Landlords left in a hard spot as tax changes push them to have to increase rents
According to the latest PRS report from the Association of Residential Letting Agents (ARLA Propertymark) now almost a third – 31% – of letting agents saw rents increase for tenants in July.
This is up from 27% that was reported in May, continuing the trend for increases in rent following various changes made by the Government in regards to the buy-to-let market.
The most prominent of these being the stamp duty surcharge and mortgage tax relief. The stamp duty surcharge which was introduced in April last year according to the accounting firm Blick Rothenberg has already made the treasury £2bn.
Private landlords are faced with significantly higher costs as a result of the recent mortgage tax relief changes and in 2020 once these changes are fully phased in they will have to pay tax on all of the rent.
Therefore it is no surprise that they are left with little alternative but to pass on at least some of these costs to tenants or exit the buy-to-let market altogether. Neither of these are good news, as a reduction in available rented housing stock will only add to the existing supply-demand imbalance in the housing market, which is already contributing to higher rents.
As we previously reported letting agents have reported a 14 month rent high.
Although the figure of 31% remains unchanged from the percentage of agents that saw rents increase a month earlier, it does represent a rise on the 28% that saw rents increase in July last year.
The number of properties managed per member branch has only marginally increased in July, to 192 which is up from 190 reported in June. While demand from prospective new tenants increased to 70 in July from 61 in June.
David Cox, ARLA Propertymark chief executive, commented:
“Landlords really are stuck between a rock and a hard place. All the tax increases they’ve incurred over the last 18 months have meant they either need to sell their properties and exit the market, or increase rent payments to plug the deficit.”
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