Landlord profitability held up in the first quarter even as regulatory costs and softer tenant demand kept pressure on the sector, according to new research from Foundation Home Loans and Pegasus Insight.
The lender’s latest Landlord Trends survey found 84% of landlords said their lettings activity remained profitable in Q1 2026. Average rental yields also edged up to 6.5% from 6.4% in the previous quarter, while portfolio values and rental income both rose.
Rental yields rise as landlords stay active
The figures point to a market that is still producing income for most investors, even if the mood is hardly carefree. According to Foundation’s latest Q1 landlord trends research, 63% of landlords now intend to remain in the sector, up from 58% in Q4 2025, and 39% plan to remortgage in the next 12 months.
Average portfolio size also increased to 7.3 properties, suggesting the market is still tilting towards better-capitalised operators rather than retreating across the board. At the same time, 61% of landlords said they expect to raise rents over the next year, with an average projected increase of 5.7%.
Grant Hendry, director of sales at Foundation Home Loans, said the figures showed “a landlord community and wider private rental sector that continues to prove its resilience” despite rising costs and regulatory change.
He added that profitability was holding up, yields were stable and there were early signs that confidence was returning.
The picture is not uniformly positive. Foundation found 43% of landlords had experienced void periods in the past 12 months and 30% reported rental arrears. Some 42% also expect to sell at least one rental property over the next year, so confidence is improving from a low base rather than surging.
This follows Residential Landlord’s analysis of mounting cost pressure and changing landlord expectations, which showed many owners are spending more time and money just to keep pace with the new regime. Combined with earlier warnings over rising buy-to-let costs and rental supply, the latest figures suggest stronger landlords are still finding ways to make the numbers work.
Landlord strategy shifts as margins get tighter
For landlords, the main takeaway is that profitability has not disappeared – but it is becoming more selective. Investors with efficient portfolios, sensible borrowing and room to refinance are in a far better position than smaller owners carrying expensive debt or facing heavy upgrade bills.
The data also hints at a more professionalised market. If average portfolio sizes are rising while a large minority still plan to sell, the likely result is not a simple exodus but further consolidation. Homes will still leave the sector in some cases, yet other stock will be absorbed by landlords with stronger balance sheets and longer time horizons.
That matters for rents as well. If 61% of landlords expect to increase rents, any easing in tenant demand may not be enough on its own to restrain pricing where supply stays tight. The more immediate brake may come from local affordability limits rather than landlord sentiment.
For investors weighing their next move, refinancing strategy and EPC planning look increasingly linked. Foundation said 62% of landlords with lower-rated properties are planning future works, which suggests many are trying to prepare before tougher standards become unavoidable.
Opinion
The most useful part of this survey is not the 84% headline but the split underneath it. Landlords are still making money, but many are doing so while carrying more admin, more uncertainty and less margin for error. That is not a broken market, but neither is it a comfortable one – and policymakers should stop pretending the sector can absorb every new cost without a consequence for supply or rents.
