The Budget didn’t provide any relief for the buy-to-let market, and industry bodies warn the government’s strategy will backfire.
The Residential Landlords Association (RLA) and the National Landlords Association (NLA) believe the latest Budget has failed tenants. They say that recent buy-to-let tax clampdowns have led to a rental supply crisis, with higher rents as a result.
The RLA and NLA, which will soon merge to become the NRLA, issued the warning after last week’s Budget statement. They had separately urged the government to take action to boost the private rented sector, but none of their advice was apparently taken.
Ministers need to wake up
In a statement, they said: “The government is undermining its own efforts to boost homeownership through its attacks on the private rented sector. By choking off supply and making renting more expensive, it is tenants who are hardest hit.
“Ministers need to wake up to the reality of the damage their tax measures are doing to the private rented sector and support landlords to provide the new homes for private rent we desperately need.”
The government has implemented a number of measures to boost homeownership in recent times. This included a major stamp duty cut to aid first-time buyers, which came into effect in 2017.
Further to this, the Help to Buy scheme has assisted thousands of people onto the housing ladder. While it mainly targets first-time buyers, some non-first-time buyers have also benefited.
The latest promise was a 30% new home discount for local key workers. However, Chancellor Rishi Sunak did not mention this in his Budget speech.
Support from the industry
The RLA and NLA are not alone in their views. The Royal Institute of Chartered Surveyors (RICS), Hamptons International, Zoopla and ARLA Propertymark have all made similar comments.
According to the latest RICS residential survey, rents are set to rise across the UK. As tenant demand continues to grow, the number of rental homes available is depleting. If the trend continues, rents could rise by up to 3% per year by 2025.
From April 2021, foreign investors in UK property will have to pay a 2% stamp duty surcharge. Some argue this additional funding should be used to reduce the stamp duty burden of landlords. While increased homeownership is the ultimate goal for the government, high rents only serve to make it more difficult for tenants to save a deposit.
Positive picture for most landlords
UK buy-to-let landlords remain largely unfazed by recent market changes. Despite Brexit, the rental market has proven to be extremely robust. The housing markets away from London in particular have performed well. The north-west, Midlands and Yorkshire continue to attract growing levels of investment, businesses and residents.
The relationship between landlords and tenants is a key aspect of the market. A recent report from Goodlord revealed that void periods – when a rental home is empty – are falling. This could be a result of the rising demand coupled with falling availability. However, landlords are also more keen than ever to offer security to tenants, to encourage them to stay for longer.
Further to this, the sector is professionalising, with more properties owned by fewer landlords. As tax changes such as Section 24 take effect, more landlords are also operating through limited companies. This in turn could shrink the already low number of “rogue landlords”, clearing the way for those who take it seriously as a profession.
Finally, the short-term and furnished holiday let industry is growing. The tax implications of these properties compared to a traditional buy-to-let are very different, which is a positive for many landlords. Staycations are becoming more popular, and as demand climbs this can also provide a lucrative alternative for investors.
