Two-thirds of landlords raising rents as costs bite in 2026

Rising Costs Trigger Rent Increases Across UK Private Rental Sector

Almost two-thirds of professional landlords have increased rents in response to mounting operating costs, according to Handelsbanken's latest Property Investor Report. The survey of 200 UK property investors, landlords and property management professionals found that 63% had raised rents as higher borrowing, maintenance, insurance and compliance costs continue to squeeze the private rented sector.

The research reveals that landlords are not simply passing costs on to tenants—they are fundamentally reshaping their approach to lettings. Some 41% of respondents have changed the type of tenants they target, prioritising lower-risk applicants, whilst 59% said the forthcoming Renters' Rights Act had prompted them to tighten tenant selection criteria. Additionally, 44% are considering bringing forward planned rent increases, suggesting landlords may be accelerating affordability pressures ahead of new regulations.

Maintenance and Compliance Costs Drive Portfolio Changes

Maintenance and repairs emerged as the most frequently cited cost pressure, identified by 45% of respondents, followed by insurance (41%) and energy efficiency improvements (40%). These escalating expenses are influencing investment decisions across the market: one in five landlords (20%) reported selling properties because of rising costs, whilst 19% had removed properties from the rental market entirely.

Compliance with the Renters' Rights Act represents a significant additional burden. The median estimated cost of compliance was £5,000, though the average figure of £31,411 reflects substantial variation between portfolios. Looking ahead, the median expected spend on compliance and property upgrades over the next 12 months is £20,000—a substantial outlay that many investors are now factoring into their planning.

Concerns about underinvestment are mounting, with 46% of landlords reporting they had delayed upgrades or improvement works. This slowdown in property investment could have long-term implications for rental stock quality and availability. The findings underscore that rising operating costs are affecting not only rental prices but also landlords' approach to tenant risk, arrears exposure and long-term tenancy stability.

Confidence and Selectivity: A Tale of Two Markets

Despite these pressures, professional property investors remain broadly confident about the sector's long-term prospects. Some 84% plan to increase their portfolio holdings over the next 12 months—a significant jump from 54% in the 2025 survey. Almost all respondents (93%) expect their portfolio value to rise over the same period, with 38% anticipating growth "a lot".

Among those planning to expand their portfolios, 70% cite buying opportunities or valuations as drivers, whilst 58% point to strong rental demand and 33% reference financing availability. For investors tracking deal finder opportunities, these statistics suggest continued appetite for acquisitions despite the challenging cost environment.

However, this confidence is accompanied by greater discipline. James Sproule, UK chief economist at Handelsbanken, noted: "The private rented sector is not simply becoming more expensive for landlords to operate; it is becoming more selective. Higher costs and greater tenant rights are feeding into rent decisions, but they are also changing how professional investors think about tenant risk, affordability and long-term portfolio planning."

The dual picture emerging is clear: whilst professional investors remain committed to property, they are increasingly selective about which properties to hold, which tenants to accept, and how aggressively to raise rents. For tenants, this means the challenge extends beyond monthly costs to securing suitable homes in an increasingly competitive environment.

The Renters' Rights Act represents both a regulatory hurdle and a catalyst for portfolio reassessment. Investors using planning alert tool systems to track regulatory changes may find themselves better positioned to anticipate further shifts in the market landscape as new legislation takes effect and costs continue to evolve.

Source: Property Industry Eye.