UK stocks aren’t letting the rental crisis go to waste

The maxim “never let a good crisis go to waste” has been variously attributed to Sir Winston Churchill, Niccolo Machiavelli and, most recently, Rahm Emanuel. The crises in question could have ranged from the Dunkirk evacuation to the collapse of the Florentine Republic or the 2008 financial meltdown, depending on your preference. Regardless of who was the most likely originator of an admittedly overworked precept, the message was straightforward enough: take control in the face of adversity.

For investors this could mean exploiting market panics to acquire high-quality assets at temporary discounts, as initial anxieties give way to a sense of opportunity. It could even extend to contrarian strategies, by betting against the baying mob during periods of extreme pessimism.

But the maxim shouldn’t stand as some kind of pedagogical straitjacket; rather, it’s a simple reminder that every crisis starts life as a risk, and the flipside of risk is opportunity. So the real knack lies in recognising risks ahead of time and formulating effective responses.

All this came to mind recently when, somewhat uncharacteristically, I actually paid attention to an online advertisement for Direct Line, the insurance group acquired by Aviva (AV.) for £3.7bn midway through last year.

The insurer has updated its landlord emergency cover to include tailored buy-to-let insurance with optional rent guarantee and legal expenses. It is by no means an outlier: insurers have been actively seeking out new opportunities in the residential rental market in anticipation of the Renters’ Rights Act, which came into force at the beginning of this month.

Whether it is appropriate to describe the newly minted Act as some kind of a ‘crisis’ probably depends on which side of the rental agreement you’re signing, but it has certainly altered the balance of power between landlords and tenants by increasing protections for the latter, while reducing financial incentives for the former.

Anyone who keeps abreast of the UK property market will have noticed a steady increase in the number of properties coming on to the market since the second half of 2025. Indeed, analysis from the National Residential Landlords Association shows that more than a third of landlords have either sold or attempted to sell properties in the past year.

There are various reasons behind this exodus from the market, but perhaps the main trigger was the abolition of no-fault evictions. A replacement mechanism has been put in place, so landlords will be able to pursue a ‘legal eviction’ for reasons such as crime or extended rent arrears, but they will doubtless realise that this will entail additional time and money.

With the threat of eviction eliminated to a large degree, landlords will also probably see an increase in repair claims and tenant complaints in England, as the Act extends the obligations of social housing landlords under Awaab’s Law to the private rental market, specifically in relation to potential health hazards such as damp, in addition to structural issues. Accordingly, Direct Line has enhanced its emergency cover to incorporate 24/7 assistance for urgent repairs and other forms of remediation.

The insurer is also now pushing its rent protection coverage, and it’s easy to appreciate why. Interest in this corner of the general insurance market has been rising rapidly. A survey conducted by lettings platform Goodlord indicates that demand for rent protection insurance increased by 41 per cent in the final quarter of 2025.

In keeping with the Churchillian maxim, insurers would have been assessing the underwriting risks (and opportunities) well ahead of the legislation receiving royal assent, while companies such as Mears (MER) are also well placed to benefit from the legislative changes. The group is probably more synonymous with public sector housing, but it also provides housing management and repair services for private landlords, along with guaranteed rent agreements under its private sector leasing scheme.

Back in November, we highlighted the investment case for another business that could profit from the changes, albeit due to the law of unintended consequences rather than any explicit foresight. Aim-traded RentGuarantor (RGG) acts as a Lloyd’s of London-backed guarantor for tenants in the UK who cannot provide a traditional rent guarantor (tenants simply apply online and can pay the service fee in instalments). We made the point that “the new legislation leaves landlords and letting agents exposed to greater financial risk in the event of tenant default” – therein lies the opportunity for a specialist operator such as RentGuarantor.

This example might suggest the Renters’ Rights Act could open up avenues for retail investors to gain exposure to the residential property market via listed vehicles, but they probably need to be mindful of a looming supply-side shock. There could be other unintended consequences down the line.