One third of landlords plan to increase rents

Landlords are planning to increase rents and reduce spending on their properties by £500m as a result of tax changes introduced over the last few years.

A recent study found that landlords spend around £15.9bn a year on their properties, including £5.5bn on maintenance, £2bn on service charges, £963m on insurance and £904m on utilities. A further £4.7bn is paid to letting agents.

According to the study, increases in tax, including the scrapping of interest relief on mortgage payments means that homeowners are beginning to shy away from splashing out on their properties. 17 per cent said they plan to cut the amount they spend on upkeep and 10 per cent said they want to cut the amount they spend on both letting agent fees and mortgage costs.

A further blow to tenants is that one third of landlords said they were planning on hiking rents.  The Government’s plan to tackle the housing crisis by targeting landlords through increased taxes is very simple, but has unintended consequences. In reality it means less work for all businesses that support the property industry, or that tenants will have to foot the bill for the Government’s tax raid.  The likelihood is that both tenants and businesses will suffer.

More than 25% of all households in London are in the private rented sector and the proportion is set to grow. A key issue for the Government is how to deliver the rental homes needed to meet ever-increasing demand.  Instead of attacking the sector, the Government might be better placed to work with the majority of good landlords to provide the significant increase in homes needed to offer tenants genuine choice and to keep rents affordable.

This would require a shift away from punitive tax hikes. Two-thirds of Residential Landlords Association members have indicated that the recent tax increases mean they do not plan on purchasing any additional properties, while 58 per cent of landlords have considered shrinking their portfolio.  It has been suggested that landlords would need to increase rents by 20-30 per cent simply to recoup the extra costs from these rising taxes.

Furthermore any form of rent control does nothing to address the root problem. Controls such as this merely reduce the incentive for landlords to invest which can then lead to a reduction in quality housing.  The quantity of rented housing stock is important, but so is the quality.

If you would like further information on this or if you are thinking about purchasing a property to rent out, please contact us