British private rented sector could lose over 100,000 homes in next 12 months
Some 133,000 homes in the UK private rented sector could be lost over the next year even although demand from tenants is increasing as landlords are selling up, according to new research.
Much of the fall in supply in the number of homes for rent can be attributed to landlords leaving the sector and selling up because of a rise in costs due to tax and regulatory change, the study of 2,600 landlords suggests.
It found that while 84% of landlords have seen tenant demand increasing or remaining stable, they are concerned about the decision to restrict mortgage interest relief to the basic rate of income tax and the decision to add an extra 3% on stamp duty for the purchase of additional homes.
According to the analysis by the Residential Landlords Association’s research group Pearl, just 2% of all private rented households in the UK are in homes developed by corporate investors and the majority of landlords are, and will continue to be, individuals and small businesses.
It suggests that the tax changes are making it unviable to operate in the sector. Previous research found, for example that 62% of landlords said that their profitability would be reduced by at least 20% due to the changes and 67% reported they would minimize investment as a result.
‘These changes make it easier for those who are wealthier and cash-rich to invest in the private rented sector, over those middle income earners that may look to purchase a property with finance while also limiting the access of the sector for the more vulnerable tenants and those who can’t afford to buy nor can’t access social housing,’ the report says.
To boost the supply of homes to rent the RLA is calling for the Government to end its tax on new homes. It suggests that the 3% additional homes levy should not be applied where landlords invest in property adding to the overall supply of housing. This includes converting empty offices and shops, turning large homes into small self-contained properties or bringing one of the over 605,000 empty dwellings across England back into use.
‘The demand for private rental homes shows no signs of slowing up, despite efforts to encourage home ownership. The Government was always mistaken to place homes to own and to rent in opposition to each other rather than seeking to supply more homes in all tenures,’ said RLA Policy Director, David Smith.
‘Corporate investors are failing to provide the new homes to rent at the pace and scale we need. They are also poorly equipped to meet the housing needs of towns and rural areas. The vast majority of landlords are individuals and small businesses, providing good housing to their tenants and supporting local economies,’ he pointed out.
‘We need to support and encourage them to provide the long term homes to rent needed.
The Government should use taxation more positively and not penalise landlords who are contributing to badly needed homes to rent,’ he concluded.