Opinions are split about whether limiting the amount of tax relief landlords can claim on mortgage interest payments will cause private rents to increase.

Chancellor George Osborne announced in the summer budget that landlords will be restricted to claiming tax relief at the basic rate only. The measure will be phased in over four years.

The Residential Landlords Association (RLA) claims the move brings “damaging uncertainty” to the private rented sector and says landlords will increase rents.

The landlord body pointed out that HM Revenue and Customs’ impact assessment refers to the proportion of individual landlords that will receive less relief as a result of this measure. It says this misses the point that it is not the landlords but the number of properties affected that matters most.

According to HMRC 20% of landlords will be affected but many of these, if not most, will have more than one property with an interest charge against each. 

The RLA pointed to an assessment by accountancy firm PWC which has warned that the measure: “could see buy-to-let investors feeling the squeeze and putting up rents”, which, it notes, “would have a major impact” on tenants.

RLA chairman Alan Ward said: “The RLA will look in detail at the Government’s measures, but on the face of it the impact could be to push up rents as landlords have to recover their extra costs.

“With many contradicting assessments of the number of private rented properties and the number of landlords, HMRC’s impact assessment is scant on detail. The reality is that this measure will hit many more tenants than landlords.

“We urge the Government to hit the pause button on these proposals and undertake a comprehensive and open consultation to assess what its measures will mean.”

But Betsy Dillner, director of Generation Rent, claimed rents are already at the maximum tenants can stand.

“Because of the housing shortage, landlords are already charging the highest rents they can get away with, so the market won’t bear any attempt to push them up any further,” she said, “Plus, only a third of landlords have a mortgage so there’ll be plenty of others who won’t be hit by the changes. However, if some landlords find they have to sell up, their tenants could be kicked out. Renters need protection from no-fault eviction, and in the meantime, councils and housing associations need to be ready to buy up homes with sitting tenants.”