Sweeping rental reforms due in 2026 are set to reshape the buy-to-let landscape, with licensing experts warning that small and accidental landlords will be first to exit. New fines, tighter compliance rules and the looming end of Section 21 could leave many unable to operate profitably, raising fresh questions about rental supply and tenant choice.
Landlord exodus
Phil Turtle of Landlord Licensing and Defence told The Telegraph that the traditional “hands-on, tenant-focused” landlord is quietly disappearing. He argues that the Renters’ Rights Act will accelerate sales among older or smaller landlords, reducing supply while encouraging more commercially driven investors to target distressed stock.
Historic ONS data shows the private rented sector shrank by over 250,000 homes between 2017 and 2023, and anecdotal reports suggest the trend resumed through 2024. For tenants, fewer available properties often translate into higher rents; for landlords, the narrowing margin between rental income and rising costs makes compliance missteps financially dangerous.
A Midlands letting agent, quoted last autumn, said new investors “focus on numbers first and service second”, noting that tenant inquiries in their area now average 14 applicants per property, highlighting the widening mismatch between demand and supply.
Landlord penalties and enforcement risks under 2026 rules
Since 27 December, councils have been able to issue fines of up to £40,000 for breaches including illegal eviction. Paul Shamplina of Landlord Action warns that self-managing landlords are most exposed, as each missed document or incorrect tenancy statement carries escalating consequences.
Rent Repayment Orders are also expanding in scope. Recent legal changes allow tenants and local authorities to pursue higher penalties and a broader range of breaches. Shamplina cautions that “the risk of costly enforcement action has never been greater”, especially where statutory paperwork is incomplete.
The pressures come as more local authorities adopt selective licensing. Geospatial firm Kamma recorded 23 new licensing schemes in 2024 and expects around 40 more in 2025, meaning landlords face rising fees and more inspections. Turtle believes councils will increasingly rely on penalties as a revenue stream, saying “any slip-up on pre-tenancy paperwork is going to cost a minimum £4,000 fine”.
Section 21 ends
The end of Section 21 remains a sticking point for the sector. NRLA chief executive Ben Beadle has called the change “a disaster waiting to happen”, warning that existing delays – nearly eight months for many possession claims, according to Ministry of Justice data – will worsen once mandatory grounds become the only route.
With possession times lengthening and enforcement risks rising, lenders may reassess affordability models, particularly for highly leveraged landlords. HMRC figures show tax on property income is also set to rise by 2% from 2027, layering further pressure on cashflow.
For many investors, the cumulative effect is clear: more cost, more compliance, and less operational flexibility.
If ever there was a moment for policymakers to recognise the fragility of rental supply, this is it. Compliance is essential, but the direction of travel risks pushing responsible landlords out while empowering only the most aggressive operators. Unless the government calibrates its reforms with real-world economics, the rental market could become harder, not fairer, for everyone involved.
