Why Landlords Are Walking Away From Buy To Let In 2026

Hi Everyone,

I hope you are having a great week so far?

We are in the property sector in the UK and Europe and the property market has been undergoing some major changes in 2026. In the UK house prices have levelled off and in some areas have dropped and there is a real problem finding a buyer if you would like to sell your property. Sellers are having to be realistic about selling prices in a buyers market.

For decades, buy-to-let was the default route into property investment for ordinary people in the UK. Borrow against a 25% deposit, let the rent cover the mortgage, watch the capital grow. It was simple, tax-efficient, and largely unregulated. That model has been dismantled piece by piece over the last decade, and 2026 looks like the year the cracks finally became a collapse for a huge number of small landlords.

Two pieces of legislation, arriving almost a decade apart, are doing most of the damage: Section 24 of the Finance Act, phased in between 2017 and 2021, and the Renters' Rights Act, whose first phase came into force on 1 May 2026. Individually, either might have been survivable. Together, they've changed the maths and the mentality of being a private landlord.

Section 24: The Tax Change That Started the Squeeze

Before 2017, landlords could deduct 100% of their mortgage interest from their rental income before calculating tax. Section 24 stripped that away over a four-year taper, replacing it with a flat 20% tax credit regardless of what rate of income tax the landlord actually paid.

The effect was brutal for anyone who was a higher-rate taxpayer, or who became one once their full rental income was counted against their salary. A landlord could now be taxed on turnover rather than profit. In some cases, landlords with heavily mortgaged portfolios found themselves owing tax in years when they'd made little or no real cash profit at all — because the interest they were paying to the bank no longer reduced their taxable income, only their tax bill by a fixed 20%.

For portfolio landlords with several mortgaged properties, this pushed many into incorporating as limited companies to keep full interest relief. For smaller, part-time landlords — the accidental landlord who inherited a flat, or the couple who bought a second property as their pension — incorporation often wasn't worth the capital gains and stamp duty hit of transferring the property into a company. Many simply found the numbers no longer worked and began exiting.

The Renters' Rights Act: Removing the Landlord's Exit Ramp

If Section 24 changed the economics, the Renters' Rights Act has changed the control. Phase one came into force on 1 May 2026, and its headline change is the abolition of Section 21 "no-fault" eviction notices. Landlords can no longer simply serve notice and take a property back at the end of a fixed term. Almost all existing assured shorthold tenancies converted automatically into assured periodic tenancies on that date, meaning there is effectively no fixed term at all any more — tenants can leave with two months' notice, but landlords can only regain possession by relying on a Section 8 ground, with its own evidence requirements and, in many cases, lengthened notice periods.

Add to that the extension of rent repayment orders to superior landlords, doubled penalties for repeat offenders, a mandatory private rented sector database landlords must register and pay for, and a new ombudsman scheme on the way, and the day-to-day job of being a landlord has shifted from largely passive income to something closer to a compliance-heavy small business. For many people who bought one or two properties years ago as a pension supplement, that was never the deal they signed up for.

EPC Reform: A Third Cost Landing on Top

As if a tax squeeze and a regulatory overhaul weren't enough, landlords are now also staring down a significant energy efficiency bill. Under the government's Warm Homes Plan, confirmed in January 2026, the minimum Energy Performance Certificate rating for privately rented homes in England and Wales is set to rise from Band E to Band C, with a single compliance deadline of 1 October 2030 applying to all tenancies — new and existing alike.

The scale of the task is significant: around 2.5 million rental homes in England currently sit below a C rating, and over half of all private rented stock would need upgrading to comply. The government has set a cost cap of £10,000 per property (reduced from an original £15,000 proposal) — landlords who spend up to that cap and still can't reach a C can register a 10-year exemption. But for many properties, especially older solid-wall terraces or homes needing insulation, glazing and heating upgrades, real-world costs can run well beyond that cap, and the supply of qualified retrofit tradespeople is already forecast to fall around 250,000 short of demand by 2030.

There's also a moving target buried in the detail: the government is overhauling how EPCs are calculated altogether, shifting to a new Home Energy Model that scores properties on how well they retain heat rather than simply how much energy they use. That system is expected to become compulsory from October 2029, meaning a property that scrapes a C rating under today's methodology may need further work to keep that rating once the new model beds in. For landlords already absorbing Section 24's tax hit and the operational burden of the Renters' Rights Act, a five-figure capital spend with a moving compliance bar is often the final piece that tips the decision toward selling rather than upgrading.

What's Actually Happening on the Ground

The data backs up the mood. Industry figures suggest well over 800,000 rental homes have left the sector in recent years, with roughly 180,000 exiting in 2025 alone as landlords rushed to sell ahead of the Act taking effect. Surveys of landlords going into 2026 found around a third planning to shrink their portfolios, and a meaningful minority considering selling everything within two years.

Interestingly, the pace of outright panic-selling has eased since the Act actually landed. Some data providers have reported the share of previously-rented homes coming to market falling sharply quarter-on-quarter in early 2026, suggesting many landlords who intended to sell had already done so in the run-up to May, and that the market has settled into more of a "wait and see" holding pattern rather than a fresh stampede. But the underlying trend is unmistakable: very few of the homes that do sell are being bought by other investors. Most are going to owner-occupiers, which means the stock leaving the rental sector isn't being replaced — private rental supply is shrinking, not just changing hands.

Why This Matters Beyond Individual Landlords

The irony sitting underneath all of this is that both pieces of legislation were designed, at least in part, to help tenants — Section 24 by cooling an overheated market dominated by leveraged investors, and the Renters' Rights Act by giving tenants more security and protection from arbitrary eviction. But a shrinking pool of available rental homes, combined with landlords who remain becoming more selective and risk-averse about who they let to, tends to push rents up rather than down. Reduced supply against steady or rising demand is a straightforward economic pressure, regardless of the good intentions behind the policy.

What It Means If You're Still In the Market

For landlords weighing up whether to stay, the calculation has genuinely changed. Highly leveraged individual ownership is now one of the least tax-efficient ways to hold rental property, and the operational side of letting requires far more attention to process, documentation and compliance than it used to. That doesn't automatically mean selling is the right answer for everyone — incorporation, portfolio consolidation, professional management, or a shift toward specialist and more resilient parts of the market are all live options worth modelling properly before deciding. But anyone still treating buy-to-let as the same passive, tax-light investment it was pre-2017 is working from an outdated playbook, and the numbers in 2026 make that clearer than ever.

We have come across a new business model that we think can replace the Buy To Let model in 2026 and beyond, it is called Specialised Supported Housing.

Specialised Supported Housing is the development and provision of good quality purpose built residential accommodation for vulnerable and disabled people. The business model involves a 15 year + Full Repairing and Insuring lease. It does not involve dealing with tenants directly, and it gives great return on investment.

Ill explain about Specialised Supported Housing in our next post.

Have a great week ahead wherever you are in the world!

Cheers

Alan