New tax increases on the private rental sector are impacting badly upon tenants and landlords alike, and are failing to achieve their intended aims, according to the Residential Landlords Association (RLA).
Research recently released by the Local Government Assocation (LGA) reveals that the average private sector rent across the whole of the UK has risen to a staggering £852 a month. Even when factoring in the skew created by the inclusion of London rental prices, this is still far from a small number.
This figure, the RLA argues, is a damning reflection on the supply crisis faced by the UK rental housing market, and “shows clearly the problem being caused by the government’s tax increases in a softening economy”..
When these increases were introduced, the government purported that they were intended to support first time buyers in an increasingly hostile housing market. However, according to RLA policy director David Smith, the reality is “tenants can’t find the homes to rent they need, whilst being unable to afford a home of their own”.
His claim is further evidenced by the steep decline in the number of buy to let mortgage applications. With the phasing out of mortgage interest relief down to the basic rate of income tax over the coming months, it seems the situation is only likely to get worse.
RLA research shows that only 19% of landlords plan on investing in new properties over the course of the next year, whereas a massive 58% are considering reducing any further investment in their properties due to these recent tax increases.
This failure to support landlords is in turn having a direct impact on the supply of rental house available, which is already struggling to meet the ever increasing demand, leading to calls for the government to reverse its decision to tax landlord’s turnover rather than profits, and to abandon the mortgage interest relief changes.