The renters' rights bill

The UK’s Renters Rights Bill, expected to come into force later this year, will introduce sweeping changes to the rental sector with implications for institutional investors in the build-to-rent market (BTR).

Primarily designed to raise standards and protect tenants in the private rented sector, the legislation targets issues such as no-fault evictions (Section 21), rent reviews and upfront payments. But despite its focus on the traditional buy-to-let and HMO segment, the impact on large-scale residential portfolios should not be underestimated by institutional investors.

John Coddington, head of residential property and asset management at JLL, says the effects are more widespread than the bill’s framing suggests.

“The bill as a whole is more aimed at that traditional buy-to-let and HMO multiple occupancy market,” he says. “But it’s having an impact on institutional investors.”

For institutional landlords, the changes mean greater operational complexity, increased risk of void periods and potential pressure on rental growth.

However, there are strategies emerging to help mitigate the impact and protect long-term returns.

For long-term, professionally managed portfolios, some of the headline measures, such as the abolition of Section 21 ‘no-fault’ evictions, are unlikely to cause major disruption, according to Coddington: “Most of our clients just don’t use that tool because they’re long-term investors. They want tenants to stay in for as long as possible.”

However, the loss of fixed-term tenancies means investors lose the ability to stagger lease-ends and may face sudden surges in vacancies. This could seriously affect how landlords predict occupancy across large developments.

“What’s really difficult is when, say, a large percentage of a building decide to leave in December,” Coddington says. “You’ve got a high number of vacant units in the toughest time of year to relet.”

In response, some landlords are already exploring short-term lets and nightly stays, particularly during off-peak periods.

“There’s going to be more landlords looking at other options like short term lets, like a way of Airbnb-ing their units,” he says. “We’re seeing more of that coming through.”

Perhaps the biggest concern among institutional landlords is the proposed limit on rent increases. Under the bill, rents may only be reviewed annually and tenants will be allowed to challenge them at a property tribunal. While fair in principle, the practical implications could be significant.

“The biggest concern landlords have is not the right to challenge,” he says. “It’s that if a challenge is made, it goes to the First Tier Tribunal and we’re not confident they’re resourced well enough to deal with that promptly.”

This could result in lengthy delays in cyclical rent uplifts and greater uncertainty around income, which may ultimately impact rental growth across the sector in the short term.

In addition, a new restriction on requesting more than one month’s rent in advance could complicate leasing for overseas tenants, such as international students who typically prepay upfront due to limited UK credit histories.

“That’s being removed,” he adds. “So I’m hopeful we’ll see more products come to market from companies that provide rental guarantees.”

Despite these challenges, Coddington is optimistic about the bill’s broader aims. By setting higher standards and improving tenant rights, the new rules could make the sector more stable and attractive over time.

“The general idea is to make things fairer for tenants in a market which hasn’t been incredibly well regulated,” he says. “That can only encourage people into the sector and make it, in the long term, a safer and secure place for tenants and a safer investment.”

Still, he believes the public – and policy makers – often fail to distinguish between small-scale landlords and institutional investors who offer high-quality, professionally managed homes.

“People that live in build-to-rent buildings generally have a great experience,” he says. “Quite often you may pay a premium, but you get a lot with that - It’s a different way of renting.”

Institutional investors with UK BTR properties in their portfolio will need to embrace flexible asset management strategies and lean more heavily on technology and operational expertise. From partnering with short-let operators to streamlining management processes through AI, innovation will be key.

“Technology is the biggest thing that will change and make build-to-rent more efficient,” he says. “We haven’t seen it fully adopted yet, but AI has the potential to reduce a lot of manual processes.”

This is also the time to lean on advisors who understand both the policy and the practical implications.

“It’s not necessarily extra work for investors themselves… they rely on agents like us to handle these changes,” he adds. “But landlords clearly need to be aware of the risks.”

JLL is already working closely with clients to map the impact of rights, manage risk and identify opportunities for better asset performance.

If you have any questions relating to BTR assets in your portfolio, get in touch.