THE Renters’ Rights Act has “driven a reduction in house prices” and has “spooked a lot of smaller landlords”, experts have warned.
Nationwide said today that house prices were down 0.6% month on month in May, the first monthly decline so far this year – while its House Price Index showed UK annual house price growth slowed to 1.7% in May, from 3% in April.
Nationwide said that the housing market has lost its momentum but the UK economy entered this shock on a slightly stronger footing than expected.
The economy grew by a healthy 0.6% quarter on quarter in the first three months of the year, while inflation softened more than expected in April to 2.8%.
Experts have warned that another important factor in house prices going down is the rent reforms in the Renters’ Rights Act (RRA) that came into force last month.
The Renters’ Rights Act 2025 includes the abolition of Section 21 evictions, meaning landlords cannot evict tenants without a legal reason, rent increases limited to once a year at market rate, tenants have the right to request a pet, and discrimination against tenants with children or on benefits is prohibited.
This could drive a reduction in house prices as supply starts to outpace demand
Chris Barry, Director at London-based Thomas Legal, said the RRA meant landlords are selling up.
He added: “The Renters’ Rights Act enforcement has certainly sparked a wave of new stock to the market as independent and accidental landlords exit the market.
“This could drive a reduction in house prices as supply starts to outpace demand. I’m having conversations with landlords on a daily basis who are deciding to cash in on their investment and put their money elsewhere which is lower risk and a smaller demand on their time.”
Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, said smaller landlords are “spooked” by the new rules.
He added: “The Renters’ Rights Act is part of the story, but I wouldn’t pin a monthly price fall on it alone. Rates, affordability, and general uncertainty are doing most of the heavy lifting here. That said, the abolition of Section 21 no-fault evictions and the shift to rolling periodic tenancies have genuinely spooked a lot of smaller landlords and I’m seeing that play out with clients.
“But the bigger picture is a combination of factors, mortgage costs, cost of living, and a buyer pool that’s become much more price-sensitive.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said many smaller landlords are unable to even cover their costs.
He added: “Whilst the RRA only went live in May, landlords have been preparing for some time beforehand. In particular, the smaller landlords, those with fewer than four properties have been hit the hardest, with properties barely covering their costs before the RRA took effect.
“With the need for social housing at record highs, rental properties have never been more in demand, yet we are determined to penalise landlords who, in the main, support a significant element of the government’s needs.
“The burdens of increased taxation, the cost of acquisition, and now giving tenants more powers than the landlord have been more than enough to tip many landlords over the edge, leaving larger institutions to monopolise. The tenant will eventually lose out.”
There is an increasing number of properties coming onto the market
Patricia Ogunfeibo, Founder & non-practicing Solicitor at London-based tenant2owner, said the RRA is a “significant” factor in house prices falling.
She added: “Is the Renters’ Rights Act a major reason prices have fallen? It is a significant strand. Nationwide points to the Middle East, energy costs, and interest rates, but that misses what began in September 2024, when the Bill was published. Soon after that, the smart money started moving, and is likely to continue, albeit at a slower pace going forward.
“The landlords exiting are not only those with non-compliant rentals, but also the well-informed risk-averse, often older landlords. They read or were told about the Bill, digested it, and concluded the risk-reward had shifted against them. Many chose to get out, causing higher than usual supply numbers.
“With demand being the same, or less, we are seeing intense downward pressure on prices. The upshot though, is opportunity: every landlord exit is a home, often keenly priced, that a mortgage-ready first-time buyer, usually a tenant could snap up.”
Leanne Hemingway, Owner at Dorset Cottage Holidays, said the RRA is a factor in the minds of landlords.
She added: “From what we are hearing from our estate agent contacts across Dorset, there is an increasing number of properties coming onto the market, but with little movement in terms of sales. At the same time, we are seeing more enquiries from owners who are considering moving their properties into the holiday letting sector.
“While it would be difficult to attribute recent house price movements solely to the Renters’ Rights Act, the proposed legislation is certainly a factor influencing some landlords’ decisions. Increased regulation, reduced flexibility around tenancy management, and concerns about future compliance requirements are causing many buy-to-let investors to reassess their options.
“For some landlords, particularly those with properties in strong tourism destinations such as Dorset, holiday letting can appear to offer greater flexibility and potentially stronger returns and we are seeing an influx of owners moving to this sector.”
Fewer landlords buying reduces competition for properties
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said it was not all about the Renters’ Rights Act.
She added: “I would be careful about blaming one monthly house price fall on the Renters’ Rights Act alone. The bigger drivers are still affordability, mortgage rates, confidence and buyers becoming more price-sensitive. That said, the Act is part of the pressure on landlord sentiment.
“Buy-to-let has already been squeezed by higher rates, tax changes, tougher stress testing and heavier regulation. If a landlord now feels they have less control, more compliance risk and thinner margins, some will sell or pause buying. That can affect prices in two ways. More ex-rental stock can increase supply in certain areas, especially flats and smaller houses.
“At the same time, fewer landlords buying reduces competition for those properties. But this is not a simple ‘landlords leave, prices crash’ story. If landlords exit, renters still need homes, so rental pressure may get worse. Protecting tenants matters, but if policy makes supply weaker, everyone pays for it somewhere.”
Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Eatenton Finance, said other factors are more important in leading to lower house prices.
She added: “I think house prices falling is less a result of the Renters’ Rights Act and much more a consequence of increased mortgage rates, tax changes, the cost of living crisis and general uncertainty and concern about the direction this government is taking the UK. Geopolitical uncertainty and domestic policy is proving a toxic combo.”
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, said stamp duty and the tension in the Middle East are pushing down house prices.
He added: “Donald Trump and stamp duty are the current culprits for the housing market’s lack of momentum. It’s anaemic but doesn’t need iron, it needs oil prices to drop and stamp duty legislation on property to be suspended.”
Supply and demand is usually the driver
Michelle Lawson, Director at Fareham-based Lawson Financial, said rising service charges on leasehold properties are leading to delays in them being sold.
She added: “The Renters’ Rights Act has definitely been a contributor but is not the sole reason for falling house prices. Supply and demand is usually the driver and there are a combination of other factors such as rising interest rates, the cost of living, job uncertainty all results of the carnage caused by the Labour government.
“Housing stock is at its highest and first-time buyers or chain free buyers are needed to start the chain – without this the market stalls. The housing market has a significant impact on many other sectors such as construction and removals – without movement less people are transacting.
“Some landlords have exited the market due to the barrage of regulation and red tape, others are diversifying but not buying traditional housing. More reform is needed with leasehold and there are still many flats being blocked from being sold due to onerous service charges making some of these properties wholly unsaleable.”
Steven Greenall, Mortgage and Protection Advisor at Dunmow-based Protect & Lend, said the rising cost of living is impacting house prices.
He added: “Whilst the RRA may have an impact on certain housing sectors that are the general buy-to-let properties, it is not the full story. Higher interest rates, stamp duty, building materials, cost of trades people and generally increases in cost to living are putting people off moving house and increasing their outgoings.”
