The Renters’ Rights Act: What 2026 holds for landlords’ costs and the impact on buy-to-let (BTL) affordability

With the Renters’ Rights Act set to come into effect on 1 May 2026, the UK’s Private Rented Sector (PRS) is set to experience one of the most significant periods of change in decades.

The legislation will create a paradigm shift towards fairer practices and enhanced protection for tenants. It will necessitate an assessment of practices in buy-to-let (BTL) lending and will likely materially influence affordability assumptions from lenders’ perspective.

Mortgage lenders will inevitably face the pressure to adjust their affordability models (and potentially their loss estimations for IFRS9) for BTL borrowers especially in relation to costs underpinning affordability calculations.

Highly uncertain rental income streams

Rolling periodic tenancies will be replacing fixed term assured shorthold tenancies (ASTs) and tenants will be allowed more flexibility by being able to end their tenancy with just two months’ notice. Thus, volatility surrounding stable rental income is highly likely.

By having open-ended tenancies with low levels of rental income predictability, void periods (unoccupied periods) forecasting may pose a challenge. Therefore, the assumptions lenders traditionally use when determining affordability will need reassessing, resulting in potentially higher assumed void periods and more prudency in affordability assessment to reflect the heightened risk of lost income  .

Additionally, rent increases will only be allowed once per year   and tenants can challenge increases creating more uncertainty around rental income. Rent inflation assumptions may present difficulties leading to more conservative model estimates to allow for a buffer of moderated rental income growth.

Rigid structure around Possessions

The Act will abolish Section 21 “no fault” evictions, which will be replaced by a specific grounds based possession pathway through courts. This may result in more lengthy and expensive processes increasing timelines for evictions, where there is no evidence of arrears, anti-social behaviour – though sale of property or landlord / family move-in are valid reasons. As a result, periods of lost rental income may prove unpredictable. Void period assumptions in affordability assessments could therefore be demanding, culminating in stricter stress tests by lenders to cover the uplifted costs.

Other considerations

The Act expands on pet ownership by requiring landlords to reasonably consider pet requests and only refuse them if they have a valid, justified reason. Through such measures, replacement costs for damage or wear and tear could be increased.

Moreover, the Decent Homes Standard will be applied to the private rented sector for the first time. This new regulation, which must be met by 2035, introduces an enforceable requirement for landlords to provide homes that are warm, free from serious hazards, and in a reasonable state of repair. As a result, landlords are likely to face higher refurbishment and ongoing maintenance costs in order to comply.

From late 2026 landlords must register on the new PRS database and use the PRS Ombudsman system in case of disputes increasing the admin responsibilities and potential resolution costs.

Overall impact on lenders

Overall, the Renter’s Rights act will, at minimum, force lenders to assess their lending guidelines and affordability expectations.

The changes are likely to reshape the BTL industry to a certain degree, and significantly influence the cost assumptions lenders use as part of their affordability assessment. Whether the more stringent legislation will push landlords to exit their portfolios will determine if supply is affected potentially resulting in higher rental values.

Although rent prices might rise, the associated costs landlords will incur might outweigh the profit. Consequently, lenders will face pressures to implement tighter controls, and more conservative stress tests in affordability.

Get in touch

Send us an email if you would like to discuss these upcoming changes in more detail – info@4-most.co.uk.