Introduction
The UK’s rental market enters 2026 amid a landscape of regulatory transformation, shifting supply-demand dynamics, and cautious investor sentiment. With significant legislative reform set to unfold and rental prices remaining elevated despite easing growth, both landlords and tenants face a year of adjustment and recalibration. Here's what you need to know as the rental sector enters a new era.
Rent Growth Slows But Prices Remain High
After years of rapid acceleration, UK rents have begun to stabilise. In 2025, average monthly rents reached £1,366, with annual rent growth moderating to 4.4%—a notable slowdown driven by a 15% year-on-year increase in supply and softening tenant demand. However, this does not signal falling rents.
Despite increased supply, the number of rental properties remains below 2016 levels, and with many landlords exiting the sector, a sustained shortage persists. Rightmove forecasts a further 2% rental increase for 2026, suggesting upward pressure will continue amidst reduced availability.
A New Era Begins: The Renters’ Rights Act
The most impactful development for 2026 is the introduction of the Renters’ Rights Act, which comes into force on 1 May 2026. Touted as the most comprehensive reform of England's rental sector in decades, the Act will be phased in over ten years. Several fundamental changes take effect immediately:
- All existing Assured Shorthold Tenancies (ASTs) automatically transition into assured periodic tenancies, removing fixed terms and enhancing tenant security.
- Rental bidding and upfront rent payments will be prohibited, levelling the playing field for prospective tenants.
- Rent increases will be limited to once per year, offering greater predictability.
- Eviction processes will undergo reform, including clearer and revised grounds for possession.
The government is still finalising elements such as prescribed tenancy wording and tenant information packs. However, landlords must prepare for robust enforcement mechanisms, including fines up to £40,000 and rent repayment orders for non-compliance.
House Prices and Market Activity
Looking beyond rentals, the broader property market is expected to grow cautiously, with house prices forecast to rise 2%–2.5% nationally, reflecting regional variations. Northern regions are tipped for stronger performance, while overall transactions are pegged at a steady 1.4–1.5 million.
Meanwhile, interest rate relief may be on the horizon. The Bank of England base rate is anticipated to ease towards 3.25%, with typical mortgage rates stabilising around 4%, offering some comfort to prospective buyers and existing owners.
New Regulatory Measures for Landlords
In addition to the Renters’ Rights Act, landlords must navigate new and evolving regulatory obligations:
- From 27 January 2026, heat network regulations apply to landlords providing heating, cooling or hot water via central systems.
- The government continues its review of Business Rates and Investment, with new property tax bands and rate multipliers in development. The consultation remains open until 18 February 2026.
- Legislation to ban upwards-only rent reviews in commercial leases is progressing through Parliament, with the draft now at Committee stage in the House of Lords.
Landlords Under Pressure: The Great Exit Continues
Landlords are increasingly reconsidering their place in the private rental sector. The combination of escalating compliance costs, heightened enforcement powers, and policy uncertainty is contributing to an ongoing exodus of landlords. According to industry observers, this withdrawal is already straining the supply of rental homes and is likely to underpin rent increases in the coming year.
Conclusion
2026 is set to be a transformative year for the UK rental market. While rent growth may moderate, structural shortages and regulatory upheaval will maintain upward pressure on prices. Landlords must adapt swiftly to the demands of the Renters’ Rights Act and other new laws, or risk significant penalties. For tenants, the reforms promise increased stability and fairness. Whether renter, investor, or developer, understanding these shifts will be essential to successfully navigating the UK housing landscape in 2026.