Rent Arrears Surge by 50% Following Renters' Rights Act Reforms
Chloe Grima ·
Rent arrears have risen sharply, with new figures showing that nearly one in five tenancies experienced missed or outstanding rental payments during the third quarter of 2026.
According to deposit alternative provider Reposit, 18% of tenancies in its dataset experienced arrears in Q3 2026, compared with 12% during the same period last year. This represents a 50% relative increase.
The findings, reported by Letting Agent Today, come as the private rented sector adjusts to changes under the Renters' Rights Act, raising concerns about rental affordability and financial risks for landlords.
1. Rent Arrears Reach a Three-Year High
Reposit's research suggests that 2026 is on course to record the highest proportion of tenancies affected by arrears in three years.
Across the first nine months of 2026, an average of 18% of tenancies experienced arrears, compared with 15% during the same periods in 2024 and 2025.
Despite the increase in affected tenancies, the average amount owed remained relatively stable at £1,837, just £13 higher than the previous year.
This suggests that payment difficulties are becoming more widespread among Reposit's tenancies, rather than individual arrears balances increasing significantly.
Source: Property Reporter – Rent Arrears on Course for Three-Year High
2. Rising Rents and Household Costs Add to Financial Pressures
Although rental inflation has slowed, tenants continue to face rising housing costs.
According to the Office for National Statistics, average UK monthly private rents reached £1,406 in September 2026, an annual increase of 3.8%, or £52 per month.
Meanwhile, annual regular wage growth stood at 3.7% in the three months to August 2026, with private sector wage growth at 3%. Consumer price inflation reached 3.5% in September.
With household expenses continuing to rise, some tenants may be finding it increasingly difficult to keep up with rental payments.
3. How Does the Renters' Rights Act Affect Rent Arrears?
The increase comes following the introduction of major reforms under the Renters' Rights Act in England on 1 May 2026.
The legislation abolished Section 21 'no-fault' evictions and introduced changes to possession procedures for landlords dealing with unpaid rent.
Under the revised mandatory Ground 8, the serious rent arrears threshold increased from two to three months' rent for tenants paying monthly, while the minimum notice period increased from two to four weeks.
These changes mean landlords generally need to meet a higher arrears threshold before obtaining mandatory possession on this ground.
Source: GOV.UK – Renters' Rights Act: An Overview for Landlords
However, while arrears have increased following the reforms, the available data does not establish that the legislation directly caused the rise.
4. Landlords Face Growing Financial Concerns
The latest figures also highlight concerns about the financial risks associated with unpaid rent.
According to Ministry of Justice figures cited in industry reporting, landlord possession claims in England and Wales increased by 6% year-on-year to 23,635 in Q2 2026. These claims cover multiple possession grounds, not just rent arrears.
Ben Grech, Chief Executive of Reposit, highlighted the difference between typical tenancy deposits and outstanding rent.
Reposit's figures show that an average cash deposit equivalent to five weeks' rent stands at £1,258, compared with the average arrears balance of £1,837, a difference of £579.
Grech also expressed concerns about the financial risks facing landlords under the revised possession procedures, alongside high interest rates and inflation.
According to Reposit, these pressures are contributing to increased landlord caution and interest in alternative deposit arrangements that may offer additional protection while reducing tenants' upfront costs.
5. What Does This Mean for Letting Agents?
Rising arrears can create additional challenges for letting agents, particularly those managing large property portfolios.
When payments are missed or delayed, agencies need clear financial records to identify outstanding balances, monitor rent received and provide landlords with accurate information.
Effective client accounting helps ensure that rental payments are correctly allocated, transactions are recorded and client accounts are regularly reconciled.
Although these procedures cannot prevent rent arrears, they support financial accuracy and help agencies maintain clear oversight of the money they handle.
6. Looking Ahead
As the rental sector adapts to rising arrears and changing legislation, efficient client accounting remains important for letting agents.
At The Letting Partnership, our fully outsourced Client Accounting service handles rent processing, landlord and supplier payments, daily reconciliation and associated accounting administration.
While outsourcing cannot prevent rent arrears, it reduces the administrative burden on agencies, allowing them to focus on supporting landlords, managing properties and growing their businesses.
And there's no need to change your existing software or banking arrangements.
