New research from Goodlord suggests the Renters' Rights Act is prompting landlords and letting agents to become more selective about prospective tenants. Just over half (51%) of letting agents surveyed say they are now more cautious when recommending applicants than a year ago, while 26% of landlords say they are more likely to reject applicants they would previously have accepted.
Almost a third (31%) of landlords would rather leave a property empty while waiting for a tenant they consider lower risk. The findings come from Goodlord's ninth annual State of the Lettings Industry report, which gathered responses from more than 3,000 letting agents, landlords and tenants across the UK.
Concerns over tenant selection
Goodlord argues that the Renters' Rights Act is creating a divide between existing tenants and those seeking accommodation. The company links the shift in attitudes to changes involving Section 21 evictions, rent in advance and rental bidding. However, the findings measure reported intentions and attitudes rather than actual changes in tenant rejection rates.
Goodlord chief executive William Reeve warned that some applicants could find it increasingly difficult to secure a tenancy. "The deep irony here is that certain tenants will now be far more likely to struggle to secure tenancies; creating a gulf between those settled in their properties and those seeking a new place to call home." He suggested students, foreign nationals and applicants with non-traditional incomes could face particular difficulties.
Industry sentiment improves
Despite concerns over tenant selection, the research suggests sentiment across the lettings industry has improved. The proportion of agents expressing pessimism has fallen from 48% to 40% over the past year. However, larger agencies appear more confident than smaller operators. Some 42% of agencies employing at least 11 staff describe themselves as optimistic, compared with just 28% of businesses employing five people or fewer.
Reeve suggested larger firms may have more resources to manage regulatory changes. Landlords remain considerably more negative about the market, with 69% describing themselves as pessimistic, although that represents an improvement from 78% last year. Among landlords with six or more properties, pessimism reaches 81%, compared with 63% among single-property landlords.
Tenant optimism rises
Tenants, meanwhile, are becoming more optimistic. The proportion expressing optimism has risen from 20% to 37%. Younger renters are particularly positive, with half of tenants aged 25 to 34 describing themselves as optimistic, alongside 48% of those aged 18 to 24.
Reeve said the findings revealed a growing divide between different groups operating in the private rented sector. "Bigger agencies are feeling far more chipper compared to their smaller counterparts." He added that the gap between landlord and tenant sentiment could make it harder to persuade landlords to remain in the sector. Goodlord will publish the full State of the Lettings Industry report on 29 October.
