Over half of UK landlords set to raise rents due to tax changes
Many landlords in the UK plan to raise rents to cope with recent tax increases in the private rented sector and do not plan on expanding their portfolios, a new survey has found.
Nearly a third of landlords are considering leaving the market altogether despite predictions that one million new homes to rent will be needed by 2021 and evidence showing that institutional investors in the rental market are not delivering the homes needed.
Some 56% of landlords are planning to increase rents in the next 12 months to offset the impact of changes to mortgage interest relief, the survey from the Residential Landlords Association shows.
This is likely to most negatively impact families as 63% of landlords are letting to tenants with at least one child and there are also likely to be cutbacks in raising the standard of existing properties with 58% saying the tax rises will hit their plans for investment in their properties.
Recent and forthcoming tax changes have included restricting the payment of mortgage interest relief to the basic rate of income tax, a 3% stamp duty on the purchase of additional properties and taxing landlords’ income and not their profit.
Indeed, the survey also found that 54% of landlords do not have confidence in the future of the sector with 70% anticipating further government policies aimed at landlords in the near future.
Other figures from the survey showed that 86% of landlords reported they had a good relationship with their tenant with almost as many 82% reporting that their tenants pay their rent on time.
The current average tenancy period is three years suggesting the majority of tenants are happy and secure in their current home while 73% of landlords have not attempted to remove tenants from their property in the last 12 months and of those who have, 70% did so due to rent arrears or abuse of the tenancy. Only 3% were related to rent increases.
The RLA is calling on the new Chancellor Philip Hammond to review the tax changes made by his predecessor and get behind the nation’s landlords and encourage more homes to be developed for rent to meet the demand.
‘These results show how perverse recent tax changes have been. By implementing policy that will increase rents and choke off the supply of homes to rent, the Government is making it more difficult for tenants to save for a home of their own,’ said RLA policy director David Smith.
‘We are calling on the Chancellor to use the Autumn Statement to hit the reset button,’ he added.