Every so often, property throws up a trend that tells us a lot about the state of the market. Right now, it’s not just house prices or rents making headlines, but the future of the smaller landlord. Those with just one or two properties are finding themselves under pressure as costs rise, rules tighten, and the outlook remains uncertain.

For some, the journey begins almost by accident. They may inherit a home, move elsewhere for work, or buy somewhere new and decide to rent the old place rather than sell. Others simply hold onto property as a long-term investment. Whatever the route, these landlords often find themselves in a world that feels more complex, costly, and demanding than they expected.

In London and other big cities, this has become more noticeable. Sales have slowed as buyers hesitate, often waiting for clarity on taxes or interest rates. At the same time, rental demand has remained strong, making letting a tempting short-term solution. Short-term lets in particular are booming, with owners choosing to rent for six months rather than accept a low sale price.

On the surface, it looks like a smart workaround. Keep the asset, cover the mortgage, and perhaps even turn a profit while waiting for better conditions. Yet the reality is far tougher. Safety certificates, deposit protection, licensing, and tax declarations are all mandatory, and failing to comply brings heavy penalties.

The financial squeeze is also biting hard. Mortgage rates remain high, wiping out much of the return smaller landlords used to enjoy. Tax rules have shifted too, with mortgage interest relief capped at 20% and the stamp duty surcharge still in place. Even selling brings its own sting in the tail with capital gains tax. For many, what was once a sound investment now feels like a financial burden.

It doesn’t stop there. Regulation has been tightening steadily, with the looming Renters’ Rights Bill set to abolish Section 21 no-fault evictions. While designed to protect tenants, it leaves many smaller landlords feeling exposed, worried about what happens if they cannot regain possession quickly when things go wrong.

The result is clear. Many landlords are leaving the sector altogether, selling up because the risks and costs outweigh the rewards. Others are turning to short-term lets in search of flexibility and higher returns, though this brings extra turnover, more admin, and often stricter local restrictions. Those who remain are increasingly professionalising – running their properties more like full businesses than side investments.

This raises bigger questions for the housing market. If small landlords continue to exit, rental supply shrinks, pushing rents higher for tenants. At the same time, fewer properties make it onto the sales market, leaving first-time buyers frustrated. The market relies on smaller landlords to provide much of the nation’s rental housing, yet the pressure they face is making many reconsider their place in it.

On Property Matters this Tuesday 30th September at 1pm, Gareth Wax and myself, Hamish McLay, will be exploring whether smaller landlords can really survive the squeeze. Are they being pushed out by design, leaving space for big institutional investors? Or will they adapt and find ways to thrive in a tougher, more regulated market?

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