NRLA calls on Chancellor for landlord tax review

There should be a full review of how private rented housing is taxed, the National Residential Landlords Association has told the Government.

Its call is backed by research findings showing that in the fourth quarter of 2022, 65 per cent of landlords had experienced increased demand for private rented housing across England and Wales. This was a 9 percentage point increase on the 56 per cent of respondents who reported an increase in demand in the fourth quarter of 2021.

Despite strong demand, 30 per cent of respondents said they plan to cut the number of properties they rent in 2023. This is the highest level of planned disinvestment in more than six years according to the research. Just nine per cent of landlords say they plan to increase the number of properties they rent over the next 12 months, down from 14 per cent who said they would do so in fourth quarter of 2021.

The crisis facing renters in need of accommodation follows tax changes aimed at dampening investment in the sector. This has included restricting mortgage interest relief, a three per cent stamp duty levy on the purchase of homes to rent out and, in the Autumn Statement last year, an effective hike in Capital Gains Tax.

In its submission to the Treasury prior to next month’s Budget, the NRLA is calling for a full review of taxes which impact the sector. As part of this call to action, the NRLA encourages the Treasury to analyse the combined impact of all recent tax changes on the supply of homes to rent.

‘From students queuing to view properties, through to benefit claimants who struggle to access homes they can afford, the impact of the supply crisis in the rental market is stark’, said NRLA chief executive Ben Beadle.

‘The harsh truth is that the Government’s efforts to discourage investment in the sector are working. But punitive taxation alongside record demand for rented housing is a disastrous combination that serves only to hurt renters.

‘The supply crisis we see is entirely Government-made and the policies of successive Chancellors have backfired spectacularly – it is time to change tack. The Treasury needs to undertake a comprehensive review of the taxation of the rental market’.

 

* The NRLA’s assertions about the effect of Government policies on landlords has been backed by the Bank of England. In its latest Monetary Policy Report, the Bank reported that ‘demand for rental properties continued to outstrip supply as the number of landlords choosing to exit the market increased. Contacts attributed this to a combination of factors including tax and regulation, higher maintenance and borrowing costs, and an inability to recoup increased costs in rents’.

It also said ‘UK house prices have risen substantially since the start of the pandemic, driven by a number of factors including changes in household preferences, accumulated savings and policy support in the form of stamp duty holidays. But higher mortgage rates and the broader real income squeeze have reduced affordability and are weighing on prices. UK house prices, as measured by the ONS House Price Index, grew by 0.1 per cent in November, having averaged 1 per cent monthly inflation in the year to October. Timelier indicators of house prices such as the Halifax and Nationwide measures indicate that UK house prices are likely to have declined since then.

‘Contacts of the Bank’s Agents also expect house prices to fall in coming months. Housing market activity has also fallen. Mortgage approvals declined sharply in November and December to levels not seen since the onset of the pandemic. Similarly, housing activity balances in the RICS survey are firmly negative’.