More than one third of private landlords plan to reduce the number of homes they rent out or quit the market altogether over the coming year, according to a new survey of over 2,000 landlords conducted by the Residential Landlords Association (RLA).
34% of landlords have suggested that they intend to reduce their investment in the buy-to-let (BTL) market, which represents a 30% rise over the previous year. Furthermore, only 12% of landlords expect to increase the number of homes they rent out, a fall from 14% a year ago.
The decrease in supply comes despite the warning from the Royal Institution for Chartered Surveyors (RICS) that the demand for privately rented homes far exceeds supply, a situation confirmed by Rightmove which has already referred to a ‘strong demand’ from tenants.
Additionally, 45% of landlords have told the RLA that the Stamp Duty Land Tax on additional properties has acted as a brake on futher investment in property.
Call to scrap stamp duty levy
Professor David Miles, a former member of the Bank of England’s Monetary Policy Committee, has warned in the past that would-be first-time buyers are being disadvantaged by the squeeze on the supply of rental property, which in turn is driving up rents.
As Ministers promise to introduce a Budget early next year, the RLA is calling on the Government to abolish the Stamp Duty levy in areas where landlords provide homes which add to the net supply of housing.
This move should include bringing empty homes back into use, converting larger properties into smaller, more affordable units of accommodation as well as developing new-build properties.
David Smith, Policy Director of the RLA, has commented that there is yet more unmistakeable evidence that the sell-off of privately rented housing is due in no small part to the Government’s imposition of additional tax on new rental homes.
It is, Smith added, unbelievable that good landlords who invest in new homes are being penalised when the country is crying out for all the extra housing it can muster. With a new government and a Budget imminent, landlords need a change in direction of policy to one that supports investment.
Otherwise, he concluded, there will be without doubt a supply crisis in the private rental sector as demand continues to increase.
Renters’ reform bill
On a related note, the government has confirmed plans to abolish Section 21 and introduce lifetime deposits as part of its ‘revolutionary’ Renters’ Reform Bill, a root and branch set of reforms for the private rented sector in England, outlined in the briefing notes to the Queen’s Speech and delivered on 19 December 2019.
The proposed reforms are intended to ‘restore fairness, honesty and transparency to the heart of the housing market’ and include:
- Ending ‘no fault’ evictions by scrapping Section 21 of the Housing Act 1988 and reforming the grounds for possession
- Giving landlords more rights to regain possession of their property and improving the court process to make it quicker and easier to reclaim property
- Introducing a new ‘lifetime deposit’ that moves with the tenant from property to property so that they don’t need to save for a new deposit every time they move house
- Improving the means by which data can be entered on the ‘rogue landlord and agent’ database and making the information easily accessible to tenants.
It is not yet known when the proposed changes are likely to come into effect, but they will be influenced by the three-month consultation period on tenancy reform that closed in October 2019.