landlords perceive problems with re-possession, especially if they have had experience of a bad tenant, they are likely to respond in predictable ways: (1) they will be far more stringent with their tenant selection procedures, (2) they will expect increased rents to compensate for risk and (3) they may decide to exit the sector altogether. 

Landlords generally are not ideological; when it affects them in the pocket their behaviour is logical. However much they care about the wellbeing of their tenants, pure economics always wins the day - they are not running a charity.

The end result of the change is a paradox: greater protection for those inside the system, but potentially higher hurdles to entry for those trying to access rental accommodation, both in terms of selection criteria, the scarcity of rental property and the amount of rent they pay.   

It’s a “double blow” for tenants

According to a Daily Express article, which frames the issue from a slightly different angle, the changes bring short-term financial pressure on tenants. It highlights what it dubs a “double blow”, that is, a regulatory change combined with rising housing costs. 

One key element, it says, is the shift in how upfront payments are handled. With a total ban on rent in advance, landlords will become even more cautious, particularly when assessing higher-risk tenants. That caution will translate into stricter referencing, guarantor requirements, and simply declining applications, which will disproportionately affect those on low incomes.

At the same time, rents are subject to continuous increase. It’s a critical point often missed in the policy discussions so far: regulation does not remove costs, it simply redistributes them, with all the consequent unintended consequences involved.

Landlords are now facing higher mortgage rates with the advent of a new conflict in the Middle East, plus there’s the cost of increased compliance obligations, and reduced flexibility over evictions. Landlords will inevitably seek to preserve yield.  In most cases, that means only one thing - upward pressure on rents.

For tenants, the net effect may be uncomfortable. They may well get improved rights on paper, but with higher costs and greater competition for their rental accommodation. In practice, the net effect could go against them. 

Compliance, complexity and professionalisation

Beyond the headlines, these reforms bring a new regime that introduces control and a broader compliance framework: a mandatory PRS ombudsman, a landlord portal and database, tighter rules on rent increases, increased property standards and a ban on rent bidding wars. 

Taken individually, these measures appear perfectly reasonable. But take them together and they add up to something quite restrictive, and an administrative burden for being a landlord.

The consequences are clear. First, the PRS landlord (and letting agents) must become more professional than hitherto. Larger landlords, portfolio investors, and corporate structures will be better equipped to absorb the compliance costs, to navigate the new regulatory systems, and to offset the higher risk.

Small-scale landlords, which represent the vast majority in England, the traditional backbone of buy-to-let and the PRS, face the biggest squeeze. For some, this regulatory challenge will be their tipping point. 

The international dimension 

A South China Morning Post article highlights an important consideration. It’s one that’s easily overlooked but represents a substantial element of supply - international capital.

UK residential property has been an attractive destination for foreign investment capital, including from Hong Kong and mainland China. What’s attracted them is a combination of a strong English legal system, a relatively stable economy, a transparent property market, and strong rental demand.

The new reforms challenge part of this proposition. From a foreign investor’s perspective, the removal of Section 21 raises concerns about exit flexibility. If regaining possession becomes a complex and protracted process, the asset class becomes less liquid in practical terms.

Add to that the increasing regulatory compliance obligations and the risk-adjusted return begins to look less appealing. Despite the prospect of improvements in the leasehold regime, this is likely to be outweighed by the other changes. 

Consequently, the likely outcome is gradual withdrawal of foreign capital, and a shift in allocation away from small-scale towards larger operations. Some may welcome this withdrawal on ideological grounds, but capital outflows of this magnitude will undoubtedly hurt the domestic market.

The “Finfluencers” dimension

The FT refers to the ‘finfluencers’ – the property Gurus as a group whose audience may be diminishing with the exodus of small-scale investors. Those offering training and financial advice, often promoted by the social media ‘finfluencers’, according to the article, are increasingly coming under scrutiny. 

Also, Labour MP Stella Creasy has secured an amendment to the Finance Bill to extend HMRC powers. This would mean financial penalties or criminal prosecutions against anyone promoting tax-avoidance schemes. 

Creasy’s amendment defines a “tax influencer” as “an individual who is not a tax professional but promotes, markets or otherwise encourages participation in a tax avoidance arrangement by means of a social media service.”

Creasy told the FT that tax avoidance influencers are operating at an “industrial scale”. “People think they are being shown a cheap hack but are being told how to break the law,” she claimed. 

“The key problem here is that “finfluencers” are all too often not driven by a desire to be helpful; they are driven by the perverse incentive that the number of clicks and likes they receive drives the money that they gain from their behaviour. The more outlandish the claim, the more money they will make,” she said.

Creasy wants to hold these so-called experts “accountable” for the “damage” they are doing by encouraging their victims to break the law, while making a fortune for themselves with few if any consequences for their actions.

Supply is an issue that won’t go away

All three of these articles, one way or another, highlight the same underlying issue, a constrained and diminishing supply of rental accommodation in England. This is particularly acute in locations where it’s needed most, and for those on low incomes.

England’s rental market is already constrained. Demand remains strong, driven by population growth and immigration, demographic trends (divorce, single living and people living longer) and affordability for owner occupation. 

Even if the reforms lead to a modest contraction in supply, the impact on rents could be out of proportion, it’s a central tension in housing policy: can increased security of tenure be balanced by sufficiency of supply in a private rented sector? We are about to find out.

Reform has consequences

These three news stories tell an interesting story and nearly summarise the issues prevalent at this momentous stage in the history of England’s private rented sector. 

The Renters’ Rights Act represents a decisive shift towards more regulation and uncertainty for landlords but increased tenant-security. 

The change carries economic consequences. Higher costs, reduced flexibility, and changing investor sentiment, all of which point in the same direction: a tighter, more competitive rental market.

For the politicians, their challenge will be to ensure that changes they have put on the statute book do not come at the expense of tenants’ inability to find the accommodation they need at a price they can afford. 

[Main image credit: brotIN blswaS]