Some prospective tenants could face a tougher route into the private rented sector (PRS) as landlords become more risk averse following the Renters’ Rights Act (RRA), according to Legalforlandlords.
The Government intended the RRA to improve tenant protections and create a more stable rental environment. However, it is expected to also change how landlords assess applicants.
Landlords may become more cautious about who they let to, because the potential for longer repossession processes could increase their exposure. As a result, affordability and a good credit rating are likely to become more important in tenant selection.
Tenants likely to face greater scrutiny
A range of applicants may find themselves under more pressure in the post-reform market. These include:
- Applicants with irregular or non-traditional income
- Tenants with low earning below roughly two and a half times the annual rent
- Students without strong guarantors
- Individuals with impaired credit histories
- Benefit recipients.
Referencing could become both stricter and slower, which may increase the risk of applications failing late in the process. This could create longer void periods and higher administrative costs, with letting agents pre-filtering applicants more firmly and reducing the number of viewings per property.
The effect could be a split market of tenants who meet enhanced criteria may secure properties more quickly, while others may face repeated rejections.
Affordability criteria are also expected to rise. Some landlords may move from traditional benchmarks of around two and a half times rent to three times rent or more.
Guarantors, rent in advance and insurance requirements
Reliance on guarantors is expected to increase. For tenants who fall short of affordability requirements, a guarantor may become essential.
In the past, rent in advance has historically been used to support applicants with weak financial profiles. However, the RRA prevents rent in advance before a tenancy begins and in-tenancy rent in advance payments are now more restrictive.
Rent guarantee insurance products are expected to involve more rigorous underwriting.
A market shaped by qualified demand
Legalforlandlords suggest the problem is not a shortage of renters, but a mismatch between demand and eligibility.
There may be plenty of prospective tenants, but fewer who can pass affordability checks, satisfy referencing criteria and meet insurer requirements at the same time. This could create hidden vacancy risk, where properties appear to attract strong demand but remain unlet because applications repeatedly fail.