IMLA's latest research examines the current state of the private rented sector
Recent sharp increases in buy-to-let mortgage rates, together with the effects of regulatory and tax changes affecting the rental market, risk putting large numbers of private landlords out of business, the Intermediary Mortgage Lenders Association (IMLA) has said.
The trade body pointed out that while there was still no evidence of a mass exodus from the private rented sector (PRS), the loss of any rented properties would affect supply and almost certainly cause rents to rise in the long-term – to the detriment of tenants.
“The PRS serves some 4.6 million households – the equivalent of 11 million people – and represents approximately 19% of the housing market,” said Kate Davies (pictured), IMLA executive director at IMLA. “Maintaining the health of the sector is therefore essential if we are to manage the UK’s chronic housing shortage.”
IMLA has released its latest PRS report, highlighting the tough environment in which landlords currently find themselves and the outlook for the sector and tenants if policymakers’ approach does not change.
In the report, IMLA discusses how the drip effect of increased regulation and adverse tax changes have gradually discouraged investment in the private rented sector. These include the restriction of mortgage interest tax deduction for landlords to the basic rate of income in 2015, the reduction of capital gains tax for other assets but not for residential property in 2016, the lack of clarity around proposals to require enhanced energy efficiency standards, provisions in The Renters Reform Bill, and calls for a temporary rent freeze and eviction ban.
The report also noted that despite media headlines of soaring rents and the shortage of rented property, in the year to April, existing private rents failed to keep pace with consumer price inflation.
IMLA added that the relatively sudden increase in funding costs was causing a significant proportion of buy-to-let landlords to fail affordability assessments when seeking to refinance loans. This had led to some landlords seeking to exit the market altogether, while others might be obliged to sell some properties and re-balance the debt on their portfolios.
“Demand for rented housing is clearly high, and measures to increase tenant protections are important,” Davies said. “However, the focus now needs to be on prompting increased investment in the sector and supporting landlords, whose operating costs risk becoming unaffordable.
“If we don’t get the balance right, the result will be higher rents, and lower availability of properties – both of which are bad news for tenants and landlords.”
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