Warnings of likely rent hikes and mass exodus of small private landlords as tax changes bite

There are new warnings, including from Savills, that the buy-to-let market is looking increasingly bleak with landlords deterred from entering the sector or considering quitting it altogether.

According to one study, as many as three-quarters of landlords could quit, including 10% who say they are definitely selling up, while four in ten say they will be forced to put up rents.

The majority of landlords thinking of getting out of the sector have just one property and say they will sell if they are making a loss, breaking even, or even just not making enough profit to make it worthwhile.

They blame continued financial pressure and costs created by a steady drip of new legislation, specifically citing the impending tenant fees ban, and the loss of tax relief on mortgage costs which is currently being phased in.

The new survey of 1,000 landlords has indicated that 41% will be forced to increase rents – but has also revealed that a majority will not hike rents because they believe tenants are already at the edge of  affordability.

The survey was conducted by 3Gem for online letting agent MakeUrMove.

Managing director Alexandra Morris said: “The result of the rising costs associated with the changing legislative and regulatory environment will either be increased rents or landlords having to sell their properties.

“The worst-case scenario will be a housing market crash if landlords default on their mortgage payments or decide to cut their losses. The Government is currently sleep-walking into this crisis. The alarm bells should be ringing. The Government needs to act now to ensure it remains financially viable for landlords to meet their financial obligations.

“While we wholly believe the industry needs to be regulated, the taxation changes could have a huge impact on smaller landlords.

“They might struggle in the new environment, having potentially devastating effects on the housing market. This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.

“The Government is supposedly bringing in this legislation to protect tenants, but the unintended consequence will likely be landlords having to increase rents, especially if they are forced into debt on their rental property. And this is the best-case scenario. In reality it could be much worse.”

Savills has also expressed concern, saying that the combination of prospective interest rate rises and the reducing ability to offset mortgage interest costs against tax is proving a double whammy for landlords.

Lucian Cook of Savills said: “It’s why we’re beginning to see signs of some people exiting the sector or reducing their porfolios.”

Landlord associations have repeatedly warned of a likely exodus of small private landlords, principally because of the loss of ability to offset mortgage interest costs against tax. Anecdotally, agents have reported in EYE posts  being instructed to sell properties rather than re-market them to let.

From next month, landlords will be able to offset only 50% of their mortgage interest costs against tax, rather than the 75% they are currently able to offset. This figure will continue to drop until 2020 when the ability to claim any tax relief will be scrapped and replaced by a tax credit worth 20% of mortgage interest.

* The Residential Landlords Association has today rebranded to add the tagline “The home for landlords”. It follows the rebranding last month of the National Landlords Association which added the tagline “The Knowledge Network”.

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12 Comments

  1. smile please

    Let’s not forget to give ‘Shealter’ the credit they deserve in all this.

    Thanks to the landlord and agent bashing they have persisted in over the last few years they have largely achieved what they want.

    It’s a shame they did not put more thought into the consequences.

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    1. Will

      I think many of us would like to forget Shelter with their massaged statistics.

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      1. markus

        “I think many of us would like to forget Shelter with their selectively edited, deliberately misleading statistics.”

        fixed your post

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  2. Bless You

    It’s also the govt. Attacking people who have worked hard in life.

     

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    1. smile please

      Agreed!

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  3. Woodentop

    Short sighted, biting the hand that feeds! Still to get worse if Corbyn and cronies have their socialist way. It is nothing more than the state taking over the private sector, shameful.

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  4. Orson67

    The law of unintended consequences is going to bite Shelter and all the other clowns that brought this situation about firmly on the backside. Of course they will deny its their fault and attempt to blame the nasty, evil PRS for these events… after all how dare we need to make a profit, or as it will be for some landlords, not run at a thumping great loss. Shelter really need to adopt the strapline of “be careful what you wish for”. The CEO of shelter wished for and increase in the £150k salary she already gets, Shelter is a charity….the clue is in the name.

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    1. Yorkshire Landlord

      However, the more their policies lead to an increase in homelessness the more they will justify that they are needed and that will require higher salaries for the ‘increased user need’…

       

      Brilliant business model – create your won need and charge more to deliver it 😉

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      1. Yorkshire Landlord

        #own need

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  5. UKtenantdata

    This sums up Shelter
    UKtenantdata
    AUGUST 10, 2017 AT 08:29
    Shelter turned over in the period 31/03/17 £57,427.000 with salaries for the same period being £37,383.000. Believe it or not in this period they made a loss of £3,033,000
    And according to public domain records they even have an active County Court Judgment13/06/2012 NORTHAMPTON CCMCC £5,705 Judgment 2YJ77112

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  6. jeremy1960

    I really cannot see why Government are so short sighted and are in total denial over this matter, as agents and landlords we predicted that this would happen so why can’t they?

    Government are currently ignoring all communication over the tenant fee ban and, irrespective of who or how they are approached they just issue a standard letter spouting rubbish about transparency and fairness for tenants – I’ve had the same letter from 14 MPs and 2 housing ministers now so what chance they will listen to the industry telling them that there is a worsening housing crisis looming daily?

    As for shelter, don’t get me started, there can be fewer organisations (they should be investigated over charity status) which blunder on with their own agenda irrespective of outcome and yet fail in the one thing that they were set up to do – provide housing for the homeless! As for the salaries paid to their executives – only one word – OBSCENE!

    I would call for an investigation into all such charities, an immediate review of landlord taxation, a setting up of a stable housing department where ministers do not just use it for career progression on their CVs and incentives for landlords to enter the market again.

    The idea that if landlords cannot buy properties first time buyers will is just wrong, unless subsidised first timers are just unable to do it.

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  7. A15

    Are the changes in letting regs part of a plan to get the smaller landlords out of the system leaving the market for housing associations and larger property speculators?

    Is it the case that as smaller landlords sell up the “big boys” are buying up and adding to their portfolios?

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