Private rented sector policy changes are putting financial pressure on British landlords

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Landlords in Britain feel under pressure from multiple changes in the private rented sector and as a result a fifth are considering selling up, mainly due to additional costs.

They are also considering increasing rents, reducing the amount they spend on maintenance and manging their properties themselves rather than using letting agents, according to a YouGov survey for The Mortgage Works, lender Nationwide’s buy to let arm.

The research is published as the Nationwide announces a new cross-industry body to support the estimated five million households in the UK’s private rented sector. The Partnership Board has been launched to help landlords deliver decent, affordable homes for their tenants.

The Nationwide Partnership Board is backed by the National Landlords Association (NLA), the Association of Residential Letting Agents (ARLA), Shelter, Countrywide and The Nationwide Foundation and will monitor the health and development of the private rented sector, discuss issues of mutual concern and provide policy suggestions to Government.

The survey found that many landlords have shielded their tenants from the financial impact of the changes with 29% having never increased their rent. However, some 44% are now considering increasing rents.

It also reveals that 10% will reduce the amount they spend on property maintenance, 14% intend to start managing the property themselves, rather than using an agent and 22% are considering selling up.

The research also found that 36% were not aware of decreases to mortgage interest tax relief which was introduced in April 2017 and will steadily decrease over the next few years. Also, 32% were unaware of the additional stamp duty on additional homes from April 2016.

Some 43% hadn’t heard of the consultation on lettings fees being paid by landlords, rather than tenants which has now been ratified and 16% either haven’t heard or aren’t aware of any of these changes.

The survey report suggest that changes, introduced by the Government with the intention of levelling the playing field between owner occupiers and landlords, actually risk reducing choice and value in the private rented sector,.

‘Being able to find a decent affordable home is one of the most pressing issues many people face today. Landlords play a vital role in providing homes and choice, where they might not otherwise exist,’ said Joe Garner, chief executive of the Nationwide Building Society.

‘Our research suggests most want to manage their property well and look after their tenants. However, because letting one or two properties is often not a landlord’s full time job, many are left struggling to keep up with the ever growing list of responsibilities, as well as the personal financial impact the recent changes may bring,’ he pointed out.

“It’s a tough ask to expect small landlords or their tenants to face these challenges alone – we must work together as an industry to better support and inform those providing housing and their tenants,’ he explained.

‘With a Draft Bill on letting agent fees already in progress, and greater powers for local councils beginning to take effect, it is clear that reappraising the private rental sector is already firmly on the Government’s agenda and so we look forward to working with the Housing Minister to help influence a future that works for all. By coming together we can help deliver somewhere decent for everyone to call home,’ he added.

The combined effect of these measures, as well as with the tougher lending standards set by the Prudential Regulation Authority, have reduced the number of new homes for rent that have been bought over the last year, resulting in less availability and choice for tenants, the report points out.

Among landlords considering increasing rent, almost three quarters, 74%, intend average increases of £100 or less per month, with a similar proportion, 72%, feeling it’s important their tenant is aware that the increase is just to cover additional costs. This is perhaps why 45% would prefer to inform their tenant of a rent increase personally, even though 39% worry their tenant might leave as a result.

Landlords are also looking at ways to reduce their costs, with 26% of those using an agent considering self-managing their property in future to save money. Currently 31% of landlords manage their property let themselves and find their own new tenants. However, 68% of those surveyed use some form of agency service with almost 47% of landlords relying on an agent to entirely manage their property.

The survey also reveals that landlords’ costs average £1,500 a year per rental, rising to £2,000 if a new tenant is needed during that time.

While the mean monthly profit from renting out property, after taking away typical costs, is £610, some 56% make £500 or less a month, a third earn less than £300 and 22% less than £200.

Some 15% say they make £100 or less monthly profit from renting out their property, amounting to less than £1,200 per year while 6% don’t know how much, or even if, they make a profit.

When asked about the financial impact of recent measures on their rental profits, 22% of landlords simply didn’t know. Some 10% expect to pay an additional £300 to £500 per year, and a similar proportion anticipate losing between £501 and £1,000 a year while 4% expected additional costs of between £1,001 and £2,000.

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Written by: Houseladder