Landlords fearful of rising rent following Budget

Changes announced in Wednesday’s Budget concerning limiting the amount of tax relief landlords can claim on their mortgage interest costs continues to divide opinion. Leading industry figures are split on whether they believe private rents will rise as a result of the changes.

Alterations

Chancellor George Osborne announced that landlords will be restricted to claiming tax relief on their interest payments at only the basic rate. From 2017, this change in legislation will be phased in during the following four years.

The Residential Landlords Association has suggested that the move brings with it, ‘damaging uncertainty,’ to the private rented sector and feels that it is inevitable that landlords will increase rents as a result of the changes. According to the landlord body, the HM Revenue and Custom’s impact assessment of the alterations refers to the exact proportion of landlords that will ultimately receive less relief as a direct result of the measures.

What’s more, the RLA believes that it is not the landlords but instead the number of properties affected that matters the most. HMRC suggest that 20% of landlords will be affected by the change and the majority will have more than one property with an interest charge against each.

Rising rents?

RLA chairman, Alan Ward, commented said that the firm, ‘will look in detail at the Government’s measures, but on the face of it, the impact could be to push up rents as landlords have to recover their extra costs.’[1]

‘With many contradicting assessments of the number of private rented properties and the number of landlords, HMRC impact assessment is scant on detail. The reality is that this measure will hit many more tenants than landlords,’ Ward continued.[1]

Landlords fearful of rising rent following Budget

Concluding, Mr Ward said, ‘we urge the Government to hit the pause button on these proposals and undertake a comprehensive and open consultation to assess what its measures will mean.’[1]

However, Betsy Dillner, director of Generation Rent, feels that rents are already at the highest that tenants can take. ‘Because of the housing shortage, landlords are already charging the highest rents they can get away with, so the market won’t bear any attempt to push them up any further,’ she commented.[1]

‘Plus, only a third of landlords have a mortgage so there’ll be plenty of others who won’t be hit by the changes. However, if some landlords find they have to sell up, their tenants could be kicked out. Renters need protection from no-fault eviction, and in the meantime, councils and housing associations need to be ready to buy up homes with sitting tenants.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2015/7/landlords-warn-of-higher-rents-tenants-in-denial