"We have to face facts. A lot of our housing stock is old and needs improvement to save energy. But the Government should be offering some financial support to achieve these targets. If that was in place, the sector might look more attractive"
Daniel Evans, chair of the Association of Independent Inventory Clerks, said: “We all know that tenants are struggling with record rent rises.
“But every single company that supplies the sector is going to struggle because too many landlords are leaving or have already left, and nobody knows where the new landlords are going to come from.
“Whether it’s inventory companies, energy assessors, maintenance firms or letting agents, themselves, the whole sector is going to struggle unless the Government can change tack and begin to attract new landlords with more properties to rent.”
Evans blames changes in tax law, tenant-friendly proposals in the Government’s new Renters (Reform) Bill and incoming energy efficiency regulations for creating the perfect storm in the rental market.
He adds: “Nobody knows how many landlords have left or are about to leave. One large firm of accountants, analysing HMRC data reckoned 70,000 landlords exited the PRS in 2022 and it looks as though the situation is getting worse.
Pushed into paying
“Rents are continuing to rise and demand is sky-high. The hikes in interest rates have made would-be buyers remain in rented accommodation for longer and now there are dozens of people chasing every available rental property.”
Evans believes that one of the biggest barriers to landlord recruitment is the changes in tax regulation.
Since April 2020, all buy-to-let landlords have had to pay tax on all their rental income although they do receive a tax credit worth 20% of their mortgage interest payments.
Evan comments: “The first thing the Government should do is U-turn on that tax policy. Landlords should be able to offset all their mortgage costs against tax.
“The new rules mean that landlords who pay higher rate tax have had to pay substantially more and some who were in the lower band have been pushed into paying the higher rate.
“Profits have been squeezed for many landlords and high tax rates aren’t going to attract new ones.”
The new Renters (Reform) Bill has been described as the most radical shake-up of the PRS in a generation. It proposes a number of new measures including the abolition of Section 21 – so-called ‘no-fault’ – evictions which many landlords oppose.
The Government has described the Bill as ‘bringing in a better deal for renters.’ And its own Impact Report on the economic effects of the legislation have estimated that it is likely to cost letting agents £278.7m over 10 years, as a result of ‘reduced use by landlords’ because fewer tenants will be moving.
Another Government measure is the proposed change to the Minimum Energy Efficiency Standards (MEES) Regulations designed to introduce an Energy Performance Certificate rating of ‘C’ for all PRS homes by 2028 – although Housing Secretary, Michael Gove, has recently queried whether this deadline is realistic.
Totally unfair
Evans states: “The problem here is that a lot of landlords who were worried by this rule change may have already sold up and left or are in the process of doing so.
“Any slight relaxation of the rules now isn’t going to tempt new landlords in.
“We have to face facts. A lot of our housing stock is old and needs improvement to save energy. But the Government should be offering some financial support to achieve these targets. If that was in place, the sector might look more attractive.
He adds: “But the bottom line is that we’re not building enough houses. If more rentable homes were built and they already had the energy efficiency standard, then more landlords might consider buying them if they could see a decent return on their investment.
Evans concludes: “Landlords have been made to feel like they’re public enemy number one and, for the vast majority of them, that’s totally unfair.
“The PRS is a vital part of the country’s overall housing strategy, if we’re not careful, it’s going to be damaged beyond repair.”
