The lack of available housing stock is creating huge problems throughout the Private Rented Sector, including the supply chain.
We all know that tenants are struggling with record rent rises. But every single company that supplies the sector is going to struggle because too many landlords are leaving or have already left, and nobody knows where the new landlords are going to come from.
Whether it’s inventory companies, energy assessors, maintenance firms or letting agents, themselves, the whole sector is going to struggle unless the Government can change tack and begin to attract new landlords with more properties to rent.
Nobody knows how many landlords have left or are about to leave. One large firm of accountants, analysing HMRC data reckoned 70,000 landlords exited the PRS in 2022 and it looks as though the situation is getting worse.
Pushed into paying
Rents are continuing to rise and demand is sky high. The hikes in interest rates have made would-be buyers remain in rented accommodation for longer and now there are dozens of people chasing every available rental property.
I believe that one of the biggest barriers to landlord recruitment is the changes in tax regulation. Since April 2020, all buy to let landlords have had to pay tax on all their rental income although they do receive a tax credit worth 20% of their mortgage interest payments.
The first thing the Government should do is U-turn on that tax policy. Landlords should be able to offset all their mortgage costs against tax.
The new rules mean that landlords who pay higher rate tax have had to pay substantially more and some who were in the lower band have been pushed into paying the higher rate. Profits have been squeezed for many landlords and high tax rates aren’t going to attract new ones.
The new Renters (Reform) Bill has been described as the most radical shake-up of the PRS in a generation. It proposes a number of new measures including the abolition of Section 21 – so-called ‘no-fault’ – evictions which many landlords oppose.
The Government has described the Bill as ‘bringing in a better deal for renters.’ And its own Impact Report on the economic effects of the legislation have estimated that it is likely to cost letting agents £278.7m over 10 years, as a result of ‘reduced use by landlords’ because fewer tenants will be moving.
Another Government measure is the proposed change to the Minimum Energy Efficiency Standards (MEES) Regulations designed to introduce an Energy Performance Certificate rating of ‘C’ for all PRS homes by 2028 – although Housing Secretary, Michael Gove, has recently queried whether this deadline is realistic.
The problem here is that a lot of landlords who were worried by this rule change may have already sold up and left or are in the process of doing so. Any slight relaxation of the rules now isn’t going to tempt new landlords in.
We have to face facts. A lot of our housing stock is old and needs improvement to save energy. But the Government should be offering some financial support to achieve these targets. If that was in place, the sector might look more attractive.
But the bottom line is that we’re not building enough houses. If more rentable homes were built and they already had the energy efficiency standard, then more landlords might consider buying them if they could see a decent return on their investment.
Landlords have been made to feel like they’re public enemy number one and, for the vast majority of them, that’s totally unfair. The PRS is a vital part of the country’s overall housing strategy, if we’re not careful, it’s going to be damaged beyond repair.
* Daniel Evans is chair of the Association of Independent Inventory Clerks *
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The first thing that the Government and the Labour Party should do is U Turn on the Renters Reform legislation and, in particular, the abolition of Section 21.
The ability of landlords to maintain control of their property and only to enter into contracts with which there is agreement from both parties is fundamental to the letting business and to contract law. Neither the Conservatives nor the Labour Party can make landlords agree to lose their ownership rights - and nor should they try.
We know what happened in the past, and what is happening in Scotland; the housing situation becomes MUCH worse for tenants, not better, when landlords don't agree with legislation.
I can’t understand why so many landlords are sleeping walking into Gove’s draconian disaster policy’s, why are they sticking up for our right’s clearly we are being done down bad.
Are they all hiding behind the bush come out and be counted if you are not from Newham Borough where according to a Guardian article sometime ago, reported half the landlords 13’000 out of 27’000, didn’t declare any income at all loosing £200’000’000, p,a to HMRC, (what).
They don't bother to warn about what is going to happen; they simply put their properties on sale.
Wow, that's a lot Michael. I've had a property there since 2001. I'm surprised by those statistics. In order to get a BTL mortgage, they require SA302's, Tax year over views, confirmation of tax paid etc etc.
For the benefit of the country, the Government/state should concentrate on finding the landlords who don't declare any income, and should not waste their time and expensive resources formulating legislation which drives out the landlords who pay every penny of the tax that they are required to pay.
Hopefully the continuing deterioration in Scotland will alert our MPs to stop meddling with the PRS.
My feeing is they have created such ‘dogs dinner’ that they will have no option but to lock LLs in. Expect eviction bans and rent caps within 2yrs
The new LL's will inevitably have to come from the local authorities, the existing ones will either leave, or just avoid any tenant on UC like the plague.
Renter's are preparing for the reform bill, LL's are preparing for the exodus.
I quote a paragraph from the above article.
The Government has described the Bill as ‘bringing in a better deal for renters.’
For better for worse, this bill will be the curse.
When the table becomes empty, where do you plan to put those deals?
Excellent post, but empty doesn't rhyme with deals - perhaps the last line should be:
When the table becomes empty, they'll know their deal was deadly.
I know what it is.
The Government and Councils have a secret stash of 2 million properties to use for all the now and up and coming homeless families.
So they are trying as hard as possible to get shut of the PRS LLs and corner the market.
THEN I WOKE UP.
Banks and building societies will close their doors to the BTL market after the abolition of section 21 because technically they will end up with hundreds and thousands of sitting tenants, BTL only came about due to the change in the landlord and tenant act
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