A growing number of private landlords are planning to exit the buy-to-let market, prompting fears that rents will rise sharply as the number of homes available to rent falls.
New research undertaken by MakeUrMove reveals that up to three quarters of existing landlords may be forced to sell property due to continued financial pressure and new legislation being introduced by the government.
The government’s decision to introduce a 3% buy-to-let surcharge on stamp duty from April 2016 and phase out tax relief on buy-to-let mortgage interest has deterred many buy-to-let landlords.
As well as selling up their existing properties, many landlords are no longer interested in buying new properties.
With the upcoming legislative changes in the buy-to-let market, 41% of landlords indicate they will be forced to increase rents, which would adversely affect tenants.
MakeUrMove managing director, Alexandra Morris, said: “The result of the rising costs associated with the changing legislative and regulatory environment will either be increased rents or landlords having to sell their properties.
“The worst-case scenario will be a housing market crash if landlords default on their mortgage payments or decide to cut their losses. The government are currently sleep walking into this crisis.
“The alarm bells should be ringing, and this should be a major concern for both homeowners and the government. The government needs to act now to ensure it remains financially viable for landlords to meet their financial obligations.”
Despite the cost implications, almost half - 46% - of landlords aim to keep rents the same, taking a hit to their bottom line, rather than passing rising costs on to tenants, recognising that many tenants can ill-afford rent increases.
Morris added: “Despite there being plenty of good landlords out there who want to keep the impact to their tenants minimal, the reality of the situation is that once the upcoming legislative changes come into effect, many landlords will find this unaffordable and may be forced to increase rents regardless.
“While we wholly believe the industry needs to be regulated, the taxation changes could have a huge impact on smaller landlords and those ‘accidental’ landlords who have a rental property they may have either inherited or couldn’t sell. They might struggle in the new environment, having potentially devastating effects on the housing market. This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.
“The government is supposedly bringing in this legislation to protect tenants, but the unintended consequence will likely be landlords having to increase rents, especially if they are forced into debt on their rental property. And this is the best-case scenario. In reality it could be much worse.”
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Note to Government - Told ya so!
We discussed this 2 years ago when the changes were first suggested. It is the inevitable consequence of a range of changes the Government has introduced to protect tenants (and attract the renters vote) that will actually have a devastating effect on the PRS in particular and probably the wider property market. Increasing rents alone really is the best case scenario.
My biggest problem is Universal credit. I have worked with Barnsley Councils Housing Benefits team for years with few problems but I can not take people on Universal credit anymore as the system is a shambles. Give control back to the people who now what they are doing.
I am now in the process of reducing my portfolio due to this.
I have 5 B2L and only raise rents every third year but have had to warn tenant families that unless government reverses tax changes I shall have to raise rent in line with inflation every year. I hate to do it as nice families with children and on not so high incomes but I have to pay mortgages. There are plenty of people wanting to rent and I have a waiting list but hope my current tenants not priced out of their home.
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