Landlords could be forced to compensate their tenants if they evict them under plans being considered by the Welsh government.
Under the proposals, tenants issued with a no-fault eviction notice would be eligible to receive two months’ worth of compensation to mitigate “the financial and wellbeing impact of a forced move”.
The recommendation, put forward by Senedd’s Housing & Local Government Select Committee, would affect landlords who evict tenants to sell up or move back into their property.
The Welsh government is expected to publish its decision on the recommendations in April.
But campaigners warned the policy could “damage” the rental sector further by driving more landlords out of the property market.
Welsh landlords also face paying thousands of pounds more in stamp duty after Mark Drakeford, Welsh cabinet secretary for finance, announced a 1 percentage point rise in land transaction tax on additional properties as part of a draft Budget for the 2025-26 year.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said: “It is absurd that a landlord should have to pay compensation to get their property back, and the recommendation demonstrates a lack of understanding as to the reasons why landlords may need to do so.
“If the Welsh government is so concerned about losing private rented housing stock and the impact this has on renters, they must ensure housing providers have confidence to remain and invest in the supply of high-quality rental property.
“Ideas such as these serve only to undermine the little confidence that remains in the Welsh private rental sector.”
Vaughan Schofield, of Welsh estate agent Belvoir Wrexham, said: “It is getting to a point where it is difficult to understand how [the Welsh government] can make such a sequence of really wrong judgment calls.
“For every action there is a consequence, but they don’t see that. All this will do is drive more landlords away from owning rental properties, which in turn will put huge pressure on tenants, as there are fewer rental properties and rents will just increase further.
“This does tenants no good at all – implementing this policy would damage them the most.”
Timothy Douglas, of estate agent body Propertymark, said: “The Renting Homes (Wales) Act 2016 already provides tenants with six months’ notice, offering greater protection than the legislation in England when a tenant is given a possession notice in Wales.
“Introducing further financial penalties for landlords is counterproductive when they already face rising costs from tax increases, higher mortgage rates, and repair costs. Introducing additional costs risks further restricting the supply of rental homes and driving up rents for tenants.”
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The Welsh government’s decision to consider the feasibility of refunding tenants’ rent following evictions comes during a challenging period for landlords, with the Renters’ Rights Bill set to be debated in Parliament this week. Among the proposed changes are bans of no-fault evictions and fixed-term tenancies.
Landlords will also be banned from asking for more than a month’s rent in advance, a move that has been criticised for its potential to harm tenants and limit their options.
Mr Douglas added: “By banning the taking of rent in advance, they are potentially reducing options for tenants to access private rented property.
“There are a wide range of circumstances and scenarios that impact how people pay their rent, for instance some renters are on fixed incomes, not all tenants pass referencing and affordability checks, and some have insecure incomes due to their work arrangements.”
Mr Beadle added: “In the end, those who will suffer most are those the Welsh government most wants to help.”
The Welsh government was approached for comment.