When the Renters’ Reform Bill came skidding round the corner in June this year, it was hailed by property commentators as the biggest shake-up of the rented sector in a generation.

Part of the latest white paper entitled ‘A Fairer Private Rented Sector’, the new Bill has been greeted by the housing charity Shelter as a “game-changer” for England’s 11 million renters. Many tenants have sighed in relief at the banning of Section 21 ‘no fault’ evictions – which, as Levelling Up and Housing Secretary Michael Gove comments, have prevented renters for too long from reporting substandard living conditions, for fear of being told to leave.

And the Daily Mail was among those to flag up the new pet-friendly rental environment outlined in the reform bill, with landlords longer able to enforce blanket bans on tenants with pets or, for that matter, children, or those in receipt of benefits.

There is much to be celebrated here, of course. Few could argue against the need for a fairer private rented sector that seeks to prevent tenants from living in cold, damp, unsafe homes, or in fear of eviction.

Many landlords, though, feel the attempt at fairness doesn’t work both ways, and the Bill has sent shivers through some areas of buy-to-let. Banning fixed-term lets, for example, will be a “hand grenade” for the student let sector, according to Richard Reed at property118.com, who says that landlords will no longer be able to guarantee spaces to students at the start of the next academic year. 

The Bill comes, too, after several years of reforms that have felt increasingly punishing for many landlords, driving them to leave the sector in their droves. Some are selling up in anticipation of rising interest rates and eventual price falls. Others feel that the increased financial burden on them, since the introduction of measures such as the 3% stamp duty surcharge and the loss of mortgage interest tax relief, is unsustainable. Many simply feel there is too much uncertainty – and these reforms merely fuel their fears.

There are also many landlords, though, with no plans whatsoever to leave the sector. And those who do remain are reaping the rewards of the huge mismatch in supply and demand of rental properties, which has seen prime London rents rise by 13.5% this year, the highest rise since 1998, according to Savills. The property agency adds that flats are now outperforming houses, with rents rising by 14.9% and 11.7% respectively.

Some landlords are of the accidental variety, and doing very nicely. One landlord in south-west London – who prefers not to be named – “became a landlord by chance,” she says. “I’d sold my London house to move out of the city, and then inherited my mother’s flat, so I decided to keep it.” That flat is now a bolthole that she uses in summer and occasional trips to London and she rents out the rest of the time on short lets.

Or there’s Nicholas Scallan, who became a landlord when he was offered “a great job” overseas but didn’t want to sell the property he bought off-plan seven years ago in case he ever returned to London. “It has covered the mortgage throughout and left me with a little bit extra left over,” says Nicholas. “Draker Lettings manage the property for me, so I can get on with my life without thinking about it, and it’s an asset that is increasing in value as it’s in a very sought-after modern development.”

There are undoubtedly landlords who are longer in the tooth and look back wistfully at the good old days – ever since Assured Shorthold Tenancies (ASTs) were first created in 1988, freeing up and modernising the market for mortgage lenders and aspiring landlords.

By the mid 90s, a new era of landlords was here to stay. More and more London-centric investors either kept hold of their first home as a buy-to-let investment while making their own house moves up the ladder, or they began diversifying their income or pension by investing in residential property. They were given a helping hand too by the 1988 and 1996 Housing Acts, which removed rent controls, allowing landlords to let at market rents, and gave them powers to repossess their property through the courts if they had to deal with bad tenants.

What’s more, over the next 15 or 20 years, there were very few legislative changes that hindered their ascent. This was an era in which it was easy to borrow, easy to release equity and you could offset all costs against income to reduce your tax liability. Rental yields tracked capital values, so a property worth £1m would rent for £1,000 a week. For those fortunate enough to be a buy-to-let landlord, it felt like it was impossible to lose.

So what happened? The Government intervened and began a punitive series of tax and legislative changes that have hit landlords where it hurts. Before the loss of mortgage interest tax relief, a landlord with a £150,000 buy to let mortgage on a property worth £200,000, with a monthly rent of £800, would have a net profit of £2,160 a year. The new system leaves them with a net profit of £960, according to estimates by the Nationwide Building Society.

Some landlords have responded by raising their rents – but they risk pricing themselves out of the market. Others have found more workable solutions, such as transferring ownership of the property to a lower tax-paying spouse, or placing their property in a limited company, which means paying corporation tax instead of income tax on their profits.

But that’s just one way in which the Government has made being a landlord more taxing in every sense. You need to check the legal status of your tenants, to satisfy the Right to Rent requirements. New EPC rules coming into place in 2025 mean all rental properties must be rated EPC C or above (currently, two thirds are rated D), or they will face fines of up to £30,000. And there’s EICR, another acronym to add to the collection, to ensure all electrical appliances meet the safety criteria.

It's also impossible now to offset any improvements you make to your property - a disincentive, as some may see it, to investing in upgrading their investment properties.

But it’s very far from all bad news for landlords. Yes, on the face of it your profits may be diminished by regulations that have been introduced in recent years. But you can still offset all other maintenance and running costs, including your property insurance, cleaner’s wages, letting and management fees, accountant’s fees and the replacement cost of white goods.

Rents are rising at their fastest rate in 24 years. And – the big one – London landlords are in it for the capital growth. Had you invested £100,000 in the stock market in 2010, you would have made a 77% profit in a decade. Had you put the same amount into a buy-to-let property in central London, however – investing £100,000 in a £500,000 property, with a £400,000 mortgage – your investment would have risen by 387%.

As a landlord in London, you have the long-term security of a physical asset over which you have total control and which, over time, will rise in value. There will be peaks and troughs and cataclysmic geo-political events – including shock referendum results and global pandemics - that threaten to derail everything we know. Yet the world still turns, and around 100,000 people a year still want to move to the capital and need somewhere to live.

Should you want to use your property from time to time, too, you have the benefit of constant high demand – and high rates - for short let properties in London, a way for landlords to push up their returns.

One certain lesson for London landlords in 2022 is not to over-leverage. In a climate of rising interest rates, rising inflation and a cost of living crisis, you don’t want to be kept awake at night by the fear of over-borrowing, and for London landlords the average loan to value is currently 39%.

To mitigate some of the other costs, you should also consider buying in a company name, and draw up a solid business plan that forces you to stay on top of the detail and all the costs. New laws, regulations and reforms are an inevitable part of the picture. But if you get it right, the uplift in value and subsequent return on investment are all you need to focus on.