For years, successive governments have argued that increasing regulation and taxation of private landlords would improve standards, protect tenants and create a fairer housing market. Few would argue against raising standards or tackling genuinely rogue landlords. However, there is growing evidence that many of these policies have had an unintended consequence: reducing the supply of homes available to rent and, increasingly, leaving perfectly good homes standing empty.
Recent research from Hamptons highlights what could become one of the most damaging unintended consequences yet. If current rules had applied last year, between 80,000 and 100,000 former rental properties could have been left empty for up to twelve months after landlords attempted to sell them but failed to find a buyer.
At a time when almost every politician is talking about a housing shortage, the prospect of tens of thousands of homes sitting empty because of legislation deserves serious attention.
The Problem Begins with the Renters’ Rights Act
The Renters’ Rights Act introduces a number of significant changes to the private rented sector. Among them is Ground 1A, allowing landlords to recover possession if they genuinely intend to sell.
However, there is an important condition.
Once possession has been obtained using this ground, the property cannot simply return to the rental market if it fails to sell. Instead, landlords face a 12-month prohibition on re-letting the property.
That may appear reasonable if every property sold quickly.
The reality is very different.
Hamptons analysed landlord sales during the previous year and found:
- Around 51% of former rental properties failed to sell
- Around 60% of flats failed to sell
- Had the new rules already been in force, 80,000–100,000 homes could have been prevented from returning to the rental market for up to a year.
These are not derelict homes.
They are not abandoned properties.
They are homes that tenants were previously living in.
Years of Pressure on Landlords
The latest restrictions do not exist in isolation.
They follow almost a decade of policies that have fundamentally changed the economics of residential property investment.
These include:
- The phased removal of mortgage interest tax relief.
- Additional Stamp Duty surcharges.
- Higher Capital Gains Tax burdens on many disposals.
- Increasing licensing schemes.
- Expanding compliance obligations.
- More demanding property standards.
- Longer and more uncertain possession processes.
- The abolition of Section 21 “no fault” possession.
- Continued increases in regulatory costs.
Each individual measure may have appeared manageable.
Collectively they have transformed what was once considered a long-term investment into an increasingly complex, highly regulated business.
Many landlords have simply decided enough is enough.
Hamptons notes that much of the landlord sell-off seen in recent years appears to have been driven by earlier tax changes and higher borrowing costs rather than the latest legislation alone.
When Selling Doesn’t Work
Leaving the sector is no longer straightforward.
Many landlords expected to sell quickly after regaining possession.
Instead they are discovering:
- slower housing markets;
- affordability constraints affecting buyers;
- mortgage availability limiting first-time purchasers;
- reduced demand for certain property types.
If the sale falls through, the property may now remain empty for months despite there being prospective tenants who need somewhere to live.
That benefits nobody.
The landlord receives no rental income.
The property produces no housing supply.
Councils continue to face housing shortages.
Prospective tenants continue searching for increasingly scarce rental accommodation.
A Strange Policy Contradiction
Government policy has increasingly focused on reducing empty homes.
Councils have been given stronger powers to impose council tax premiums on long-term empty properties and ministers have repeatedly emphasised the importance of bringing vacant homes back into use.
Yet another government policy may simultaneously create tens of thousands of additional empty homes.
One policy attempts to reduce vacant housing.
Another risks creating it.
That contradiction is difficult to ignore.
Fewer Rental Homes Means Higher Rents
Housing markets are governed by supply and demand.
When rental supply falls while demand remains strong, rents inevitably rise.
This is exactly what many commentators have warned about over recent years.
Every landlord who exits the market removes another property from the available rental stock unless another landlord purchases it.
Where homes fail to sell and cannot legally be re-let, supply reduces even further.
It is difficult to see how this helps tenants.
Investment Needs Confidence
Private landlords have traditionally provided a substantial proportion of the UK’s rental housing.
Many also supported housebuilders by purchasing new-build homes, helping developments proceed that may otherwise have stalled.
Investment requires confidence.
Investors need certainty that:
- regulations are proportionate;
- taxation is predictable;
- possession rights are workable;
- risks remain commercially manageable.
When governments continually increase costs while reducing flexibility, investment inevitably becomes less attractive.
Many experienced landlords have already stopped expanding.
Others are reducing portfolio sizes.
Potential new investors are increasingly looking elsewhere.
Could This Have Been Avoided?
The objective of preventing abuse of sale grounds is understandable.
However, legislation also needs to recognise commercial reality.
Property markets are unpredictable.
Sales collapse.
Mortgage offers expire.
Chains break.
Buyers withdraw.
Preventing a landlord from re-letting a home that genuinely failed to sell risks creating exactly the type of empty housing that government says it wants to eliminate.
A more flexible approach may have protected tenants while avoiding unnecessary reductions in housing supply.
The Bigger Picture
Britain undoubtedly needs more homes.
But it also needs the homes it already has to remain available.
Policies that unintentionally remove tens of thousands of properties from the rental market—even temporarily—risk making an already difficult housing shortage considerably worse.
The private rented sector has absorbed decades of increasing regulation and taxation.
Whether it can continue to do so while still providing the level of housing the country requires is becoming an increasingly important question.
If policymakers genuinely want more homes available for tenants, future reforms should encourage investment and keep existing properties in productive use rather than allowing them to stand empty.
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Disclaimer: NetRent does not provide legal advice. This article represents our understanding of current developments affecting the private rented sector and is provided for general information only. Landlords should obtain professional legal advice regarding their own circumstances.