New Tax Research Highlights Difficulties in the Rental Market

New research published by the Residential Landlords Association’s (RLA) research exchange, PEARL, has provided us fresh insight into the impact that recent tax changes have had in the rental market. It is believed from this research that the increase of tax on the development of new homes to rent is having a massive impact on young people, leaving them unable to access the homes they need.

New Tax Research Highlights Difficulties in the Rental Market

New Tax Research Highlights Difficulties in the Rental Market

This research involved a survey of almost 3,300 landlords, with a 69% response saying that they had been put off investing in further rental property due to the 3% Stamp Duty levy added to the purchase of new homes to rent. Looking at the responses of said survey, we can see that only 18% have purchased at least one property in the past year. In comparison to last year, this is down nine percentage points.

As the market is at the moment, taxes are raising the cost of property investments for landlords, creating the need for higher rent prices. We feel it worth noting that there is help available for landlords worried about the risk of rent default by their tenants. Here at Just Landlords, we provide a Rent Guarantee Insurance, which protects a landlord’s rental income against tenant rent arrears.

The lull in the property to let market only adds to the difficulties young people are having with their own attempts to rent. The RLA Policy Director, David Smith, has said:

“Young people are now facing the full force of the housing crisis… Without change, we will still be talking of a housing crisis for years to come.”

They are already in a situation where buying is unachievable, therefore renting being the only other option, for them to then struggle to find new homes up to let.

There has been a show of support by ministers to encourage corporate investment in the private rental market. An increase of properties built for the purpose of being rented could be an ideal solution to this problem, presenting more options at a more affordable price. However, the RLA’s analysis suggests that a mere 2% of all UK private rented homes are build to rent properties.

The majority of landlords in the UK are individuals rather than companies, meaning that increased fees, such as the 3% Stamp Duty levy, can have a huge financial impact. If we could see fees such as these scrapped, there might be increased interest in property investments by landlords once again.

A provision of tax relief is being called for by the RLA, for landlords who may be willing to sell a property to a sitting tenant. If landlords could be convinced to do so, not only would they be able to profit from the act of letting the building for a set time and then selling it on, it would also put them in a prime position to purchase another property and do so again. Having landlords throughout the UK repeating such a process would keep the property market in rotation, whilst also providing a viable starting place for young people with aspirations of owning their own home. The RLA believes that the Government could play their part in encouraging such a transition by being more creative with their use of taxation, such as providing Capital Gains Tax relief for landlords.

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