The Renters’ Rights Bill is expected to come into force later this year, resulting in significant changes for the private rental sector.

Among the proposals is the end of assured shorthold tenancies. These will be replaced with open-ended periodic contracts, giving tenants the ability to end tenancies at any time by giving two months’ notice. ‘No fault’ evictions will also be abolished and rent increases can only be imposed once a year, with two months’ notice required.

For residential landlords and investors, these changes will affect traditional rental income streams, which could have an impact on the value of their assets and their ability to secure funding against them.

Some investors are concerned that the uncertainty over income and tighter control on rent increases will lead to a more cautious approach to predicting rental yields, with values moving south as a result.

The lack of a guaranteed term of tenancy could also tempt lenders to raise borrowing costs, to cushion the added risk. The abolition of ‘no fault’ evictions arguably weakens landlords’ possession rights – though landlords can still take possession, to sell a property or to occupy it themselves, for example – further complicating underwriting for lenders.

Owners of student accommodation probably have greater cause for concern. The new rules mean students can leave mid-term, providing less security for an academic year.

However, rents and tenancy duration aside, market fundamentals will also play a large part in setting values. A structural undersupply of housing and strong demand for high-quality rental homes will help mitigate risk. Stock shortages will also put upward pressure on rents: while the Bill allows for annual rent increases only, these can still be at market rates.

In the last few years, residential landlords have faced a barrage of legislation which has made private rental increasingly onerous. Stamp Duty hikes on buy-to-let purchases, the removal of mortgage interest relief and stricter energy efficiency standards have seen landlords exit the market in droves. According to Rightmove, 15% of homes listed for sale in 2024 were previously rental properties. The Renters’ Rights Bill provides even more red tape and additional incentive for landlords to exit the market.

But the loss of rental homes from the buy-to-let market will work in favour of more commercial landlords operating blocks or portfolios of single asset properties. Rentals that are well-maintained and compliant with the new regulations will continue to attract tenants, leading to higher occupancy rates and more stable rental income.

Whilst it looks like we are moving into unchartered territory, astute landlords will already be evaluating their portfolios and getting their operational systems in place to accommodate the new legislation. This will reassure lenders and help shore up values.