What landlords should expect in 2025: Higher rents, more stamp duty and the Renters’ Rights Bill

As we start the new year, landlords may well feeling that the twelve months stretching out ahead of them are a bit of a mixed bag. 

On the one hand, mortgage rates remain fairly high, and buy-to-let investors face a higher stamp duty bill when they buy a new property. 

Legal changes which could curtail landlords’ freedoms over eviction and rent increases beckon. 

And the Government is also consulting on new energy efficiency rules which could see landlords required to upgrade homes to an EPC rating of C by 2030. 

But are also reasons to cheer. There was no hike in Capital Gains Tax rates for landlords selling properties in the recent Budget – something many had feared. 

Meanwhile, rents have continued to rise, going up by 9.1 per cent on average in the 12 months to November 2024 according to the ONS. 

This has helped to ease the strain on the 2 million rental homes which are owned with a mortgage.

We look at the five big issues landlords will have to contend with in 2025 – and how the rental market could look at the end of the year. 

Renters’ Rights Bill will ring the changes

It is likely this will be the year in which a raft of legal changes for the private rental sector will take effect.

Labour’s Renters’ Rights Bill received its second reading in parliament in October and is on course to become law later this year, though we don’t know exactly when. 

When this happens, Section 21 ‘no fault’ evictions will be scrapped, and the remaining grounds for eviction will require landlords to give tenants longer notice periods. 

In its current form, the bill sets out that if a landlord wants to evict a tenant in order to sell the property or move back in, this cannot happen in the first 12 months of the tenancy. The landlord will also need to give the tenant four months’ notice. 

Landlords will only be able to increase rents for existing tenancies once a year, via a statutory Section 13 notice and will have to give at least two months’ notice. 

For new tenancies, landlords will not be allowed to accept offers above the advertised price to prohibit the practice of ‘rental bidding’.

Fixed-term assured tenancies or ASTs will be abolished, with all tenancies becoming rolling periodic agreements.

Tenants will have the right to request permission to keep a pet, and the landlord cannot unreasonably refuse – but they will have the right to require pet insurance.

The bill will also make it illegal for landlords to discriminate against tenants who receive benefits or who have children. 

Landlords will also be forced to investigate and fix health hazards such as damp and mould within strict timeframes. 

Labour intends for all changes to be applied to both new and existing tenancies at the same time, rather than being introduced for just new tenancies initially.

Furry friends: Landlords will not be able to ‘unreasonably’ refuse a tenant’s request to keep a pet under the Renters’ Rights Bill, set to come into force later in 2025

Taken together, the policies will represent the biggest change for landlords in several decades. 

David Fell, lead analyst at the estate agent firm Hamptons, says: ‘This will be a year of both landlords and tenants finding their feet under the new system.

‘In particular, landlords will be watching whether the court system stands up to a potentially much higher workload – both in terms of regaining possession of their property from a non-paying tenant, and whether their ability to raise rents is curtailed in any way. 

‘On the other hand, tenants will be watching whether indefinite rolling contracts will change their relationship with their landlord.’

Energy efficiency in the spotlight

The Government is once again considering moving the goalposts for rental homes when it comes to energy efficiency.

It has proposed that all rental homes in England upgrade to an Energy Performance Certificate (EPC) of C by 2030, and is currently running a consultation on this which closes in February. 

The EPC is a rating scheme which bands properties between A and G, with an A rating being the most energy efficient and G the least efficient.

At present, landlords need to ensure their property has a minimum EPC rating of E in order to let it, unless they have an exemption – for example for a period property. 

It is estimated that 2.6 million privately rented homes are EPC D or below, according to the Ministry of Housing, Communities and Local Government. That equates to 60 per cent of the entire sector.

Retrofitting dilemma: Landlords may be expecting to upgrade their homes to meet new EPC regulations but to do will come at considerable cost, not to mention disruption for a tenant

The property firm JLL has said that if the 2030 deadline was put in place, some landlords would offload less efficient stock or remove properties from the market to retrofit them. 

This could result in rents rising in the run-up to the deadline as there would be fewer homes available to let. 

With only five years to go until 2030, Chris Norris of the National Residential Landlords Association says the Government needs to clarify the rules as soon as possible and to give landlords time to make the necessary changes. 

‘The Government also needs to establish a financial package to support energy efficiency improvements in the sector, just as the homeowner and social rented sectors have, as proposed by the Committee on Fuel Poverty and more recently by Citizens Advice,’ he says. 

He also raised concerns about there not being enough tradespeople to carry out energy efficiency upgrade work. 

Rent 

Renters have endured a tough time in recent years, paying ever-higher prices as they compete for a declining number of available homes.

The average property is renting for £1,270 a month, according to Zoopla, with renters paying 34 per cent more than they were four years ago.

In the four years before that, between October 2016 and 2020, average rents rose by 3.5 per cent. 

This is down to a supply and demand imbalance that has opened up across the rental sector in recent years. 

The average number of enquiries sent to agents about each available property they have to rent is nearly double the level it was in 2019, according to Rightmove.

Each available property receives an average of 11 enquiries, nearly double the six they received at this time in 2019.

However, while rents have shot up in recent years, there are signs they could be hitting a ceiling, according to Rightmove, which says that tenant affordability limits are now vying with a lack of available homes.

It says more than a quarter of rental properties are currently seeing a reduction in the advertised rental price.

And while average UK rents have risen by 40 per cent over the last five years, earnings have risen by a lesser 28 per cent.

The property portal is therefore predicting that average newly advertised rents will rise by only 3 per cent by the end of 2025.

‘There are two competing factors influencing rental price changes right now,’ says Tim Bannister, Rightmove’s property expert.

‘The ongoing imbalance between supply and demand is putting upwards pressure on prices. 

‘On the other hand, rent rises outpacing wage growth over the past five years has stretched affordability to extreme levels, and is showing in the increasing number of price reductions.’

David Fell, lead analyst at Hamptons says that rising rents will have encouraged many landlords to keep their investments and not sell up. 

‘While it’s unlikely the pace of growth will return anywhere close to the levels we saw post-Covid, there are signs that rents will continue to rise faster than inflation,’ says Fell.

‘Existing tenants who’ve lived in their homes for a few years will probably bear the brunt of these price increases, with renewal rents more closely tracking market rates, which have increased materially as landlords try to create room to cover their higher cost base.

‘Despite some grumbling, higher rents are, for the most part, keeping landlords in the market.’

Higher stamp duty will hit landlords’ pockets

In England, buy-to-let investors already faced a 3 per cent surcharge above and beyond what those purchasing a property to live in currently pay. 

However, from 30 October that went up to 5 per cent, adding thousands of pounds to the cost of buy-to-let and second home purchases.

Under previous rules, a £300,000 property with the surcharge included would cost £11,500 in stamp duty.

That has now risen to £17,500. And from 1 April when the standard stamp duty rates change, that will rise to £20,000.

Non-UK buyers based overseas pay an extra 2 per cent on top of that, so a 7 per cent surcharge overall.  

David Fell thinks the extra stamp duty costs alongside the Renters’ Rights Bill will result in landlords treading carefully this year, despite rising rents improving the rental yields they are able to achieve .

He says: ‘Against the backdrop of falling interest rates, buy-to-let returns are likely to look increasingly attractive [thanks to rising rents].’ 

‘In years gone by, this would have attracted a rush of new investment. However, with higher stamp duty rates alongside questions about how the practicalities of the new regulation will work still to be thrashed out, would-be landlords will be treading cautiously.’

Note: These figures are set to increase after 1 April when the standard stamp duty thresholds for home movers are reduced

Will landlords quit the market?

With all these changes on the horizon, some landlords might see it as a good time to call it a day and sell their investments. 

One in three landlords now plan to sell some or all of the properties they rent out, according to The Government’s English Private Landlord Survey. 

This is up from around one in five the last time the survey was published in 2021.

However, for all the talk of a landlord exodus, there is no concrete evidence this is playing out in reality. 

The English Housing Survey published last month confirmed that there’s been no big landlord sell-off, with the number of rented homes virtually unchanged since 2016.

The estate agent Hamptons also says the growth of institutional investment (build-to-rent) continues to broadly offset smaller landlords leaving the market. 

Even so, the number of rental homes does not appear to be matching demand. 

Chris Norris of the NRLA says: ‘Underlying all changes next year will be the ongoing crisis renters face in simply finding, and accessing, a home to rent.

‘The idea, as some have argued, that landlords selling up is somehow good for tenants is simply bizarre.

‘Firstly, it doesn’t benefit the very many tenants who simply cannot afford to purchase homes for sale. 

‘Similarly, even when rental properties are sold and return to the rental market, it offers little comfort for the tenants who have had properties repossessed so the landlord could sell in the first place.’

He adds: ‘The reality is that all the reforms in the world will do nothing to address the fundamental challenge tenants face: not enough homes to meet their needs. 

‘Unless and until meaningful steps are taken to address this, 2025 will continue to be a year where tenants have little choice about where they live and continue to face rising rents.’