Private rental prices paid by tenants are rising in the United Kingdom. According to the Office for National Statistics’ Index of Private Housing Rental Prices for January 2024, annual private rental prices rose by 6.1 per cent in England, seven per cent in Wales, and 6.8 per cent in Scotland in the 12 months to January 2024.
Propertymark has been one of the leading voices in the private rental market when it comes to easing a landlord’s tax burden. In 2015, then Chancellor George Osborne decided to reduce the available tax relief on mortgage interest costs and remove the 10 per cent wear and tear allowance for fully furnished homes, which has hindered the opportunities of small investors due to the fact they can no longer offset finance costs against tax liabilities.
The 2015 tax changes have affected one student landlord, who agreed to speak to Propertymark on the condition of anonymity, who said that taxes are making it difficult for him to operate as a landlord as it feels like people in general are getting taxed more, and that rents keep going up as a result because they need to find a way to pay for those increasing taxes.
A private landlord, who also said they would talk to Propertymark on the condition of anonymity, said that landlords ‘are on the frontline politically’ and that it is tiring for landlords to be used ‘as the reason why rents are increasing when that is simply not true.’
They added: ‘Government support that would be most welcome for us would be tax support or the relaxation of existing thresholds. More importantly for me, I would be pleased to see any government be more aware of the positive work we do as landlords and be more considerate and positive towards the industry.
‘As a group (private landlords), we manage a huge percentage of rental property, effectively being partners to the Government in the accommodation supply train. I feel the press and Government’s attitude is biased towards tenants’ issues, and landlords face an uphill battle in this regard.’
NEGATIVE PERCEPTION
The negative perception that many people have of landlords, which the private landlord referred to, was reflected in one 2023 study, which quoted a 2017 YouGov study that discovered they were associated with being ‘greedy’, ‘difficult’, and ‘wealthy’. One landlord who was asked how they felt about people’s perceptions of them during the study said that the media ‘are always on the lookout for bad stories.’ This just shows the uphill struggle many of them face when they are trying to transform people’s perceptions of them.
Despite this, the UK Government’s latest Spring Budget reduced Capital Gains Tax from 28 per cent to 24 per cent, which Chancellor Jeremy Hunt said would increase the number of transactions, and this is something Propertymark has argued for in the past. Perhaps this could be a turning point for landlords considering the scale of the challenges the private rental sector faces, but that may change depending on which party wins the next election. However, there was no Stamp Duty relief which can stifle supply in the private rental sector because it is applied to every property bought, which hinders market activity.
SUPPLY SHORTAGE
The private landlord Propertymark communicated with, alongside Propertymark’s own data gathered by members, has recorded the volume of private rental properties dropping, which also causes rents to rise due to a shortage in supply and a surge in demand due to many people competing for the same property. A 2022 Propertymark report titled A shrinking private rented sector, discovered that 53 per cent of buy-to-let properties sold in March 2022 left the private rented sector and there was a 49 per cent depletion in properties available to rent per member branch in March 2022 compared to March 2019. The industry body is calling on the UK Government to create an economic environment that works for both tenants and landlords.
‘MAD’ COMPLIANCE
Many landlords also have to maintain their properties, and the student landlord Propertymark spoke to described compliance as ‘mad’. This is where governments can cause confusion for landlords. For example, in September 2023, Prime Minister Rishi Sunak ruled out policies to ensure landlords upgrade the EPC rating of their properties, which many landlords felt could have harmed investment for them. Propertymark’s August 2023 report, Energy efficiency in UK property: Where to go from here?, found that insufficient communication and guidance from governments on energy efficiency regulation triggered much confusion and stress across the private rented sector.
Meanwhile, the private landlord that communicated with the professional body stated that they have noticed maintenance and service costs are rising. For example, they commented that they had noticed service charges across their portfolio had risen by 33 per cent in one year. This just shows that maintenance costs have become more expensive since Propertymark issued its 2019 report, Private rented sector costs: property maintenance and rent controls, which stated that maintenance costs were worth £1,000 every year. Additionally, 68 per cent of agents said they had experienced an expensive alteration to a rental property beyond the usual maintenance costs.
RISING INTEREST RATES
But rising interest rates are impacting the student landlord Propertymark spoke to in particular.
‘There is a reluctance to take out loans and mortgages due to current interest rates. This is having a huge impact on landlords,’ the student landlord added.
Indeed, UK Finance found that roughly 93,680 homeowner mortgages were in arrears of 2.5 per cent or more of the remaining balance in the fourth quarter of 2023.
A combination of higher taxes, rising costs, and higher interest rates is impacting the private rental sector. Neither of the two landlords Propertymark spoke to are planning on cutting back on their portfolios for now, but if the UK Government fails to encourage private rental sector growth, this may lead to more landlords exiting the market in the longer term, as they already have, and furthermore, tenants will suffer for it in the form of higher rents.
