The Government’s new Renters’ Rights Act promises safer homes and stronger protections for tenants, but accountants warn it could place heavy financial pressure on smaller landlords trying to keep up with the new standards.
Adam Caplan, partner at FFT Accountants, says the cost of compliance is likely to hit one-property and small-portfolio landlords hardest.
“The new Decent Homes Standard will mean many landlords have to carry out insulation, heating and energy-efficiency improvements” he says.
“A significant number of UK homes will need work to meet the new rules. For those with only one or two properties, the cost of getting compliant will feel much higher, especially when you add in the registration and administrative requirements.”
Caplan explains that landlords with larger portfolios are likely to find it easier to spread those costs.
“Those with a wider portfolio can make use of economies of scale and often have trusted tradespeople on hand. Smaller landlords might not have that network or the experience to get work done efficiently or at a fair price.”
While some landlords may look at incorporation for tax or administrative reasons, he believes the more likely outcome is a gradual exit of smaller players from the market.
“For many, the extra regulation and compliance burden will simply be too much. I think we’ll see some landlords choosing to sell up altogether rather than adapt.”
The reforms also introduce new record-keeping and transparency measures through the Private Rented Sector Database and Landlord Ombudsman.
“With every large cash outlay, it’s important to keep full records and seek professional advice on whether any reliefs or allowances might apply to help reduce the burden,” Caplan continues.
“This could include spreading the cost of works over several tax years or checking for local grants that support energy-efficiency improvements.”
Despite the pressures, he believes institutional investors could see opportunity where smaller landlords step back.
“More regulation could actually bring more predictability around standards, costs and returns. That may appeal to larger investors who value stability.”
Looking ahead, he doubts this will be the final word on property reform, particularly when it comes to social and affordable housing.
“It feels like the Government is intent on driving lasting improvement across the housing sector, particularly around quality and safety. I’d be surprised if this is the last major change we see.”
For private landlords, Caplan offers this advice.
“Assess your portfolio and ascertain the costs you will be incurring. Give yourself time to get the necessary work done and to get a reasonable price for it.
“Make plans for how and when your future rents may be amended to help recoup some of the landlord’s costs. If you need help with this, don’t hesitate to contact a professional for advice.
“Improving the housing stock of the UK is a good thing for us all, tenants, landlords, society on the whole, but most private landlords are trying to operate a business, so they must watch their income and their costs.”
