Could restrictions on upfront rent be coming to Wales? What landlords need to know
If you’ve been following the latest changes to renting rules in England, you may have noticed something that could eventually have implications for landlords here in Wales.
Landlords in England can no longer ask tenants to pay more than one month’s rent in advance, so the days of asking for three, six or even 12 months’ rent upfront for security are gone. Additionally, they’re prohibited from accepting offers above the advertised rent. Those rules don’t currently apply in Wales.
It’s an interesting change in direction. When the Renting Homes (Wales) Act came into force in 2022, Wales was widely regarded as being ahead of England in a number of ‘tenant protection’ areas. But since England’s introduction of the Renters’ Rights Act, England are now soon as leading the way on issues such as upfront rent and rental bidding, as well as protecting tenants from eviction without very good reason.
With Welsh Government preparing further housing legislation during this Senedd term, the question is whether Wales could eventually follow a similar path.
How much are we talking about?
According to the latest ONS figures, the average private rent in Wales is now £843 a month, an increase of 4.5% over the year.
That means:
- Six months’ rent would be £5,058
- A full year’s rent would be £10,116
Rents are considerably higher in some parts of Wales, of course. In Cardiff, for example, average rents are above the national average, meaning the amount required to pay several months upfront can quickly become significant.
For the majority of tenants who pass standard referencing, this isn't really an issue. They pay their deposit and first month's rent and move into the property in the usual way.
The situation becomes more interesting when an applicant doesn't quite fit the standard referencing criteria…
Why can upfront rent be useful?
Asking for more than one month’s rent in advance isn’t very common, but there are situations where it can provide another option.
For example, we may come across applicants who can comfortably afford the rent but don't meet the usual referencing criteria. That could include:
- International workers or students without an established UK credit history or a suitable UK guarantor
- Freelancers and contractors whose income doesn't fit neatly into standard referencing criteria
- Applicants with historic financial issues who are now in a much stronger financial position
In these situations, rent in advance can sometimes provide a practical way for a landlord to manage the additional risk while allowing an otherwise suitable tenant to secure a home.
What happens if that option disappears?
We can understand why England have shone a light on upfront rent. After all, asking someone to find several thousand pounds before they can move into a property is a significant financial barrier.
However, there is also a question about what happens to the applicants who currently use upfront rent as an alternative to a traditional guarantor and/or referencing profile.
Not every applicant fits neatly into a standard referencing model, i.e. pass a credit check with a good credit score and no County Court Judgement (CCJs), and provide suitable landlord and employer references.
Someone may have a good income and enough money to comfortably afford their rent, but have no UK credit history, an unusual employment structure or a historic financial issue.
If Welsh Government decide upfront rent is no longer available as one of the ways of managing that risk, some of these applicants may struggle to secure a property, when in reality they’d have been a perfectly good tenant.
Landlords may reconsider whether they want to remain in the rental market
There is also the wider question of landlord confidence.
Private landlords are already operating in a market with increasing regulation and compliance requirements. If further restrictions remove another tool they can use to manage risk, some landlords here in Wales may decide that letting property is no longer attractive enough.
If more landlords sell, that reduces the supply of privately rented homes. And, ultimately, fewer homes available to rent means more competition between tenants for the properties that remain, which will drive up asking prices.
So, could Wales introduce a cap like England?
At the moment, there is no cap on upfront rent in Wales equivalent to the restrictions introduced in England.
There is also no need for landlords to change their current approach simply because similar rules have been introduced over the border.
But housing policy in Wales continues to evolve, and further changes are expected during this Senedd term. This is Plaid Cymru’s first term in office, and their manifesto spoke about making renting fairer and strengthening tenants' rights, so this is one to keep an eye on.
What should landlords in Wales do now?
For now, our advice is simple: don't change your strategy because of something that hasn't happened. Instead, make sure you're prepared for the market you're operating in.
That means understanding your current referencing process and what alternative risk-management options are available when an applicant doesn't meet the usual criteria.
Changes to housing legislation can sound significant when you first read the headlines, but what matters to an individual landlord is how those changes actually apply to their property, their tenants and their circumstances.
We'll continue to keep an eye on developments from the Welsh Government and the Senedd and, if the position changes, we'll explain what it actually means for landlords rather than simply repeating the headline.
If you're about to let a property and want to talk through referencing, rent in advance or managing risk with a potential tenant, our team is always happy to help. Get in touch on 02920 668585 or email lettings@cpshomes.co.uk.
The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.
