Almost two-thirds of landlords say they will look to increase rents to recover losses from higher property income tax, according to new research ahead of next month’s Budget.
The latest Landlord Trends research from Pegasus Insight finds 64% of landlords intend to recoup losses through higher rents, while 88% are concerned about the two percentage point increase in income tax rates applying to personally held rental property.
The research also points to potential consequences for tenants beyond rents, with 83% of landlords saying tax and regulatory changes will make them more selective about who they are prepared to let to.
Pegasus is warning against imposing further costs on landlords in the Budget on 28 October, arguing that additional financial pressure on the sector could ultimately be passed through to tenants.
TENANT IMPACT
Separate Tenant Trends research from Pegasus suggests renters are already concerned about the impact of higher landlord costs.
More than a quarter of tenants expect rents to rise as landlords pass on costs associated with complying with the Renters’ Rights Act, compared with 9% who expect rents to fall.
The research puts typical monthly rent among tenants surveyed at £917, 11% higher than a year earlier.
Some 46% of tenants who had been living in their property for at least a year say their rent increased during the previous 12 months.
COURT CONCERNS
Landlords also remain concerned about the operation of the possession system following the introduction of the Renters’ Rights Act.
Some 91% say they are very concerned about potential court backlogs when attempting to regain possession of a property.
The new tenancy regime came into force in England on 1 May, abolishing Section 21 and requiring landlords to use specified grounds for possession.
Mark Long (main picture, inset), Founder and Director of Pegasus Insight, says: “Landlords are already preparing for significant change under the Renters’ Rights Act, and the prospect of further tax changes in October’s Budget is adding to the uncertainty facing the sector.
“The growing concern about the courts should also give policymakers pause. The new possession regime will depend heavily on a court system landlords can have confidence in, so ensuring it has the capacity to cope must be a priority.
“The Private Rented Sector needs a period of stability. Further tax increases or additional costs could change landlord behaviour in ways that ultimately affect tenants through higher rents, reduced choice or fewer homes available to rent. The Budget should not add to those pressures.”
