A coalition of property industry chief executives have issued a stark warning about the unintended consequences of the Renters’ Rights Bill on the UK’s private rental market and its potential ripple effects on mortgage lending.

In a letter to Housing Minister Matthew Pennycook, signed by the chief executives of both Paragon and Keystone Property Finance as well as chief executives from the National Residential Landlords Association (NRLA), the British Property Federation, Goodlord and Propertymark, the industry leaders point out the risks posed by New Clauses 13 and 14 of the proposed legislation.

These clauses, which aim to protect tenants by prohibiting advance rent payments and restricting landlords’ ability to request the first month’s rent before tenancy agreements are signed, could significantly reshape how financial risk is assessed in the rental sector.

Critics argue that these measures may lead to unintended consequences, including a reduction in the supply of rental properties and heightened risk perceptions among mortgage lenders supporting buy-to-let investors.

Clause 13, which bans tenants from paying multiple months of rent upfront, is particularly concerning for those with poor credit histories or irregular incomes.

Such tenants, including international students and seasonal workers, often rely on advance payments to secure accommodation.

By removing this option, landlords may become less willing to accept these tenants, potentially narrowing their rental pool and reducing income streams that underpin mortgage repayments.

Clause 14 further compounds the issue by eliminating landlords’ ability to collect the first month’s rent prior to tenancy agreements, making it harder for property owners to mitigate financial risk.

NEGATIVE MARKET EFFECT

But the chief executives warn that this could deter landlords from investing in rental properties altogether, exacerbating an already constrained market.

The letter also raises alarm about the broader economic implications of the government’s decision to freeze housing benefit rates while introducing reforms that could discourage landlords from renting to benefit claimants.

Reduced access to rental housing for these groups could lead to higher vacancy rates and increased uncertainty for mortgage lenders.

Concerns were also voiced about the impact of the reforms on the justice system. With the Bill increasing the likelihood of rent disputes and arrears, the Property Tribunal is expected to face a surge in cases, potentially leading to prolonged resolutions.

The chief executives suggest empowering the Valuation Office Agency to provide rent assessments to ease the burden and ensure disputes are addressed more efficiently.

CALL FOR ROADMAP

And while the chief executives say that they support efforts to improve rental standards and remove Section 21 “no-fault” evictions, they urged the government to publish a clear roadmap for implementing the reforms.

Such a plan would provide much-needed clarity for landlords, tenants and financial institutions, ensuring a smoother transition that minimizes disruptions to the rental and mortgage markets.

They conclude by seeking a meeting with the Housing Minister to discuss these issues and explore solutions that balance tenant protections with the stability of the housing market.

Michael Cook, chief executive of Leaders Romans Group, says: “The Government’s proposed changes risk making access to rented housing harder for the very people we want to support.

“Limiting rent in advance, combined with frozen housing benefit rates and not enough rental housing will make it all but impossible for those with poor or no credit histories in the UK to prove their ability to sustain tenancies. This includes international students, workers from overseas and those employed on a short-term or variable basis with an income that fluctuates.

“Cutting off any assurance landlords might seek when renting to those who cannot easily prove their ability to afford a tenancy is neither practical nor responsible. Those who will suffer are those most likely to struggle to pass affordability checks.”