Landlords considering a shift to short-term lets to avoid the complexities of the new Renters’ Rights Act have a limited window to act, and should perhaps prioritise investment elsewhere, according to experts.
Simon Caines, property expert at Buy Association, said: “The Renters’ Rights Act has already been reshaping the private rental sector in recent months, with much of the focus being on the ‘no-fault’ eviction legislation, reducing flexibility in the long-term lettings market.
“As a result, many landlords have started to reassess their position in the market, with growing discussion around whether short-term holiday lets could offer an alternative route to maintain high rental yields.”
Not a straightforward switch
However, he warned that the decision is not a straightforward switch, with the government also considering cracking down on landlords who convert residential housing, particularly in tourist areas, into short-term rentals.
He said: “This adds another layer of complexity for landlords considering a move into short-term lets, with stricter council tax rules and tighter criteria on how long a property must be let to qualify. This means landlords are now facing increasing pressure across both long and short-term markets,” he said.
He pointed out that the sector is already dealing with rising financial and regulatory challenges. “For example, landlords can no longer fully offset mortgage costs for holiday lets unless operating via a company structure, further squeezing profits. As a result, returns are already less attractive than they once were. “When this is combined with tighter rules on long-term lets, it creates a more challenging environment for investors and landlords when deciding where to position their portfolios.”
Sustainable yield areas a better focus
Instead, he said investors should consider shifting their focus to areas such as Manchester and Liverpool that still offer strong, sustainable yields.
“This could ultimately deliver higher and more consistent rental yields over the long term than short-term lets once did,” he said.
Caines said that investors who are adaptable, plan carefully, and target high-demand areas with stable tenant profiles, while aligning with evolving regulations, are far more likely to achieve sustainable returns in the year ahead. The key, however, will be adapting early, he said.
“The rental sector is becoming more professionalised by the day, and landlords who treat it as a long-term investment rather than a short-term asset are the ones most likely to succeed.”
This article is taken from Landlord Today