Many private tenants may soon be facing rent rises, as two thirds of landlords plan to increase their rents to cope with recent tax changes, according to a major new survey by the Residential Landlords Association (RLA).
In a study of almost 3,000 private landlords, the RLA found that the same proportion of landlords do not plan to purchase any additional buy-to-let properties.
Worryingly, nearly a third of landlords are thinking of leaving the market altogether. The news arrives as predictions claim that one million new homes to rent are needed by 2021, yet institutional investors are not delivering the properties needed.
The RLA found that 56% of landlords plan to increase rents in the next 12 months, predominantly to offset the impact of changes to mortgage interest tax relief. The organisation warns that the policy will most negatively affect families, with the majority (63%) of landlords letting to tenants with at least one child.
The RLA also expects there to be cutbacks in raising the standards of existing rental properties, with 58% of landlords saying the tax increases will affect their plans for home improvement investments.
Recent landlord tax changes include the reduction in mortgage interest tax relief, a 3% Stamp Duty surcharge on buy-to-let properties, and tax levied on landlords’ income rather than profits.
Disappointingly, the majority (54%) of landlords do not have confidence in the future of the buy-to-let sector, with 70% expecting further Government policies aimed at landlords in the near future.
Positive findings from the survey show that the sector is defying some of the assumptions it often attracts. A huge 86% of landlords said they had a good relationship with their tenant, while 82% report that their tenants pay the rent on time. The current average tenancy length is three years, which suggests that many tenants are happy and secure in their rental homes.
Almost three quarters of landlords (73%) have not attempted to remove tenants from their property in the last 12 months, and of those who have, most (70%) were due to rent arrears or abuse of the tenancy, while just 3% were related to rent rises.
The RLA is calling on the new Chancellor to review the tax changes made by his predecessor, showing more support for the country’s landlords and encouraging more housebuilding for the private rental sector.
The Policy Director of the RLA, David Smith, comments on the findings: “These results show how perverse recent tax changes have been. By implementing policy that will increase rents and choke off the supply of homes to rent, the Government is making it more difficult for tenants to save for a home of their own. We are calling on the Chancellor to use the Autumn Statement to hit the reset button.”
Landlords, will you be forced to put rents up? If so, be aware that your tenants may struggle to adjust to the changes. To ensure that you still get paid if your tenants fall into rent arrears, remember to protect your income with Rent Guarantee Insurance.
The Just Landlords policy also covers legal expenses, so that you can rest assured your investment is safe if you do face any troubles. Find out more here: https://www.justlandlords.co.uk/rentguaranteeinsurance