Abstract
This dissertation examines whether private landlords exit the rental market in anticipation of tenancy reforms and assesses the consequent effects on local housing supply. Employing a comprehensive literature synthesis methodology, this study analyses peer-reviewed research from multiple jurisdictions, including the United States, Australia, Ireland, and Germany. The findings reveal that whilst direct empirical evidence of pre-emptive landlord exits specifically triggered by impending tenancy reforms remains sparse, substantial research demonstrates that regulatory changes, fiscal pressures, and declining profitability consistently correlate with landlord disinvestment. Studies from San Francisco indicate that rent control expansion reduced rental housing stock by approximately fifteen per cent, whilst Irish surveys suggest one-third of landlords intend to leave the sector due to regulatory and market pressures. The evidence further demonstrates that landlord exits and property repurposing contribute to diminished long-term rental supply and upward pressure on rents. This research concludes that policymakers must carefully consider the behavioural responses of private landlords when designing tenancy reforms, as unintended supply-side consequences may undermine the very affordability objectives such regulations seek to achieve.
Introduction
The private rented sector has experienced remarkable growth across developed economies over recent decades, becoming an increasingly significant tenure for households unable or unwilling to access owner-occupation. In the United Kingdom, the private rented sector doubled between 2002 and 2017, housing approximately 4.5 million households by 2020 (Ministry of Housing, Communities and Local Government, 2020). This expansion has been accompanied by intensifying policy debates regarding the appropriate balance between tenant security and landlord flexibility, culminating in proposals for substantial tenancy reforms across multiple jurisdictions.
Governments increasingly seek to strengthen tenant protections through measures including the abolition of no-fault evictions, rent controls, and enhanced security of tenure. The Renters (Reform) Bill in England, for instance, represents one of the most significant proposed changes to private tenancy law in a generation. Proponents argue such reforms are essential to address the precariousness faced by renters and to provide stability for families, workers, and vulnerable populations. However, these proposals have generated considerable concern regarding their potential impact on rental housing supply.
The academic significance of this topic lies at the intersection of housing economics, regulatory theory, and urban policy. Understanding how landlords respond to regulatory environments is crucial for predicting housing market outcomes and designing effective policy interventions. The practical importance is equally substantial: if tenancy reforms inadvertently trigger landlord exits, the resulting supply contractions could paradoxically harm the very tenants such policies aim to protect through increased rents and reduced housing availability.
This dissertation addresses a critical gap in the existing literature by systematically examining the evidence regarding landlord behavioural responses to tenancy reforms, with particular attention to whether exits occur in anticipation of regulatory changes. The analysis synthesises findings from multiple international contexts to provide policymakers and academics with a comprehensive understanding of the relationship between regulation, landlord behaviour, and rental housing supply.
Aim and objectives
The primary aim of this dissertation is to critically evaluate the evidence regarding private landlord exits from the rental market in response to tenancy reforms and to assess the consequent impacts on local housing supply.
To achieve this aim, the following specific objectives guide the investigation:
1. To examine the existing empirical evidence on whether private landlords exit the rental market in anticipation of, or in response to, tenancy reforms and other regulatory changes.
2. To identify the key financial, regulatory, and market factors that influence landlord decisions to retain or dispose of rental properties.
3. To assess the documented impacts of landlord exits on local rental housing supply, including effects on rent levels and housing availability.
4. To critically evaluate the mechanisms through which landlord disinvestment affects rental market outcomes, including property conversion, short-term letting, and redevelopment.
5. To synthesise the international evidence and draw conclusions regarding the potential supply-side consequences of tenancy reform policies.
Methodology
This dissertation employs a systematic literature synthesis methodology to address the research aim and objectives. Literature synthesis represents an appropriate methodological approach when direct primary research is constrained and when the research questions benefit from the integration of diverse empirical findings across multiple contexts (Snyder, 2019).
The synthesis draws upon peer-reviewed academic literature, government publications, and reports from reputable organisations. The primary sources include empirical studies employing various methodological approaches, including quasi-experimental designs, econometric analyses of administrative data, and survey-based investigations. This methodological pluralism enables triangulation of findings and provides a more robust evidence base than any single study could offer.
The search strategy prioritised studies examining landlord behavioural responses to regulatory changes, with particular attention to research investigating exits, disinvestment, or property conversion following tenancy reforms, rent controls, or fiscal changes affecting rental property returns. Studies from multiple jurisdictions were included to enable comparative analysis and to identify consistent patterns across different institutional contexts.
Quality assessment criteria were applied to ensure the inclusion of rigorous empirical research. Studies were evaluated based on their methodological sophistication, sample sizes, control for confounding variables, and publication in peer-reviewed outlets. The synthesis integrates findings from studies employing natural experiments, difference-in-differences designs, and large-scale surveys to maximise the reliability of conclusions.
The analytical approach involved thematic organisation of findings around the key research objectives, followed by critical evaluation of the consistency, strength, and generalisability of evidence across studies. Where studies offered conflicting findings, attention was given to methodological differences that might explain divergent results.
Literature review
Theoretical frameworks for understanding landlord behaviour
Economic theory provides essential foundations for understanding landlord investment and disinvestment decisions. Within the portfolio theory framework, rental property represents one asset class among many, and rational investors continuously evaluate risk-adjusted returns relative to alternative investments (Markowitz, 1952). Regulatory changes that reduce expected returns or increase perceived risks should, according to this framework, prompt portfolio rebalancing, potentially including property disposal.
The concept of regulatory risk has received increasing attention in housing economics. Regulatory uncertainty creates additional investment risk that rational landlords incorporate into their decision-making. When governments signal intentions to strengthen tenant protections, landlords may revise their return expectations downward, potentially triggering pre-emptive disinvestment before reforms take effect. This theoretical proposition, whilst intuitively plausible, requires empirical verification.
Institutional economics offers complementary insights through its emphasis on how property rights configurations influence investment behaviour. Stronger tenant protections effectively redistribute certain property rights from landlords to tenants, potentially reducing landlords’ willingness to supply rental housing (Arnott, 1995). However, the magnitude of such effects depends critically on implementation details and market conditions.
Regulatory and financial drivers of landlord exits
Empirical research provides substantial evidence that regulatory changes and financial pressures influence landlord exit decisions. In San Francisco, Diamond, McQuade and Qian (2019) conducted a rigorous quasi-experimental study examining the effects of rent control expansion. Their findings revealed that landlords affected by the policy expansion reduced their rental housing supply by approximately fifteen per cent. This reduction occurred primarily through conversion to owner-occupation or redevelopment, demonstrating that regulatory changes can trigger significant supply contractions.
The San Francisco evidence is particularly valuable because the study exploited a natural experiment created by the 1994 ballot initiative extending rent control to small multi-family buildings constructed before 1980. By comparing buildings just above and below the size threshold, the researchers isolated the causal effect of rent control from other confounding factors. The substantial magnitude of the supply response suggests that landlords are highly sensitive to regulatory changes affecting their expected returns.
Research from Australia provides insights into the financial determinants of landlord retention decisions. Wood and Ong (2013) examined how fiscal and interest rate conditions influence landlord exit probability. Their analysis revealed that exit probability rises when conditions make investments loss-making, with leveraged investors demonstrating particular sensitivity to changes in returns. Importantly, their findings suggest that financial considerations, rather than security of tenure provisions per se, drive many exit decisions.
Survey evidence from Ireland corroborates the pattern of regulatory pressure influencing landlord intentions. Duffy, Kelleher and Hughes (2017) found that approximately one-third of landlords in their national sample reported intentions to leave the sector. The authors highlighted regulatory and market pressures as key factors, noting that maintaining supply represents a significant policy challenge in this context.
Research on subsidised housing programmes in the United States provides additional evidence regarding profit-motivated exit. An and colleagues (2025) examined rural Section 515 properties and found that profit-motivated owners and weaker subsidy packages were associated with higher programme exit rates, reducing the stock of affordable housing. This finding reinforces the broader pattern that reductions in expected returns, whether through regulation or subsidy changes, prompt landlord disinvestment.
Impacts on local rental supply and market outcomes
The consequences of landlord exits extend beyond the immediate loss of rental units to affect broader market dynamics. Diamond, McQuade and Qian (2019) documented that the lost controlled units in San Francisco contributed to market tightening and raised overall rents. Paradoxically, the rent control policy intended to improve affordability may have undermined long-run affordability by triggering supply reductions that affected the entire rental market.
The emergence of short-term rental platforms has introduced an additional mechanism through which long-term rental supply can contract. Li, Kim and Srinivasan (2020) examined the impact of Airbnb on housing rental markets in the United States. Their analysis indicated that landlord switching from long-term to short-term rentals reduces long-term supply and contributes to rent increases. Each additional high-availability short-term rental listing was found to crowd out approximately 0.6 long-term rentals and increase local asking rents by roughly 1.8 per cent.
Similar findings emerged from German research. Duso and colleagues (2021) studied the Berlin market and confirmed that short-term rental growth displaces long-term rental supply. These findings are significant because they demonstrate that landlords respond to regulatory and market environments not only through outright exit but also through tenure conversion, with similar supply-reducing effects.
The cumulative evidence suggests that landlord behavioural responses to perceived regulatory burdens can have substantial market-wide implications. Supply contractions tend to increase rents, potentially harming tenants who do not benefit directly from enhanced protections whilst facing higher housing costs.
Evidence gaps regarding anticipatory exits
Despite the substantial evidence reviewed above, a significant gap exists regarding anticipatory landlord behaviour. Most studies examine responses to implemented policies rather than announced or anticipated reforms. The San Francisco research, for instance, analysed landlord responses following rent control expansion rather than behaviour during the announcement or legislative process.
The question of whether landlords exit pre-emptively in anticipation of reforms has important policy implications. If significant anticipatory exits occur, the supply-reducing effects of tenancy reforms may materialise before protections take effect, potentially undermining policy objectives. Conversely, if exits primarily occur in response to implemented policies, regulatory design and transition arrangements become crucial for managing supply impacts.
Limited evidence exists regarding anticipatory behaviour, partly reflecting methodological challenges. Identifying pre-emptive responses requires clear reform announcement dates, observable landlord behaviour during announcement-implementation periods, and appropriate counterfactual conditions. These demanding requirements have constrained research on this specific question.
Discussion
The synthesised evidence provides important insights regarding landlord responses to regulatory and financial changes, whilst highlighting significant uncertainties regarding anticipatory exit behaviour. This discussion critically analyses the findings in relation to the stated objectives and considers their implications for policy and future research.
Regarding the first objective, the evidence confirms that regulatory changes influence landlord exit decisions, though direct evidence of pre-emptive exits specifically triggered by impending tenancy reforms remains sparse. The San Francisco findings demonstrate substantial landlord responses to rent control, but these responses occurred following implementation rather than in anticipation. The Irish survey evidence captures intentions rather than actual behaviour and does not distinguish between responses to implemented versus anticipated reforms.
The absence of direct evidence regarding anticipatory exits does not necessarily indicate that such behaviour is uncommon. Methodological constraints, including difficulties in identifying clean natural experiments involving announced but not-yet-implemented reforms, may explain the evidence gap. Landlords facing announced reforms may rationally begin exit processes before implementation, but such behaviour is challenging to isolate empirically from other market dynamics.
The second objective sought to identify factors influencing landlord retention decisions. The evidence points to financial considerations as primary drivers, with regulatory burdens operating partly through their effects on expected returns. Wood and Ong’s (2013) findings regarding leveraged investors’ sensitivity to financial conditions suggest that landlords continuously evaluate portfolio allocations. Regulatory changes that reduce expected returns or increase uncertainty would, within this framework, trigger exit consideration regardless of whether formal implementation has occurred.
Profitability emerges as a consistent theme across studies. The Section 515 research demonstrates that profit-motivated owners are more likely to exit when returns decline. This finding has important implications for understanding potential responses to tenancy reforms: if reforms reduce expected profitability, exit pressure will likely intensify regardless of specific policy mechanisms.
The third and fourth objectives addressed supply impacts and transmission mechanisms. The evidence strongly supports the conclusion that landlord exits reduce local rental supply and tend to increase rents. The San Francisco study provides particularly compelling evidence, estimating that rent control expansion reduced rental housing by fifteen per cent among affected buildings. The short-term rental research adds an important dimension by demonstrating that landlords may respond to regulatory environments through tenure conversion rather than outright sale, with similar supply-reducing effects.
The mechanisms through which landlord disinvestment affects supply are diverse. Property conversion to owner-occupation removes units from the rental sector permanently or semi-permanently. Redevelopment may reduce unit counts or change property characteristics. Short-term rental conversion maintains physical stock but removes long-term rental availability. Each mechanism has distinct implications for policy responses: conversion to owner-occupation may benefit would-be homeowners, whilst short-term rental switching provides no such offset.
Regarding the fifth objective, synthesising international evidence reveals consistent patterns despite institutional differences. Across the United States, Australia, Ireland, and Germany, landlords demonstrate sensitivity to regulatory and financial conditions. This consistency strengthens confidence in the general finding that policy changes affecting landlord returns influence supply decisions.
However, important contextual factors moderate these relationships. The magnitude of supply responses likely depends on local market conditions, alternative investment opportunities, landlord characteristics, and specific regulatory design features. Studies from high-demand markets like San Francisco and Berlin may not generalise directly to lower-demand contexts where landlords have fewer exit options.
The policy implications of these findings warrant careful consideration. Tenancy reforms may achieve their immediate objectives of enhancing tenant security whilst generating unintended supply-side consequences that undermine broader affordability goals. This tension does not necessarily argue against reform but suggests the importance of complementary supply-side policies and careful attention to transition arrangements.
Conclusions
This dissertation has systematically examined the evidence regarding private landlord exits in relation to tenancy reforms and their impacts on local rental supply. The analysis reveals important findings whilst identifying significant areas of uncertainty.
The first objective has been partially achieved. Research demonstrates that regulatory changes, including rent control and other tenant protections, correlate with landlord exit and disinvestment. However, direct empirical evidence that landlords pre-emptively leave ahead of specific tenancy reforms remains sparse, representing a significant evidence gap rather than evidence of absence.
The second objective has been substantially achieved. The evidence identifies financial considerations, particularly expected returns and profitability, as primary drivers of landlord retention decisions. Regulatory burdens influence exit decisions partly through their effects on these financial parameters. Leveraged investors demonstrate particular sensitivity to conditions affecting returns.
The third and fourth objectives have been achieved. The evidence strongly supports the conclusion that when regulations or financial shifts reduce landlords’ expected returns, some exit or shift property uses, which shrinks local long-term rental supply and tends to push rents up. The San Francisco research documents a fifteen per cent reduction in rental housing following rent control expansion, with consequent market tightening and rent increases. Short-term rental growth provides an additional mechanism through which long-term supply contracts.
The fifth objective has been achieved through synthesis demonstrating consistent patterns across international contexts. Despite institutional variations, landlords across jurisdictions respond to regulatory and financial pressures through disinvestment, supporting the general mechanism linking policy changes to supply outcomes.
The significance of these findings extends to both academic understanding and policy development. Academically, the research demonstrates the importance of considering supply-side behavioural responses when analysing housing policies. The standard economic prediction that regulations reducing landlord returns will prompt exit receives substantial empirical support, though the specific dynamics of anticipatory behaviour require further investigation.
For policymakers, the findings suggest that tenancy reforms should be designed with attention to their potential supply-side consequences. Complementary policies supporting rental supply, careful transition arrangements, and ongoing market monitoring may help mitigate unintended effects. The goal of enhancing tenant security need not conflict with supply maintenance if policy design incorporates behavioural insights.
Future research should prioritise several areas. First, studies examining landlord behaviour during reform announcement-implementation periods could directly address the anticipatory exit question. Second, research comparing supply responses across different regulatory designs could inform optimal policy development. Third, longitudinal studies tracking individual landlord decisions through regulatory changes could illuminate decision-making processes. Finally, research examining whether specific policy features, such as exemptions, phase-in periods, or compensation mechanisms, moderate supply responses would provide valuable practical guidance.
In conclusion, whilst direct evidence of anticipatory landlord exits ahead of tenancy reforms remains limited, the broader evidence strongly suggests that policy changes affecting landlord returns influence supply decisions. Policymakers pursuing enhanced tenant protections should anticipate potential supply-side responses and develop comprehensive approaches that address both security and supply objectives.
References
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Ministry of Housing, Communities and Local Government, 2020. *English housing survey 2019 to 2020: headline report*. London: Ministry of Housing, Communities and Local Government. Available at: https://www.gov.uk/government/statistics/english-housing-survey-2019-to-2020-headline-report
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