Guaranteed Rent Schemes Are Broken: Why the Renters' Rights Act Has Changed Everything for London Landlords

Nearly Half of Landlords Want to Raise Rents, but Many Simply Can't

A recent survey from the NRLA reveals that nearly half of all landlords are planning rent increases to offset rising tax burdens and mounting costs. That's hardly surprising. With changes to Capital Gains Tax, mortgage interest relief long gone, and operational expenses climbing steadily, landlords need their income to keep pace.

But here's the problem that nobody in the guaranteed rent space wants to talk about: the Renters' Rights Act (RRA) has fundamentally broken the mechanism that allowed guaranteed rent providers to promise annual uplifts. If you're a London landlord locked into one of these agreements, you may already be feeling the squeeze. And it's only going to get tighter.

Let's unpack exactly what's happened, why it matters, and what your best options are going forward.

What the Renters' Rights Act Actually Changed

The RRA replaced Section 21 "no fault" evictions and overhauled the entire framework for how rents can be reviewed and increased. Among its most significant (and underreported) changes is the invalidation of existing contractual rent review clauses in assured tenancies.

Previously, landlords and guaranteed rent companies could write annual escalation clauses directly into tenancy agreements. A typical clause might promise a 3% to 5% annual uplift, baked into the contract from day one. It was neat, predictable, and gave landlords confidence that their income would at least track inflation.

Under the new rules, those clauses are no longer enforceable. Rent increases are now capped to once per year and must go through the formal tribunal process if the tenant (or occupant) disputes them. The tribunal assesses what a "market rent" would be, and there is no guarantee it will match what your old contract promised.

For landlords on standard ASTs, this is an inconvenience. For landlords on guaranteed rent schemes, it's a crisis.

How Guaranteed Rent Schemes Actually Work

If you're unfamiliar with the model, here's a quick overview. A guaranteed rent company takes a lease on your property, typically for one to five years. They pay you a fixed monthly sum regardless of occupancy. In return, they sublet the property (often to tenants, corporate clients, or local authority placements) and pocket the difference between what they charge and what they pay you.

On the surface, it sounds like a dream. No voids, no tenant headaches, no management hassle. Just a reliable bank transfer each month.

The Pros (On Paper)

• Consistent monthly income with no void periods
• Minimal landlord involvement in day to day management
• Tenants are the rent company's problem, not yours
• Some schemes include basic maintenance cover

The Hidden Cons (Especially Now)

• The fixed rent is typically 10% to 25% below market rate from the start, because the company needs to build in their profit margin
• You lose control over who lives in your property and how it's managed
• Property condition can deteriorate significantly under some operators, particularly those placing high turnover tenants
• The annual uplift clauses that were supposed to keep your income growing are now legally unenforceable under the RRA

That last point deserves emphasis. If you signed a guaranteed rent agreement with a 3% annual escalation clause, your provider is no longer legally obligated to honour it. And because the tenancy framework now funnels all increases through the tribunal process, there's no simple contractual workaround.

The Inflation Trap Landlords Didn't See Coming

Let's put some numbers to this. Say you signed a three year guaranteed rent deal in 2024 at £1,800 per month, with a 4% annual increase written into the contract. By year three, you expected to be receiving £1,946.

Instead, your income is frozen at £1,800. Meanwhile, your mortgage costs may have risen. Your insurance certainly has. Service charges, maintenance, and compliance costs have all crept up. And the tax changes highlighted by the NRLA survey mean you're keeping less of every pound earned.

The gap between your fixed income and your actual costs widens every single month. You're effectively subsidising your guaranteed rent provider's business model with your own margin.

At Airhosts, we've spoken to dozens of London landlords in exactly this position. They were promised peace of mind and predictable income. What they got was a locked in agreement that can't adapt to the real world.

What Are Your Options Now?

If you're currently in a guaranteed rent scheme, it's worth reviewing your agreement carefully. Some contracts include break clauses or renegotiation terms that may give you an exit. Others, unfortunately, will require you to wait until the fixed term expires.

Once you're free of the agreement, though, the question becomes: what next?

You could return to traditional long term letting. But with the RRA's new rules around Section 21, rent increases, and expanded tenant protections, the regulatory burden on long term landlords has never been heavier. Managing a compliant long term let in London now requires serious time, knowledge, and attention to detail.

Or you could consider an approach that sidesteps many of these limitations entirely.

Why Short-Term Let Management Is the Smarter Play for London Landlords

Short-term lets operate in a fundamentally different market. Your pricing adjusts dynamically with demand, meaning your income naturally tracks (and often outpaces) inflation without relying on any contractual escalation clause or tribunal process. When costs go up, your nightly rate goes up with them.

In a city like London, where demand from tourists, business travellers, and relocating professionals is consistently strong, well managed short-term lets regularly outperform long term rents by 30% to 60%. There are no fixed agreements locking you into below market returns. There is no regulatory cap on how often you can adjust your pricing, because each booking is a fresh transaction.

Of course, short-term letting does require active, professional management to perform well. Listing optimisation, dynamic pricing, guest communications, cleaning, maintenance coordination, compliance with local authority rules: it's a real operation.

That's exactly where Airhosts comes in.

Hands Off Income Without the Guaranteed Rent Compromise

Airhosts is a London based short-term let management company that handles every aspect of your property's performance. From professional photography and listing creation to 24/7 guest support, pricing optimisation, and full regulatory compliance, we take the complexity off your plate entirely.

The difference between our approach and a guaranteed rent scheme is simple. With guaranteed rent, you accept a discounted, fixed income that can no longer grow. With Airhosts, your property earns what the market will actually pay, and we manage every detail to make sure it earns as much as possible.

You keep full ownership and control of your property. You see transparent reporting on every booking and every pound earned. And you benefit from London's premium short-term rental market without lifting a finger.

The Bottom Line

The Renters' Rights Act has changed the game for guaranteed rent. The uplifts you were promised aren't coming. The gap between your fixed income and your rising costs will only widen. And the longer you stay locked in, the more money you leave on the table.

If you're a London landlord ready to stop settling for below market returns and start earning what your property is truly worth, get in touch with Airhosts today. We'll show you exactly what your property could generate as a professionally managed short-term let, with zero hassle on your end. Your property deserves to work harder for you.