Landlords call on next Prime Minister to fix the ‘rental crisis’ saying that high demand and rising rents make it hard to save for a house deposit
- Some 60% of landlords in England and Wales have seen an increase in demand
- A quarter of landlords plan to reduce the number of properties they let
- This is largely due to changes in taxes and regulations in recent years
- Rents climb 2.8% in a year, the sharpest increase since January 2016
- NRLA says high rents make it hard to realise ‘home ownership ambitions’
Landlords have called on the next Prime Minister to address the ‘supply crisis’ in the private rental sector.
Amid the race to decide the next Conservative party leader and Prime Minister, the National Residential Landlords Association has warned that home ownership ambitions cannot be supported without addressing the ‘rental crisis’.
Three in five landlords in England and Wales reported increased demand for rental housing between March and June this year, a sharp increase from the 39 per cent who reported the same a year ago.
Rents climbed 2.8% in the year to May 2022, the highest annual increase since January 2016
The report revealed that nearly a quarter of landlords (23 per cent) planned to cut the number of properties they let over the next year, exacerbating the supply shortage.
In contrast just 14 per cent of them said they planned to increase the number of properties they let.
And as demand continues to outstrip supply rents are being forced up, rising 2.8 per cent in the year to May 2022 across the UK, the largest annual growth since January 2016.
This rise is taking away the money would-be homeowners could be putting towards saving for a deposit, according to the NRLA.
Ben Beadle, chief executive of the National Residential Landlords Association, said: ‘The last six years prove that it was a nonsense to think that cutting the supply of rental housing when demand is so strong would make it easier for those saving for a home of their own.
‘Driving rents up just leaves tenants with less cash to save for a deposit.
‘We need a strong and vibrant private rental market that meets the needs of those who rely on the flexibility it provides, those who need somewhere to live before becoming homeowners and those for whom the promise of social housing tomorrow provides cold comfort today.
‘The next administration needs to reset its plans for the sector.’
The average rent in the UK has increased by £177 since the start of the pandemic as landlords look set to reduce the number of properties they let.
Furthermore, the NRLA said the Government’s 2016 decision to restrict tax relief on mortgage interest for landlords was directly responsible for its members’ decision to reduce the number of properties they rent and restricting the market.
This is in contrast to holiday let landlords who still enjoy full tax relief on their mortgage interest.
And the pressure on the private rental market is impacting other areas of housing.
The District Councils Network has said that 76 per cent of the councils it surveyed have warned that a rise in landlords leaving the sector or converting properties to holiday lets has led to longer waits for council housing.
According to the English Housing Survey, between 2016/17 and 2020/21 the number of households in the private rented sector fell by 258,000 from 4,692,000 to 4,434,000.
Furthermore, recent research from Rightmove found that the average rent in the UK has increased by £177 since the start of the pandemic with the average monthly rent outside of London reaching a new record of £1,126.
In 2015, the then-Chancellor, George Osborne, announced a stamp duty surcharge of 3 per cent on the purchase of second homes and buy-to-lets, and began to withdraw the full tax relief available on mortgage interest.
The stamp duty change meant much bigger tax bills at the point of purchasing a property, but the removal of mortgage interest tax relief created an ongoing erosion of returns for landlords. Both changes took effect from April 2017.
Before this was introduced, landlords could deduct all mortgage interest from rental income and only pay tax on their difference, which amounted to their profits.
Under the new system, landlords must add rental income to their other income and pay income tax on the amount in full. They then receive a basic rate tax credit at a maximum of 20 per cent of their mortgage interest.
This effectively means they are paying tax based on revenue not profits.