Rent Arrears Decline in 2025

One of the biggest headaches for landlords is dealing with missed rent payments and chasing arrears. The Renters’ Rights Act will add further complexity to these situations, with the mandatory threshold for rent arrears evictions being increased from two to three months’ rent arrears.

Recent statistics shared that rent arrears declined in Q2 of 2025, with a 12% fall. This represented the first year-on-year decline in rent arrears since 2021.

Average rent arrears were recorded at £1,861, a 20% decrease from the arrears average of £2,237 in Q1.

What has led to the rent arrears decline?

The decline in arrears is likely to be related to the slowdown in rental price growth. The UK average rents increase was 7% in the 12 months leading up to May 2025. At the end of 2024, the average annual rents increased by 9%, so rent inflation has been slowing down as rent affordability has been pushed to the limits with the cost-of-living crisis.

The average monthly private rent in the UK for the 12 months up to May 2025 was £1,339 and was £949 in Somerset. Between May 2021 and March 2024, average rent inflation had been steadily growing but from May 2024, when it peaked at 9.1%, the growth rate started to decline.

In Somerset specifically, rent inflation peaked at 10.1% in September 2023 before starting to slow down. In May 2025, the rent inflation in Somerset had fallen to 4.1%.

What changes are coming for rent arrears?

The Renters’ Rights Act will introduce many changes impacting landlords, including rules around rent arrears. One of the headline reforms is the abolishment of Section 21 no-fault evictions and several changes to the grounds for Section 8 eviction notices.

Once the Act is fully in effect, landlords will only be able to use Section 8 notices to evict tenants. If a landlord wants to start the eviction process for serious rent arrears, they will need to provide 4 weeks’ notice (an increase from 2 weeks), and the arrears threshold will increase from two months to three months to constitute ‘serious rent arrears’.

The changes will mean that landlords will not be able to start eviction proceedings for rent arrears until the tenant has missed three months of rent payments, and with the additional two weeks’ notice required, gaining possession will take longer.

Are rent increase rules changing?

Yes, another change in the Renters’ Rights Act is the rule around increasing rents. Landlords will be restricted to increasing rents once per year and tenants will be able to challenge proposals for rent increases through a First-tier Tribunal, if they think they are unfair. So, landlords will need to ensure that any rent increase they propose are fair in relation to the current market rates.

With fixed term tenancies also coming to an end, the way that landlords will be able to propose a rent increase will be through completing a Section 13 notice and providing it to the tenant, and any rent increase will require two months’ notice.

If you are looking for support with managing your rental property, including handling rent increases and arrears, we can help. Get in touch with our team to find out more about our letting agent services.