Why Landlords Are Fleeing the Buy-to-Let Market

“We’re Evicting Our 90-Year-Old Tenant Because of Labour”:

Labour’s rental reforms may aim to protect tenants – but for long-standing landlords like Alan Shields, they mark the end of the road.

The UK’s private rental sector is undergoing a seismic shift. For years, political pressure has been mounting to address the precarious situation faced by many tenants across the country. Against a backdrop of spiralling rents, growing homelessness, and rising demand for affordable housing, the Labour Party’s promise to abolish so-called no-fault evictions has won public favour. Yet for many landlords – especially those who have been in the sector for decades – it feels like a betrayal.

Alan Shields is one such landlord. At 75, and having owned and rented out a single property in Hampshire since 2002, he has reluctantly decided to sell up – and with that decision, came the painful task of evicting his 90-year-old tenant.

“It was one of the hardest decisions we’ve made,” said Mr Shields. “We’ve known him for 18 years. He’s ex-military, polite, and always paid his rent on time. But with the way things are going, we just couldn’t justify holding on to the property.”

A Landlord by Chance

Mr Shields never set out to be a landlord. Back in the early 2000s, the opportunity arose when the bungalow next door to his own home failed to sell. The previous owner was struggling, and the neighbour on the other side – who already had a modest rental portfolio – proposed they go in together on the purchase. When that partner pulled out, Mr Shields and his wife went it alone, buying the house for £164,000 and investing a further £20,000 in renovations.

For the next two decades, the couple rented the property to a single tenant: a quiet, reliable elderly man who paid his rent without fail. Their arrangement was informal, neighbourly, and stable – everything the modern rental market often lacks.

But that simplicity has now given way to growing anxiety, red tape, and fears of punitive taxation.

“We’re not in this to get rich,” Mr Shields explained. “We saw it as a long-term investment, something solid. But with all the changes to legislation, the removal of Section 21, and talk of raising capital gains tax, we felt backed into a corner.”

Section 21: The Final Straw

Section 21 of the Housing Act 1988 allows landlords to evict tenants without giving a specific reason, provided proper notice is served. While often criticised for enabling unfair evictions, it has been a cornerstone of landlord flexibility.

Labour has long committed to scrapping it. The Conservative government, under Michael Gove’s Department for Levelling Up, Housing and Communities, had also proposed abolishing it, aligning both major parties on the issue. For landlords, this bipartisan consensus signalled the writing was on the wall.

“We waited to see what would happen after the election,” Mr Shields said. “But the prospect of losing Section 21 entirely was too big a risk. We had to act.”

He isn’t alone in his decision. According to the most recent English Private Landlord Survey, approximately one third of landlords are planning to sell some or all of their rental properties in the coming year. The primary reasons? A cocktail of legal uncertainty, diminished tax relief, rising mortgage costs, and growing fears of being locked into problematic tenancies with no straightforward route to repossession.

A Business No Longer Worth the Trouble?

For many small-scale landlords like Mr Shields – who make up the majority of the UK’s buy-to-let market – the pressures are piling up. The past decade has seen the erosion of tax incentives and a steady rise in regulatory burdens.

Once allowed to deduct mortgage interest from rental income for tax purposes, landlords now receive only a 20% basic rate relief. For higher-rate taxpayers, the cost of owning mortgaged properties has skyrocketed. Factor in stricter energy efficiency rules, complex licensing requirements, and the possibility of tenants gaining indefinite security of tenure, and it’s no surprise so many are throwing in the towel.

Mr Shields admits they have done well out of the property, financially speaking. Bought for £164,000, it recently sold for £425,000 – a tidy sum, albeit one that brings its own tax implications.

“We’re looking at a hefty capital gains tax bill even at current rates,” he said. “And the uncertainty around whether Labour would raise CGT to 45% really forced our hand.”

In the end, Chancellor Rachel Reeves opted not to raise capital gains tax in her post-election budget. But for many landlords, the damage has already been done.

“You can’t run a business based on crossed fingers,” Mr Shields added. “The risk is too great.”

Human Cost of a Shrinking Rental Market

The personal toll of these decisions is profound. Though they were legally entitled to issue a Section 21 notice, Mr and Mrs Shields found it emotionally difficult.

“Our tenant wasn’t in the best health and struggled with maintaining the property,” Mr Shields said. “But he’d been with us so long. It felt cruel.”

The couple assisted him in finding a new home, not far away, and did everything they could to ensure the transition was smooth. Still, the experience left a sour taste.

“This is what happens when politicians make sweeping changes without thinking about the consequences,” Mr Shields lamented. “It’s the renters who’ll end up suffering the most.”

That prediction is already playing out. According to figures from the Department for Levelling Up, Housing and Communities, the number of households at risk of homelessness due to landlords selling their properties has surged in recent months.

Between October and December 2023, 5,400 private rental households sought council help to avoid homelessness following a Section 21 eviction. By April to June 2024, that figure had climbed to 7,130 – a rise of over 30%.

Supply Crisis Worsens

Ben Beadle, Chief Executive of the National Residential Landlords Association (NRLA), has warned repeatedly that the UK faces a deepening supply crisis in the rental market.

“Right across the country, it is tenants who are suffering as landlords decide to sell up,” Mr Beadle said. “No amount of changing the rules about when landlords can sell will address the central problem in the rental market – namely, a chronic shortage of homes to meet demand.”

Landlords aren’t just selling up out of fear; many are being squeezed out. Rising interest rates have made buy-to-let mortgages significantly more expensive. Recent research shows that the average two-year buy-to-let fixed rate is now above 6%, compared to just 3.5% two years ago. This has forced many landlords to operate at a loss, particularly in areas with rent controls or high maintenance demands.

Add to that the requirement for all rental properties to meet EPC band C by 2028 (a measure since delayed, but still looming), and the financial burden becomes untenable for smaller landlords.

Who Will House the Nation?

As landlords leave the sector, supply is tightening – and tenants are feeling the pinch. Competition for rental properties has reached fever pitch in cities like London, Manchester, and Bristol, with queues forming outside viewings and some renters offering to pay above asking price to secure a home.

In rural and suburban areas, where landlords like Mr Shields once offered stable, long-term housing, the exodus is equally worrying. Local authorities are already stretched thin, with social housing waiting lists growing and emergency accommodation costs rising.

“The irony is that in trying to protect tenants, the reforms may leave many without anywhere to live,” said one Hampshire estate agent, who asked not to be named. “We’re seeing properties flood onto the sales market, but these were homes once rented to low-income or elderly tenants who now face being displaced.”

Is Reform Still Possible?

Few would dispute the need for greater protections for renters in the UK. Horror stories of rogue landlords, unsafe homes, and exploitative evictions are far too common. But critics argue that the current approach – targeting landlords with tax hikes and sweeping legal reforms – risks throwing the baby out with the bathwater.

The NRLA has urged the Government to take a more balanced approach, one that supports good landlords while rooting out bad actors.

“We need to ensure a fair, transparent system,” Mr Beadle said. “Abolishing Section 21 without court reform will trap landlords in situations where they can’t act, even when things go wrong. That’s not sustainable.”

Court delays are already a major issue. It can take six months or more to gain possession of a property through Section 8 – the alternative to Section 21 – if a tenant refuses to leave. For landlords reliant on rental income to pay mortgages or supplement pensions, that delay can be financially ruinous.

A Vanishing Middle

The UK’s rental sector is polarising. On one side, corporate landlords and institutional investors are expanding their reach, snapping up properties at scale. On the other, small private landlords – the traditional backbone of the market – are exiting in droves.

This “vanishing middle” is a concern not just for tenants, but for communities. Long-term landlords often have a vested interest in maintaining their properties and building relationships with tenants. Corporate operators, by contrast, may lack that personal touch.

Alan Shields represents that middle. A local resident, neighbour, and modest investor who never viewed property as a quick-profit scheme. Now, he’s bowing out – and warning others to think carefully.

“There’s no security in it anymore,” he said. “We did our best by our tenant. But I don’t think we’d ever do it again.”

Conclusion: A Tipping Point for Buy-to-Let

The UK’s rental market is at a crossroads. The policy drive to protect tenants is well-intentioned – but the current execution is pushing landlords out faster than new ones can enter.

If the Government wishes to avoid a full-blown rental crisis, it must balance the scales. That means court reform, realistic tax policy, and support for responsible landlords who provide stable homes to millions.

Otherwise, stories like Mr Shields’ will become the norm – and vulnerable tenants may find themselves with fewer protections, not more.