Landlords have become an easy political target. For nearly a decade, property investors have operated with little to no profit surplus.
Extending National Insurance to rental income, especially when coupled with the upcoming Renters’ Rights Bill reforms, will inevitably result in higher rents. That’s just basic economics, and it will be the tenants who pay the price.
An investment must make sense financially, and when costs rise, so do rents unless tenants simply cannot afford them. In those cases, landlords will be forced to sell.
This won’t necessarily help renters onto the property ladder though, as demand for housing remains strong and prices are unlikely to fall meaningfully. Instead, we’ll see more properties acquired by large corporate landlords, who tend to prioritise shareholder value over tenant wellbeing.
HOSTILE RELATIONSHIP
The Government is particularly targeting the ‘accidental’ landlords who aren’t operating like a large corporation but who are adding value to the economy by investing money into refreshing old properties, or creating new homes by converting the lower-demand large properties into share living.
The relationship between landlords and tenants is too often considered by the government as hostile, rather than as what it should be, a valued relationship between service-provider and customer.
HMOs (House in Multiple Occupation) will be hit the hardest. These landlords tend to generate higher rental income per property of around 12%-18% ROI with typical six-bed homes, compared to standard 3%-6% ROI on a two-bed buy-to-let investors.
HMOs will therefore shoulder a particularly large share of the proposed 8% NI levy on income over £50,270. These landlords house those on lower income, and those who most value connection with others.
PROFESSIONAL TENANTS WILL SUFFER
Whilst landlords can’t raise the rent much whilst occupied, as tenants leave, landlords will reset rents to market rates, and as unprofitable properties exit the market, demand for those that remain will intensify.
This will disproportionately affect professional tenants, both in single lets and HMOs, with HMOs reacting faster due to shorter tenancy cycles. Longer-term, we may see more properties shift towards social housing, where government rents often exceed market rates, further squeezing those seeking affordable, high-quality homes.
SUPPORTING MOBILITY
However, people often rent out of choice or because they can’t afford a deposit on a mortgage. Unlike home ownership, renting supports mobility, lets people move quickly for work, removes the burden of major upkeep, and, in shared living, gives people the connection and support that comes from living with others.
But undermining landlords’ viability risks reducing choice and flexibility for renters. The sector needs predictability and incentives to invest in better homes, not policies that drive out those committed to quality and community.
HOME CREATION INCENTIVES
Instead of adding NI to rental income, the Government should focus on measures, such encouraging councils to approve more high-quality shared living and rental homes.
There should be incentives to home creation, such as for converting a six- bed property, which is lower in demand, into six single bed properties, which are higher in demand.
Easing the stamp duty surcharge on second homes, reviewing mortgage interest rules, and dropping NI proposals would reduce costs and encourage investment in upgrading ageing stock.
Treating secure, affordable rental housing as essential economic infrastructure, rather than a secondary concern, is the only way to restore balance and stability for millions who rely on the private rented sector.”
