Steve Reed announced as new Housing Secretary

Hello Steve and Welcome to the Housing Revolving Door

I’m not sure how up to speed you are on issues in housing or whether you are already a landlord.

At the moment, because of changes introduced by George Osborne, landlords who don’t hold their properties in a limited company are unable to offset their finance costs against rents. The only thing that they can do to recover the additional tax is to raise rents to tenants. And if national insurance were to be deducted from rental income, raising rents would be the only option landlords would have to recover the additional tax.

It is tenants who pay these additional taxes, not landlords. These taxes are regressive and they do not act to increase the supply of housing.

Furthermore, if landlords who hold property outside a limited company have to raise additional finance to fund improvements to EPCs then the tax system penalises them for doing so as of course they are already being penalised for their existing gearing vs. limited companies.

This government has already been told that landlords are legally permitted to raise rents to cover the cost of EPC improvements. If a labour government insists that all rental properties must be band C or above the effect will be to raise rents to tenants.

Angela Rayner never had any prospect of building the additional 1.5 million homes that she committed to. You can’t do it either by penalising investors for investing in housing, and that’s obvious. Unless the market is part of the solution it’s impossible.

Sometimes the best thing to do is the simplest. When as a landlord you fill in the property section of your tax return there is a box for the cost of finance of non-residential property. If this box said ‘finance costs for non-residential property and residential property at Band C or above’ then at least this would be a small step forward.

It would also help if HMRC guidance ended up being clear that you could offset improvements to your property designed to improve the EPC against your rents, i.e. as operational expenditure rather than as capital expenditure to be recovered against CGT.

Unless you do these things the PRS (the market) can’t be part of the solution to the problems of housing people and increasing energy security.

Landlords receive tax relief on finance costs (such as mortgage interest) at a flat rate of 20%.

However, rental income is taxed before deducting interest, and this full amount is added to your other income. This can create several issues:

If your total income exceeds £100,000, you begin to lose your personal allowance. This can create an effective tax rate of 60%, while your finance costs still only attract relief at 20%.

Even if you are a 40% taxpayer, you only get relief at 20% on finance costs.

As a result, you can be in a position where, after finance costs, your property is running at a loss, yet you are still taxed at 40–60% on the gross rental income, with only 20% relief on the interest.

Reply to the comment left by Ryan Stevens at 08/09/2025 – 17:41
Agreed. It’s easy to hit the £50K gross income limit even if you aren’t actually earning much money after all your costs have been deducted. And if NI were to be applied to your gross income then that would make the situation even worse.

The only thing that you can do as a landlord to recover the loss caused by the extra tax burden is to raise rent to tenants. A limited company does not have to do this. This has the effect of skewing the market.

And tenants don’t benefit from these policies: They are regressive.

The forthcoming Renters Reform Bill does not help either here because landlords faced with a greater risk of loss have to be even more careful about screening out tenants who they might not be able to quickly and easily get rid of in the event of non-payment or anti-social behaviour. The RRB will make it impossible to house some tenants.

Generation Rent said: “We look forward to working with you at a critical time for renters who are relying on the Renters’ Rights Bill to finally end unfair evictions and who desperately need breathing space from the soaring cost of renting.”

Sorry, chums the RRB is already and will continue to lead to increased rents.

there are numerous reasons. These include (a) the RRB subjects landlords to increased costs, (b) defaulting tenants will be allowed longer not paying rent before the landlord can even begin to take action increasing the risk and quantum, of default, (c) the courts (which are already have a backlog of cases) will have even more cases to deal with (good news for tenants from hell but not for most people), (d) anti-social behaviour will be much harder for landlords to deal with and (e) many landlords are withdrawing their properties from the market which will lead to higher rents as tenants chase the fewer properties available.

Reply to the comment left by Ian Narbeth at 08/09/2025 – 18:14
All of this is true.

And the last iteration I saw of the RRB also stated that landlords will be prevented from taking an offer higher than the advertised rent. And all that this means is that landlords and their agents will advertise at the MAXIMUM rent. This in turn will drive up market rents.

Reply to the comment left by Beaver at 08/09/2025 – 18:19
I really need to understand this issue of advertised rent post RRB a bit more.

Does anyone know if it will be possible to advertise a rental at a ‘guide price’ instead?

As it is impossible to know in advance to whom you may rent a property to, its difficult to assess the risk. If I were to work out the cost of rent gtee insurance (for example and the person was a benefit receiver) the cost would be £X. If the person was fully employed the cost would probably be a less.

So do I automatically bake in the price of the RGI on the increased cost/risk basis and advertise at that and then I am covered for potentially any type of tenant, or is it best to advertise a on the basis that the rent will be set according to independently determined risk, so that self earners are not discriminated against?

Reply to the comment left by Beaver at 08/09/2025 – 18:19
do we then advertise at an (inflated) higher rent, but then state lower offers will be considered just to be on the ‘right side’ of the RRB?

If the only reason for this bit in the RRB was to stop bidding wars upwards from the advertised rent, if you do not advertise a set figure at £X by offering a ‘guide price not exceeding £X’ then surely this falls within the rules? Any tenant can then make an offer of any amount up to that maximum figure.

Reply to the comment left by Reluctant Landlord at 09/09/2025 – 07:55
I use an agent so if the proposals in the RRB go through then firstly I will tell the agent not to advertise the property in any form of writing and I will ask the agent to sift the 10-20 viewers to see what they can pay PCM. If that doesn’t result in a tenant I will ask the agent to advertise the rent at the highest possible price.

That’s very different to what my agent was advising and what I was doing in 2017 when my agent was advising me to hold rents down a bit to encourage long-term tenancies. Then, my agent actually had a pre-printed matrix to demonstrate for me the effect of an extended void period on profitability.

But now my agent just advises me to put rent up when I can and that’s because of government meddling in the market since 2017. And the effect of the proposals in the RRB will be more of the same, but worse because as Ian Narbeth and others have pointed out, the other proposals in the RRB dramatically increase the risk.

Faced with dramatically increased risk your options are:

(1) Don’t house the tenant
(2) Dramatically increase the rent
(3) Take out additional rent insurance and charge that to the tenant.

But the bottom line is, everything government does has the effect of increasing rents. If they don’t need to meddle in the market then they shouldn’t do it. Instead they should look at the barriers that stop the market from delivering solutions and these are primarily to do with tax policy.

Reply to the comment left by Reluctant Landlord at 09/09/2025 – 07:55
Yes, that’s right. Be careful. It appears that the current version of the Bill says:

“A relevant person [i.e. landlord or agent] must not advertise in writing, or otherwise offer in writing, the proposed letting unless— (a) the rent that is to be payable under the letting is a specific amount (the “proposed rent”), and (b) the advertisement or offer states the proposed rent.”

It may be difficult to generate interest in your property unless it is advertised in writing. However the provision quoted above “does not apply to a sign displayed at the dwelling, or at premises in which the dwelling is situated, which merely advertises that the dwelling is to let.”

As others have noted, this is likely to encourage landlords to ask for the highest possible rent.”

You won’t be able to say “Offers up to £X” because the proposed rent must be a specific amount.

It is not clear if landlords, faced with unexpected interest in their property, can withdraw the advertisement and then re-advertise at a higher rent.

Reply to the comment left by Ian Narbeth at 09/09/2025 – 11:14
This is of course, all correct.

When surveyors assess ‘market rent’ they assess what’s called ‘comparable evidence’. Advertised rents for similar properties form a key part of comparable evidence when calculating market rent. Valuers analyse these “asking prices” or “quotable rents” from online listings, such as Rightmove or Zoopla, newspapers, and shop windows as strong indicators of market conditions and the potential ceiling rent achievable for a property. Actual transactional evidence is more reliable but it’s not easy to come by and is not public, unlike for example house prices listed at the land registry.

So the proposals in the RRB to interfere with competitive forces and stop landlords taking an offer above advertised rent will push ‘market rents’ upwards. And this adds to the pressure on housing caused by all the UK governments’ increasing competition in the PRS by for example stopping people renting out houses below band C. Government says one thing, but does something else.

It is the various UK governments driving rents up in the UK by interfering in the market.