'It's time the govt introduced pro-growth policies to rental market'

Like the majority of people, landlords are experiencing increased costs due to the cost of living crisis and impact on mortgages following the 2022 "mini"-Budget, as the latest figures from estate agent Hamptons show that landlords are spending 40 per cent more on mortgage interest year-on-year, and this is during a time when the rental market is surging in value.  

Alongside that, the Simply Business Landlord report, compiled from the analysis of a survey of 1,455 UK landlords, reveals that a quarter of them intend to sell an investment property in the next 12 months. This is worrying news at a time when rented property is in huge demand.

UK government data, analysed by experts at Confused.com mortgages, shows that the total value of the buy-to-let mortgage market stood at £41.3bn in 2022, which represents a substantial 88 per cent increase from 2013.

About 15 per cent of homes in England are privately rented, 15 per cent in Scotland, and 14 per cent in Wales and Northern Ireland. Therefore, there is more that all governments across the UK should be doing to support this expanding market.

However, instead of making this opportunity attractive to landlords, the UK government has alienated them with higher taxes.

These include higher rates of property taxes on buy-to-let properties, the withdrawal of tax relief on mortgage interest costs and replacement with a 20 per cent tax credit as well as removal of the 10 per cent wear and tear allowance for fully furnished properties being replaced with an at-cost relief. 

Also, the rate of capital gains tax was maintained for rented property at 18 per cent and 28 per cent for higher rate payers, when it was reduced to 10 per cent and 20 per cent (higher rate taxpayers) for other assets.  

There is so much potential here for all governments across the UK to regenerate the private rental market.

Furthermore, landlords must pay a corporation tax rate of 25 per cent as of this year, when it stood at 19 per cent before then. As mentioned, with landlords now paying 40 per cent more on mortgage interest year-on-year, there seem to be fewer and fewer incentives to become one.   

Propertymark is urging all governments to reduce taxes on additional properties by splitting surcharges, so a lower percentage is paid by landlords looking to invest in the private rented sector.

In Scotland, for example, would-be landlords will pay 6 per cent Additional Dwelling Supplement when buying a property to rent, making it the most expense place in the UK to invest in the private rented sector.

For those landlords that do, they will be thanked by future rent control legislation that the SNP/Green alliance want to implement.

The UK government can also play its part by reducing CGT thresholds by aligning residential property with other asset classes and removing the disincentive to invest.  

Unlike the Scottish government, the administrations in Wales, Northern Ireland and at Westminster are avoiding implementing rent control.

Flexible tenancies and rent prices driven by market forces have led to the success of the private rented sector across the UK.

It is vital that landlords are not deterred from the market and have finances to invest and improve property standards. Increasing the supply of properties, rather than capping rents, will ensure rents fall and landlords stay in the market.  

Finally, Propertymark believes that by slashing VAT on home improvements, as well as providing discounts or exemptions on council tax and property taxes, the empty homes crisis can be averted by encouraging landlords to purchase empty homes and transform them into desirable properties for people to live in.  

There is so much potential here for all governments across the UK to regenerate the private rental market, but housing decisions must work with financial policy and include the impact of welfare reforms and energy efficiency targets.

It’s now time for all governments to recognise the key role landlords and agents play as housing providers, understand the impact of recent tax changes on the private rented sector and introduce pro-growth policies that will help tackle demand and bring down the cost of renting for tenants. 

Timothy Douglas is head of policy and campaigns at Propertymark