One in five landlords in the UK plan to sell at least one property from their portfolios in the next 12 months despite seeing more demand for lettings, new research shows.
While 22% want to sell, some 18% are planning to buy more properties to add to their portfolios, according to a survey of almost 3,000 landlords published by the Residential Landlord Association (RLA).
In the last six months the proportion of landlords who have added to their portfolio is down by 7%, and the proportion who have reduced the size of their portfolio is up by 2%.
The quarterly research survey also found that 33% of landlords have seen an increase in demand for homes to rent over the past three years and faced by an imbalance in the supply and demand for rental properties, 47% indicated that they expected to increase rents over the next year.
The main reason for raising rents seems to be the phasing out of mortgage interest relief which began in April with 35% saying being taxed on their turnover rather than their profit is why they are set to increase rents.
While a number still want to increase their portfolios, the 18% is down from six months ago and the proportion who plan to reduce the size of their portfolio has increased. This finding could signify that landlords are preparing to reduce the size of their portfolios in reaction to policy change, the report suggests.
‘As demand continues to increase for homes to rent, punitive tax changes are discouraging investment by the majority of good landlords who want to provide accommodation. Whilst efforts by the Government to support institutional investment in the sector are welcome, this will remain a drop in the ocean,’ said RLA chairman Alan Ward.
‘To meet demand, we need pro-growth taxation that actively supports and encourages the majority of landlords who are individuals providing good housing, to invest in the new homes to rent we so desperately need,’ he added.
The survey also found that almost one in three landlords reported that they attempted to evict a tenant in the past 12 months with the majority, 60%, saying this was due to rent arrears, with tenants owing on average £1,000. The report says this is a serious concern, and future changes to the sector could exacerbate this issue, especially the changes to mortgage interest relief.
Regarding the impact of welfare reform, the findings present a stark account of issues associated with the introduction of universal credit. Of those who let to tenants on universal credit or housing benefit 38% reported that they have experienced universal credit tenants going into rent arrears in the past 12 months.
The survey shows that 53% of landlords successfully request an Alternative Payment Arrangement, but 45% reported that the DWP were unhelpful when contacted. The issue of rent arrears for universal credit tenants, is also one of the leading reasons for a landlord attempting to regain possession of the property with 64% of landlords saying so.
The report says that these findings suggest that reform to universal credit is needed. ‘The Government needs to ensure that it is easier for landlords to claim alternative payment arrangements and ensure rent arrears are kept to a minimum. Without these reforms, landlords may continue to be unwilling to provide homes to those on universal credit,’ it points out.
The report concludes that landlord confidence in the sector has been shaken by the current political and economic climate. While more landlords were confident at 38% than not confident at 28%, plans for landlord portfolios have changed over the past six months. The proportion of landlords who have added to their portfolio is down by 7%, and the proportion who have reduced the size of their portfolio is up by 2%.
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