For the first time since 2021, a growing share of UK landlords say they won’t raise rents in the year ahead. It’s not because demand is weak — enquiry levels and occupancy remain robust — but because tenant affordability has reached a practical ceiling in many postcodes. The rational landlord now prioritises income quality over headline growth.
The Affordability Wall
- Household budgets are thin: Food, energy and transport costs have stabilised but at a higher base; arrears tolerance is lower.
- Void risk matters more: A one‑month void can wipe out the benefit of a 6–8% rent rise. Landlords are rediscovering the compounding value of zero voids.
- Regulatory glidepath: Annual increase limits, clearer notice periods and tribunal oversight (as part of renters’ rights reform) encourage moderation and documentation.
The result is a shift from “how high” to “how stable” — an optimisation problem across renewal pricing, tenant retention and operating efficiency.
Where Pricing Power Persists (and Where It Doesn’t)
| Stock Type | Pricing Power | Notes |
|---|---|---|
| Newer, EPC B apartments near transit | Higher | Energy savings + location premium; strong in Manchester, Leeds, Birmingham |
| Family houses with gardens & parking | Medium‑high | Low turnover; schools catchments drive bids |
| Older, EPC D/E flats far from transit | Low | Higher bills + longer commutes = resistance |
| HMOs in saturated micro‑markets | Mixed | Quality & management standards decide outcomes |
Tenants are discerning. Energy performance and commute convenience have become core value drivers, not afterthoughts. Capital expenditure that shifts a unit from EPC D to B can pay back quickly through retention and reduced arrears risk.
How Professional Landlords Are Responding
- Renewal discipline: Pre‑expiry check‑ins, light refurbishments, and data‑led rent setting by micro‑postcode.
- Operating efficiency: Portfolio‑wide contracts for insurance, utilities in HMOs, and repairs scheduling.
- Capex that matters: Insulation, heating upgrades, and durable finishes reduce lifecycle costs and tenant churn.
- Financing strategy: Refinancing onto five‑year fixes where DSCR permits; keeping cash buffers for selective acquisitions.
The Demand Backstop
Even as landlords moderate increases, structural demand underpins occupancy: net migration, delayed first‑time buyer transitions, and constrained new build all keep the private rented sector tight. This dynamic supports yields even as growth cools.
Risks to Watch
- Labour market wobble: A material rise in unemployment would pressure renewal rates.
- Local licensing creep: Additional licensing and selective licensing can add cost and complexity.
- Tribunal load: As rent challenges rise, time-to-resolution matters; documentation quality is crucial.
Ethira Perspective
For 2025–26, we expect mid‑single‑digit rent growth nationally, with higher out‑turns in energy‑efficient stock close to transit and lower in older, peripheral stock. The winning strategy is tenant‑centric asset management: fair pricing, reliability, and homes that are cheaper to run. Investors should underwrite conservatively, design operating models for zero‑void ambition, and deploy capex where it tangibly improves retention and arrears outcomes.